Startups are prospering in Tartu, Estonia!
In 2016, dozens of new ventures raised money — and the city hosted more than 60 startup events, with more than 2,600 people from the tech industry getting involved.
But what recipe did Tartu (the second largest city in Estonia) follow to develop its local startup community?
According to Rein Lemberpuu, former CEO of Playtech Estonia and founder of Contriber, the community’s prosperity can be largely attributed to the beneficial relationships that have developed among key players in Tartu. This has produced a nurturing and supportive ecosystem.
And in working to make Tartu a truly attractive city for startup founders (from Tartu and beyond), Rein believes that an intelligent cooperation has started to unfold among these key players.
This entails developing partnerships among startup founders, the city government, Tartu University and others, that create win-win situations for all parties involved, while keeping an eye on the primary goal of continuing to improve the local startup ecosystem.
A Startup Ecosystem Needs Physical Space
The hardware accelerator Buildit is now based in SPARK. The office space will soon welcome a Makerlab and a showroom for Estonian businesses called SparkDemo. Both initiatives are the result of collaborations with both public and private organizations.
Many members of the Estonian Business Angel Network (EstBAN) are accomplished entrepreneurs who mentor and invest in startups. In addition to a dynamic pool of investors, startups raise money on the crowdfunding platform Funderbeam. This was the case for two startups from Tartu this year: Sportlyzer recently raised €132,000 and SportID €161,000 using the platform. A flow of capital helps new projects to be started.
Another reason for Tartu’s success as a startup hub lies in Estonia’s talent pool. As Government CIO Taavi Kotka explains, doing IT at a reasonable price is a competitive advantage of Estonia. Although Estonian software engineers are not the cheapest among Eastern Europeans, they understand how to design more efficient solutions. The result per euro is higher than in any other country. This is the result of people leaving tech giants like Skype, as well as the ability of universities like UT in encouraging students to become more knowledgeable about both computer science and entrepreneurship.
Implementing the Lean Startup Methodology
The new generation of startups is also able to grow with less resources than dot-com companies like Playtech.
Rein Lemberpuu points out that modern startups can establish successful businesses without big budgets and the need for bank loans. The focus for founders should be working on an idea that can solve a specific problem for a specific group of people. This is why he encourages entrepreneurs in Tartu to run as lean as possible.
Lean startup is about gaining insight on the market at a low cost by using experimentation.
And while it’s true that entrepreneurs need money to cover their basic operating costs in the beginning, their main concern should be on developing a prototype to validate the potential of a business idea. Tartu startups SportID and Weekdone have both demonstrated that it’s possible to run really lean. Contriber is also using the lean approach for developing a new product, which will help other startups to raise money from investors more efficiently.
Entrepreneurs should not waste their time, energy, and money on developing products that don’t solve problems for potential customers. This is where startups often fail—they adopt a product-oriented approach rather than a customer-oriented one. They have a vision for a product and spend an enormous amount of time refining the product without considering how it might serve their customers.
The lean approach can be summarized in three words, the build-measure-learn cycle.
You build a prototype from the insight you get by observing and interacting with your customers. Then, you measure how real people buy and use this prototype. You end the cycle by learning from measurable outcomes like conversion rate or usage behavior. It means that the idea/product is continuously tested in reality.
Validating an idea with customers allows startups to improve their business model and shorten the total time of building the final product. Startups that implement the lean methodology have lower rates of failure and are more likely to build a sustainable business.
But running lean is not the only reason behind the success of the local startup ecosystem in Tartu. As mentioned, it’s also the cooperation between key players of the local startup community. You’re probably wondering, who are these main players? Here’s a quick overview.
The Key Players in Tartu’s Booming Ecosystem (and Their Contributions)
Inspiring and Connecting Young Entrepreneurs: The Academic World
Firstly, University of Tartu plays a very important role in the ecosystem as it is keen on supporting and promoting entrepreneurship.
UT encourages its students to work on their business ideas already during their studies. They run a pre-incubation program called Idea Lab. The Idea Lab program consists of a series of events with the goal of providing mentorship to students. Participating teams work on their ideas throughout the program, where they have a chance to get advice from experts of different fields at every event.
At the end of each semester, a pitching competition called Kaleidoskoop is organized. At Kaleidoskoop, teams pitch their business plans they’ve been developing to a jury. The jury chooses the team with the most promising business idea — this team gets a chance to participate in SLUSH.
The university takes part in organizing many entrepreneurship-related events. The biggest event in 2016 is the sTARTUp Day business festival. This December, the student business and project ideas competition Kaleidoskoop is also held as a part of the festival.
sTARTUp Day: Tartu’s Flagship Event for Estonian Startups
sTARTUp Day is a flagship event for Southern Estonian IT businesses, organized by the key players of the startup ecosystem of Tartu. The idea was initiated by the University of Tartu, which decided to collaborate with the city government of Tartu, sTARTUp Hub, and many other partners to bring the business festival to life.
Collaboration between the startups and public organizations in Tartu is what really made the event possible.
sTARTUp Day is expected to host more than 1,000 guests: startup founders, IT specialists, entrepreneurs, and business enthusiasts.
This year’s sTARTUp Day will focus on a theme that is linked to the startup mentality in Tartu: running lean. The event aims at answering one question, ‘How To Earn If There’s Nothing To Burn?’. Startups are often criticized for burning through investors’ money and failing to earn enough profit. The speakers will discuss how to increase the success rate of startups and how the lean approach can help startups to avoid making common mistakes.
sTARTUp Day has the potential to become an annual wrap-up event for the Estonian startup scene. The event is a celebration of entrepreneurship and innovation, where awards for the year will be given out. This year, Estonian Startup Leaders Club and EstBAN (Estonian Business Angels Network), will be giving awards to the top 20 early stage startups of the year.
The business festival will be held on December 9, 2016 in the new main building of the Estonian National Museum — a new and exciting venue in the city of Tartu, which is to be opened this autumn, October 1, 2016.
Other Tartu Events and Coworking Space
In addition to the business festival sTARTUp Day, many other interesting events in Tartu are consistently held. For example, there is a monthly networking event called OpenCoffee Club Tartu that takes place in SPARK every two months and in sTARTUp Hub every other two months.
There are also hackathons, pitching and ideation events, such as Idea Storm (organized by the University of Tartu). There is also VUNK Idea Garage (organized by VUNK accelerator) which serves as a pre-event for their accelerator program.
Coworking spaces are pivotal elements of the local startup ecosystem. This is where founders work to make the magic happen in addition to being a nice place for people to meet. For example, sTARTUp HUB hosts some of Idea Lab’s pre-incubation program events and serves as a workplace for members of different startup teams.
The number of startups founded in Tartu that are becoming successful is on the rise.
This is important because success stories of Estonian startups inspire other entrepreneurial citizens to get started working on their own business ideas and building startups. It gives them a chance to learn from other founders and triggers a chain reaction, which leads to more startups being born and enjoying success.
- Click & Grow — a startup that developed a smart plant growing technology and is now selling their product globally.
- Qminder — a fast-growing tech company that created a SaaS queue management software.
- Speak Languages — a free website for learning foreign languages, translated into Estonian and 35 other languages.
- SprayPrinter — a startup that created a smart device, which makes painting pictures and patterns on walls super easy.
- Nortal — a tech company that provides instantly responsive and interoperable services, which simplify the processes of the different aspects of society, created with the latest technology.
- GoWorkaBit — an online job board that helps companies find temporary workforce.
- Sportlyzer — a startup providing team management software for coaches.
- SportID — a company that developed a solution that makes providing sports and health benefits for employees easier for companies.
- Greenhouse CI — a startup that helps you build, test, and deploy Android, Cordova, Ionic & iOS apps.
Mentorship is vital for those who are new to the business world. Having a great number of experienced startup founders in Tartu makes the city attractive for entrepreneurs — it’s easy to find good mentors and implement vicarious learning.
Successful entrepreneurs often become angel investors. They are passionate about startups and therefore want to support the growth and development of the local startup ecosystem with both their knowledge and investments.
Availability of Investments and Mentorship
The startups of Tartu don’t have to look far for investments. Several EstBAN members are located in Tartu — accelerators are popping up as well, with Buildit being the first one. This is a good example of the development that is taking place and of the growing need for such services.
Buildit was created in 2014 and has already accelerated 26 startups. Buildit provides €3,000 for participating startups for 3% of the shares (to cover the living costs of the teams, so that they can commit themselves completely to working on their startups), but also additional investments in the follow-on program.
In fact, the startup ecosystems of Tartu and Estonia are thriving so much that, foreigners are also increasingly interested in the country. More than 700 foreign entrepreneurs have already incorporated companies in Estonia with the help of the country’s e-Residency program and the digital ecosystem which has attracted a great number of foreigners to work at Estonian startups.
Tartu startup hubs illustrate it very well — you can come across people from many different countries when walking through them.
*Photo Credit for the featured image goes to Sven Zacek via visitestonia.com