The Baltic region, comprising Estonia, Latvia, and Lithuania, is becoming an increasingly important player in the European startup ecosystem. The Baltic Startup Survey 2024, conducted by BalticVC, provides a comprehensive analysis of the startup scene in these three countries, offering insights into the challenges and opportunities facing local entrepreneurs, as well as the overall investment climate.
The primary aim of the Baltic Startup Survey 2024 was to capture the state and development trends of the startup ecosystem in Estonia, Latvia, and Lithuania. The survey sought to assess various aspects of the region’s startups, including business development, team dynamics, sales, and fundraising. The findings are based on the responses from over 280 startup founders, with 107 of them participating in a 23-question survey.
By gathering data on the socio-demographic profiles of the founders, their professional experiences, and the current state of their businesses, the survey highlights not only the strengths and weaknesses of the Baltic startup ecosystem but also the region’s attractiveness to global investors.
Founder Demographics: Experience and Education
The typical Baltic startup founder is 39 years old, with a university degree, and often has prior entrepreneurial experience. Interestingly, despite the stereotype that younger generations are more likely to start their own businesses, the average founder in the Baltic region is older than expected, with the age slightly varying between countries: Estonia at 39, Latvia at 37, and Lithuania at 40.
The educational background of Baltic founders is impressive, with around 90% holding university degrees and 11% possessing a PhD. This high level of formal education reflects the strong emphasis on academic qualifications in the region. Universities in the Baltics play a significant role in fostering entrepreneurial activity, offering incubator programs and courses designed to equip students with the skills necessary to launch their own startups.
Katalista Ventures, Startup Wise Guys, and BSV Ventures also helped conduct the survey.
Elena Salamandic-Alijosiene, Partner at Katalista Ventures, emphasized that while education provides a strong foundation, experience and complementary skills among co-founders are more important when selecting startups for investment or accelerator programs.
“The education level of founders of Baltic startups is notably high, reflecting a strong focus on formal education in the region. This equips founders with the necessary skills, knowledge, and network to begin their entrepreneurial journey. Universities in the Baltic region encourage entrepreneurship through incubation programs, expos and entrepreneurship specialisation courses, which is a welcome step for the Baltic startup ecosystem. An education level is not something we look at when choosing our accelerator participants or choosing what startups to invest in. The main factor is their experience and expertise and the way the founders complement each other’s skills. Most of the real life learning happens outside of university anyway, but it’s a great place to begin building a network that can eventually lead to creating a startup”, said Partner at Katalista Ventures Elena Salamandic-Alijosiene.
Furthermore, nearly half of the surveyed founders (48%) have previous experience running their own businesses, while 34% had worked in large corporations before embarking on their entrepreneurial journeys. The data also shows that Lithuanian startup founders are more likely to have come from corporate environments (33%) compared to their Estonian counterparts, where only 16% of founders come from large enterprises.
Startup Profiles and Market Outlook
The Baltic startup scene is predominantly composed of young companies. The majority (46%) of startups are in the pre-seed stage, while 26% are in the seed stage and 17% have entered early growth. On average, Baltic startups are around 1-4 years old, with only 36% of the companies having been in operation for five or more years.
Most startups in the region have small teams of 2-5 employees (46%), and only a small percentage (5%) have large teams of over 30 employees. The leading industries for Baltic startups are fintech, health and medicine, and edtech, with the majority of these companies developing B2B products (82%). A smaller portion focuses on end-user products (29%), and 12% are working on government-related solutions.
The market sentiment in the Baltic startup ecosystem is diverse, with varying perceptions of the current business environment. Over half of the tech entrepreneurs (54%) report that their businesses have improved in the past year, while 28% have seen no change, and 18% feel that the market has worsened. Despite these optimistic responses, a significant number of startups (39%) admitted that they were close to shutting down in 2023.
Looking at the countries individually, Estonian startups were the most positive, with 61% stating that market conditions had improved. In contrast, Latvia showed a more pessimistic outlook, with 52% of Latvian startups reporting that they were on the verge of closure last year. Lithuanian startups, however, were relatively optimistic, with 53% reporting improvements, though 33% acknowledged that they were nearly shutting down.
Despite the early-stage nature of many startups, only 18% of respondents reported having no income. The majority (28%) earned between €10K and €100K, while 9% made up to €10K, and 17% reported earning between €100K and €1M.
When it comes to sales geography, the survey shows that most Baltic startups focus primarily on local (77%) and European markets (80%). However, a significant portion (24%) are already targeting North America, and 22% are expanding into Asia. Lithuanian startups appear to be the most globally oriented, with only 43% of their revenue coming from the Baltic region, compared to 60% for Estonian startups.
The investment climate in the Baltic region has seen some changes. Many entrepreneurs (60%) feel that investors have become more cautious, a sentiment that is especially strong in Latvia, where 70% of founders report less interest from investors. Despite this, a substantial number of startups (65%) have external investors, with Estonian and Latvian startups showing the highest rates of investor engagement (65% and 71%, respectively).
A notable trend is the increasing prevalence of bootstrapping, with 59% of founders starting their companies with their own funds. Additionally, 23% of startups continue to rely on their own resources, while 22% have raised venture capital. The survey highlights that accelerator programs and angel investment could provide a much-needed boost to the region’s startups in the coming years.
In terms of funding rounds, the majority of startups (41%) raised up to €300K, and another 41% secured between €300K and €1M. Only 14% of startups raised between €1M and €5M. The investment landscape varies slightly between countries, with Lithuanian and Estonian startups more likely to raise larger sums compared to their Latvian counterparts.
The Baltic Startup Survey 2024 paints a picture of a dynamic but challenging startup ecosystem. While the region boasts a well-educated and experienced founding population, many startups are still in the early stages of development and face obstacles such as market uncertainty and limited funding options.
Nonetheless, the region’s strong entrepreneurial spirit, coupled with its emphasis on education and international expansion, offers great promise. For investors, the Baltic startup scene presents opportunities to support innovative companies in industries ranging from fintech to healthtech, while helping to nurture the region’s growing reputation as a startup hub.
With the right support and investment, the Baltic states have the potential to become a key player in the global startup ecosystem in the years to come.
Visit Baltic VC’s website to see the detailed data and graphics presented in the study.
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Read the orginal article: https://arcticstartup.com/the-baltic-startup-survey-2024-by-baltic-vc/
