This week we launched the Sifted 30: Eastern Europe and the Baltics, sponsored by Google for Startups, a ranking of 30 startups with the strongest revenue growth in the region in the past three financial years.
Seventeen eastern European and Baltic countries were considered for the leaderboard. Only six made the cut. While we’d hoped for broader representation, the result isn’t surprising.
The region’s startup scenes are gradually changing for the better — drawing increased interest from budding entrepreneurs and global VCs. But only a few urban hubs have really succeeded in putting their startups on the map.
Estonia keeps on Estonia-ing
It would’ve been a shock had Estonian startups not taken roughly half the spots (14 out of 30) on this ranking. The country — though ridiculously small — rivals any tech hub in Europe.
All the startups need to say thank you to the Skype guys.
“All the startups need to say thank you to the Skype guys,” says Taavi Tuisk, cofounder of Ringy, which trades refurbished electronics and is #3 on the leaderboard. This is the agreed-upon starting point when describing Estonia’s success, with the well-known story of how an internet call company led to the creation of lots of new companies — many of them with Skype connections — and created one of Europe’s most energetic tech clusters in the process.
Much ink has been spilled over the so-called Skype effect (there have been a lot of wistful glances at Estonia and perhaps even some hair-pulling over how to create a similar effect elsewhere).
The country of 1.3m people has produced 10 unicorns, including fintech Wise — which relocated to London — Uber rival Bolt and software companies Pipedrive and Veriff. The two biggest tech deals in eastern Europe so far in 2024 — €300m raised by renewable energy provider Sunly and €220m by Bolt — were both signed in Tallinn.
What explains the special draw of Estonia? The country is also famous for initiatives like its e-residency programme, which means you can become a digital resident of Estonia even if you’ve never set foot there. This approach has been a “game-changer” for reducing red tape hurdles common in other parts of Europe and functioned as a honeypot for attracting entrepreneurs, according to Roman Pakholkov, founder of Vilnius-based accelerator Bridgio. Estonia has also introduced online voting — “the first and only one in the world to do so,” says Eva-Kristiina Ponomarjov, director of the Estonian Trade Development Agency.
But boiled down to its essence, the Estonia story is about how a bunch of successful people with easy access to each other produces more successful outcomes. “You can get advice from anyone. They’ve made all the mistakes already and can tell you how to avoid them,” says Tuisk.
Latvia’s rare moment in the sun
It’s rare to see a Latvian startup top a ranking: the country, a tech minnow, does not threaten many league tables.
While the country has had some standout funding rounds — a $50m Series A for print-on-demand startup Prinitify in 2021 and a $30m Series A for drone-maker Aerones in 2022 — the reality is that out of the three Baltic ecosystems, Latvia clocks the smallest deal count.
VC funding is pretty sparse: in 2023, Latvian startups raised just $12m in venture capital. Sifted counts just 19 tech fundraises in Latvia this year, which add up to a paltry €16m. By contrast, Estonia’s 61 deals have raised €726m in 2024.
What’s holding Latvia back? The country needs to make a cleaner break with its past, says Jeff’s CEO, Toms Niparts (Jeff is #1 on the leaderboard). “Post-Soviet integration has been relatively unsuccessful. The number of Russian speakers we have is large compared to Lithuania and Estonia.”
Niparts bemoans the lack of a really big tech exit that could “spill over into other success stories. We’ve not had that first big Skype wave.”
[Estonian founders] reach out widely to get critical opinions from founders and to get their ideas trashed early on. That’s healthy
Culturally, there’s a lot of work to do, Niparts believes. “Generally speaking, people pay too much attention to what others think. Estonian founders in contrast reach out widely to get critical opinions from founders and to get their ideas trashed early on. That’s healthy.
“In general, I would say people here are more reserved — they don’t want to appear less intelligent by asking for help.”
He’s hopeful that things will get a little better. The arrival of Startup House in Riga — part coding school, part coworking space — can become an important meeting spot for techies, he says.
Bulgarian struggles
There are easier places to build a deeptech company than Bulgaria.
Sofia-based Nasekomo is developing technologies to rear insects for animal feed. “Everybody loves what we do but that doesn’t mean they want to finance it,” says Xavier Marcenac, the company’s cofounder and co-CEO. “Whatever VC money is here is mostly directed to IT businesses.”
Still, Nasekomo — the name means insect in Bulgarian; “we’re not Japanese,” Marcenac clarifies — has raised decent money: most recently, an €8m round in January 2024. It’s the €50m follow-on — needed to build factories to produce larvae — that will be more challenging.
Marcenac, a Frenchman, first came to Bulgaria in the early 90s, as the country was making uncertain steps towards a free market. His wife told him he was crazy because “all the Bulgarians were leaving the country and I came to start a business”. Having one foot in France has undoubtedly helped Nasekomo: in 2020, the company created a joint venture called Fly Genetics with French biotech group Grimaud.
It was tough when Marcenac first came to Bulgaria and so it is again today. In October, the country held its seventh national election in three years. Bulgaria has been rocked by political instability since 2020, when protests erupted against oligarchic mafia leaders that had taken control of state institutions. ”There’s lots of disinformation flowing in from the Russian side and the far right guys are on the rise,” says Marcenac.
Romania builds on UiPath success
Bulgaria’s next-door neighbour is faring better on the tech front. As with Skype in Estonia, Romania’s another example of how one big tech success can change your country’s narrative — in this case, it’s workplace automation UiPath, which IPOed in New York in 2021.
Since UiPath became one of Europe’s biggest tech listings, Romania has produced a few more big potential names, such as FlowX, which helps large enterprises streamline their internal processes. FlowX raised $35m in 2023, the largest Series A in Romanian tech history. In another chunky deal this year FintechOS, a product management platform for financial services providers, raised a $60m Series B extension.
In the past five years the Romanian ecosystem has evolved from a poorly financed and underdeveloped phenomenon into [something] more diverse.
“In the past five years the Romanian ecosystem has evolved from a poorly financed and underdeveloped phenomenon into [something] more diverse,” says Vladimir Ghita, CEO at Bucharest-based cybersecurity company Fort. Low operating costs are a key selling point, says Iulian Paval, chief revenue officer at BlueTweak, which automates customer service functions. Graduate programmers and coders provided a cheap, skilled workforce for fledgling IT firms.
Romanian entrepreneurs are creating products and exporting not just manpower, but intellectual property. One of the country’s new generation of founders is Cornel Amariei, whose company .lumen raised €4m in July for glasses that help blind people get around. These glasses — similar in appearance to a VR headset — use sensors to spot obstacles and direct the wearer away from them.
Further proof of an evolving tech scene can be seen in the four Romanian startups that place on the leaderboard. These are: online education platform for high schoolers Spark Generation (#4), treasury automation platform Finqware (#9), school management software tool Kinderpedia (#24) and online medical consultations platform Telios Care (#30).
Europe’s G-spot?
Last year, when there were mass layoffs at tech companies, Vilnius officials went on a charm offensive, posting all over social media and sticking up posters around King’s Cross station in London, where big tech companies have their offices. Their message: “Got fired by Meta or Twitter? Move to Vilnius.”
Another poster, plastered in European capitals a few years ago, called Vilnius “the G-spot of Europe”: “Nobody knows where it is but when you find it — it’s amazing”.
These cheeky campaigns speak to a growing Lithuanian confidence. And why shouldn’t the country be feeling a little chipper? Despite being very small — population roughly 2.8m people — Lithuania is the birthplace of some of Europe’s top startups. These include secondhand online market Vinted — one of the few European startups to increase its valuation in recent years — solar engineering software business PVcase and cyber firm Nord Security, maker of NordVPN, which allows users to avoid content geoblocking and watch their favourite Netflix shows abroad.
We’re still not doing the best work when it comes to importing great people.
Of course, there’s more to do. “The big bottleneck is talent,” says Turing College CEO Lukas Kaminskis, who points to the Lithuania-founded Wise moving its headquarters to London to grow. Cheeky ads will only get you so far. “We’re tiny and we’re still not doing the best work when it comes to importing great people,” says Kaminskis. Turing College is #2 on the leaderboard.
But overall, he’s loving the way things are moving. “Estonia had this really huge sprint but Lithuania is doing even better now in terms of growth,” he says. And he’s excited by Vinted’s recent €340m share sale, a deal that will allow some of the company’s employees and early investors to cash out some of their shares. “That’s a potentially big cash boost to the country.”
This article also appears in Sifted’s Eastern Europe & Baltics Leaderboard report. You can download it here
Read the orginal article: https://sifted.eu/articles/eastern-europe-baltic-startup-rank/
