Guest blog by Merilin Lukk, member of the Startup Estonia team and an official spokesperson of the Startup Visa program
Ragnar Sass is a leadership figure on a truly international scale — his ever-growing team at LIFT99 is dedicated to building up startup ecosystems and helping founders from non-traditional startup markets succeed. He launched his first startup back in 2007 when the phrase “startup ecosystem” wasn’t yet widely spread. In the past 13 years, he has co-founded several startups and impactful organizations, including Pipedrive and Garage48.
LIFT99’s strongest presence is in Estonia and Ukraine through their startup hubs in Tallinn and Kyiv. But Ragnar and his team are leading activities across enitre CEE area. The latest addition to LIFT99 product family is Salto Network, a private founder network for founders from outside the startup hotspots like Silicon Valley, London, Tel Aviv, etc.
In partnership with Startup Estonia, the Project Lead of Startup Visa Merilin Lukk interviewed Ragnar to reveal the backstory of the Estonian startup ecosystem, the potential it has now, and why Kyiv is the next big hotspot for the local startup community.
Ragnar Sass during Grand Launch of Ukrainian Startups Wall of Fame in LIFT99 Kyiv Hub (October, 2019)
When LIFT99 started in 2016 did you anticipate it to become a bridge between Estonian & Ukrainian startup ecosystems?
No, I didn’t know that it would even stand as a company. It was just a hobby. I wanted to build a place and a community where founders can help each other and grow. It was never meant to be a business, it was never meant to be anything that you see here. There were no expansion plans, and it had only two people in the team, Susanne and Karina.
So, when did it become what it is today?
After 6 months, it felt like this works — people are very happy. We did an NPS (Net Promoter Score) survey and we had, I think, a rating of more than 70 which is crazy! Pipedrive as a product had NPS around 40-45 at that time. So, I thought there is something here. Then we discussed how we can turn it from just one location to a whole company, with global impact.
This is how we grew. In 2018, we discussed this concept and after looking at 20 cities as possible locations we felt that Kyiv is the spot that could have the biggest impact on the local community. I was in Kyiv just last Monday and feels that it has done much more than we expected. It took us about 6 months to fill the hub! We have a pretty similar place in Kyiv which is twice as big as in Estonia.
Startup Visa launched around the same time (beginning of 2017) with LIFT99 (autumn of 2016). What was the key thing to figure out back then? Do you think it has served its purpose?
I think that the key element for Estonia is how it can be a more open society and how it can make it easier for foreign founders to come here and build a company. The huge difference is that investors are flying in, and it wasn’t the case 3 years ago. Last week we had a German VC visiting us. It's a huge change that impactful people and organizations are now coming here to meet the local community.
I think that the foreign founders’ community is like a secret part of Estonia. And I definitely see that this is growing, along with the number of foreigners working in Estonian companies. I remember a recent example of one guy from Ukraine who had his own startup, it didn’t work out, but he is so talented that he now works in Bolt. And again, these established cases are making it easier for driven people to move here, work for the bigger companies. In the long term, it can build a new wave of startups.
“In the long term, it can build a new wave of startups.”
During LIFTOFF with Kristjan Maruste, co-founder and CEO of COMODULE (October 2019).
Can you compare the Estonian startup ecosystem in 2010 and 2019? What has changed in the decade?
Everything has changed. My first startup was launched in 2007. So, the biggest difference is the ecosystem. It wasn’t an ecosystem back then. But we have an ecosystem now. We have investors here, finally! That wasn’t the case in 2007.
The fact that there are local companies, success stories and amazing growth curves, to learn from, holds the biggest impact — you can simply go and ask for advice. I think the greatest thing is that you can learn some things here and you don’t have to fly abroad for that.
What is a startup for you?
For me, the startup is a company that has a global product and founders are aiming to build a company that can grow super fast. So companies are designed to have high growth.
Talking about role models, how big is Skype’s impact?
It does have an impact if you go outside of the startup sector and want to see what Estonia is. But the Skype effect created an ecosystem and now it's time for the next generation to boost the ecosystem — Pipedrive, Bolt, etc. We see that Tranferwise is investing heavily, Bolt is super active as well, from Pipedrive we see companies that going out. The next wave is happening.
Talking about Pipedrive — when will Pipedrive become a unicorn?
This is a good question. For B2B companies it takes more time. It’s more than halfway there - I think that Pipedrive is about 2 years away from the unicorn status. But the challenge is that Pipedrive doesn’t need to fundraise anymore because financially they are very strong players. They have always focused on revenue and have always been conservative in the costs. So, the question is — why fundraise if you have enough financial power. What I can say is that there are no funding plans in sight for the next 12 months, but after that I don’t know.
“We’re developing a pretty good understanding of the challenges Ukrainian founders face.”
What is your long term mission regarding helping other startups?
For the last 2 days I’ve been in calls with various founders, CEOs who are interesting to meet and talk to. We’re developing a pretty good understanding of the challenges Ukrainian founders face. But looking at Hungary and Poland, they are really big countries, it seems that we are extremely lucky, because we are so well developed compared to those countries. Which is surprising but it is what it is.
Estonian companies are really strong, they can compete pretty much everywhere, but we have an ecosystem that is much stronger than Eastern European countries and we can see how we can help them to develop and get involved more.
During the Founder 2 Founder meeting with Niklas Zennström, CEO and founding partner at Atomico (June 2019).
What is that one uniting thing or a couple of things about Estonian startups that have made them so successful in the world?
Many things helped but the thing that made so much difference is that there has always been a lot of hype, but in Estonia, it is much lower than anywhere else. People tend to deliver before making noise.
There is a company that works in a software product in kindergartens, I didn’t know about them until recently. They have been working for 4-5 years and they have the highest revenue but no one knows about them. What keeps surprising me is that our companies are working silently, in a specific area and doesn’t do much noise. They were just building a product and they haven’t been fundraising at all.
“There has always been a lot of hype, but in Estonia, it is much lower than anywhere else. People tend to deliver before making noise.”
That’s what I am saying all the time, the Estonians generally are the quiet humble overachievers. Heading back to the definition of a startup, is the definition of a startup similar in Estonia and Ukraine?
Yes, pretty much. Ukraine is heavy on outsourcing but part of our mission is to basically make the system stronger and also we explain to them what startup is today. We have seen a trend in Ukraine even before some outsourcing companies looking for a product and looking at how to go to the next stage.
So, as I said around almost 2000 people within the past two years have relocated to Estonia. Do you know, or can you tell how much talent is still missing in Estonia in numbers?
I think that the number of talent we need is growing. Because how much we need today is not important, but how much we will need tomorrow is a question. Given the fact of how many companies actively fundraise money, we need way more people.
Thousands?
Yeah. So in that sense, we definitely need thousands and this number is much likely not going to decrease ever.
The legendary #EstonianMafia Wall of Fame at LIFT99 (October 2017).
What would you say are the main benefits for a startup from anywhere around the world to relocate to Estonia?
Tallinn is a great location because you are not facing traffic jams, logistics tasks are really minor, you can just focus and do your job. You have an ecosystem. It's like a snowball effect. It is the perfect location for the European market, you can be a part of it without legal issues.
When a founder comes here, what is the first thing that they should do? Because we have founders coming from all over the world, I would say that, for some places they are really independent, they come here and they start doing their things, they don’t need any help. But from some other places, they expect us to take them by the hand and do everything for them.
That is not a founder. The founder’s style is just go and survive! I don’t believe that the government should do anything beyond the legal framework to make it easier and so on. Everything else is on you.
“I don’t believe that the government should do anything beyond the legal framework to make it easier and so on. Everything else is on you. ”
It is said that government money is making startups lazy.
Even though, I know that Finnish founders are very happy with this program, that if you take private money it is possible to double it by the government. That is something which might be useful but at the same time, I know that many investors are unhappy.
What has LIFT99 gained from being physically located in Kyiv?
The fact that we are so actively connected in Estonian and Ukrainian communities. So definitely I can see trends that I couldn’t see if we weren’t present. Also, the fact that many great people come to work in Estonia. So it makes us have a much bigger and stronger community. So I think that in this way we can increase the size of the two countries.
Ukrainian and Estonian startup ecosystem builders during a panel discussion in LIFT99 Kyiv Hub (October 2019).
For Startup Estonia, we can see that it is the IT Embassy of Estonia.
Ukraine is so freaking big. You can go and do, and take opportunities like ten times more. The fact that we have foreign investors ready to go to Ukraine, it’s a place that they can go to a place that they can have the best meetings and time spent.
Before Startup Estonia, if you needed to talk to the government what did you do?
I don’t remember really. I don’t think we had a system. You were able to arrange some meetings but it wasn’t so much organized and structured. The level that was missing was how to attract founders. Every company was recruiting anyway but it didn’t focus on this specific type of people.
How do you think the Estonian startup ecosystem will look in ten years, 2029?
As an area, Silicon Valley is smaller than Estonia. I believe that we can be as successful as they are because the country is small in size. And the most important is that after 10 years it will be financially much stronger with investors. I would predict that Tallinn especially will be one of the top places to not only build but also to fundraise because London is losing now. Paris gained momentum the fastest, Berlin as well, but I believe Tallinn will be at least in the top 5 by all numbers. I believe that we will be on a completely different level.
“I would predict that Tallinn especially will be one of the top places to not only build but also to fundraise because London is losing now.”
Let’s talk more numbers. Do you know the percentage the startup sector is contributing to Estonian GDP?
Our startup sector had been on a steady growth of 30% for years now. It’s growing so much faster than the rest of the economy. And I believe that it can be at least five times bigger, at some point 10% of GDP. It’s just a question of time.
Do you believe that startups share that goal, overall?
I would say that Estonia can be for startups what Switzerland is for banking. If you look at bigger countries, Germany has cars, London has the finance sector. But for Estonia, smart mobility might be the thing.
For example, Starship is here, there is Cleveron, and next week Comodule is opening a factory in Estonia. So that is the trend to build up a factory in a completely different way than ever before. So I believe that there will be even more great things in the future, we see some models like that.
What could the Estonian ecosystem learn from Ukraine?
Overall Ukraine is stronger historically in mechanical products. It has been very active in the world of space and navigation areas that Estonia has never had. Also, so much interesting talent is (and has been, historically) in Ukraine. It is a place where everyone can go and learn.
We have the opportunity to be much more involved and help too built companies in several countries, mostly because it is so easy to fly there. So we can learn how to build world-class companies.
This article is a guest post by Merilin Lukk, member of the Startup Estonia team and an official spokesperson of the Startup Visa program that Estonia launched in 2017. Big thanks to her and Sander Sillavee for finding the time to interview Ragnar and helping to spread LIFT99’s story and mission. Keep on supercharging the Estonian startup scene!
P.S. Click HERE to listen to Startup Estonia’s podcast series about the trends, challenges and success stories of the startup ecosystem in Estonia.
Keep on rocking, Startup Estonia!