What does Estonia have that India doesn’t?

To the untrained eyes of an outsider, Tallinn, the capital city of Estonia doesn’t give away that the city, or even the country, is one of the world’s most digitized places. Or that it has a teeming startup ecosystem.

Tallinn is home to unicorns like TransferWise, a cross-border payments startup. And Avijit Sarkar, founder of CapOne, a Delhi-based company, is taking competition right to TransferWise. In CapOne, Sarkar wants to set up a cross-border payments company by building his own blockchain infrastructure.

Seeking the cross-border payments

Setting up in Tallinn makes it look like Sarkar thought of himself as David searching for the Goliath of cross-border payments. But setting up shop in this tiny Baltic nation was the only way Capone could run. And luckily for him, he is there on the Estonian government’s invitation.

Estonia has been hyped up to be Europe’s silicon valley. But the reality is, with a population of just 1.3 million, it has a serious talent crunch. It can no longer depend on its population to support it is up and coming startup ecosystem. And as part of solving it, the Estonian government in January rolled out a program that eases visa norms so entrepreneurs from other countries can easily set foot in the country.

So far, 220 companies from 40 countries applied to set up in Estonia and 35 of those were Indian. Of the 100 whose applications were accepted, 13 were Indian. These are startups mostly working on the blockchain, logistics, automation-related sectors.

But why would Indian entrepreneurs like Sarkar leave a market as enormous as India to markets that are alien?

It is a question of acceptance, said Sarkar, who moved to Tallinn in January. “It is not easy to run a startup in India. I have found better acceptance in Estonia.”

Living the Estonian dream

The old town center of Estonia lulls you into thinking it is a quaint Eastern European city with its long sloping red-tiled roofs and spires. But it belies the fact it has a digital pulse. The average Estonian relies on digital for everything—from consulting with a doctor to paying taxes. Nearly 80% of the country is also cashless.

Estonia does not have huge reserves of natural resources or big industries to boast of. It was a startup called Skype that put the country on the world map. But after a point, the video calling company moved its headquarters out of the country to the UK. So did TransferWise. They did this because they were scaling rapidly, and they couldn’t find the talent they needed from the country.

Why is that? Well, there are just two universities in the country—The Tallinn Technical University and the University of Tartu. And together, they account for about 500-600 engineers graduating each year from which all of Estonia’s 400 startups hire. So as a startup scales and its talent need increases, it has to move its company elsewhere.

“While the quality of the talent pool is high, if we need to hire 200 engineers, we are not going to find those numbers here, so we need to move our headquarters out of Estonia,” said Martin Henk, head of customer support for Pipedrive, a software as a service company, in an interview. Pipedrive is looking to move to Portugal.

This is the biggest problem in the way of Estonia’s ambition to be a top startup ecosystem in Europe. The very active startup lobby ‘Startup Estonia’ is in charge of not just bringing fresh talent from other countries but it also encourages startups to come to Estonia. In what is one of the biggest moves, the program convinced the government to ease rules for startups like doing away with the minimum investment requirement of €65,000. And founders of startups can also get a five-year permit to stay in the country.

And Indian startups are already warming up to this idea.

 

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