Cristobal Alonso: What to expect from 2017 in the Baltic startup scene

This is an excerpt from our CEO Cristobal Alonso interview with The Baltic Times. Full article here.

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2015 was a record year in the region in terms of investments and we see in 2016 a similar year on startup investment amounts and also the number of startups created each year is growing.

Estonia is still going strong but not comparable with 2015, which was, as in the case of Lithuania also, a record year. However, the number of companies founded, 22 in total, and the amount they are worth is still an indication of a healthy ecosystem. The good work of the government in the area of e-residency is helping the country to keep its positioning and has even allowed e-residents from abroad to open bank accounts. Still having the strongest accelerator Startup Wise Guys, which keeps creating a lot of deal flow and was the ninth largest investor in the Nordics (report by Funderbeam, 2016). We can also see the Tartu startup scene emerging stronger with their recent tech/business festival sTARTUp Day. The question may be if Estonia is starting to become too complacent with its good positioning.

Latvia has been the only of the three Baltic countries in which 2016 was a stronger year than 2015, with an investment volume close to 50 million euros. But truth to be told, 2015 was not a strong year on its own. Also, there has been a huge level of activity with the creation of the startup association Startin.LV, the launch of the new startup law (with the social flat fee as the star measure), and the opening of the first startup accelerator in the country, Startup Wise Guys Riga, powered by Lattelecom.

For Lithuania, 2016 has been a difficult year. After a 2015 where Lithuania set national records in terms of companies funded by VC (26) and also the amounts invested (45 million euros), having one company (Vinted) driving half of that amount, 2016 has slowed down quite dramatically. Also, Practica Capital has slowed down investments on early stage startups (as the current fund is mostly invested). And there is no accelerator running in the country to help create deal flow. Last but not least, the IT sector is booming, which has raised the cost of developers in the country dramatically, which was in the past a great startup value proposition. To finish on a high note, Vilnius Tech Park opened its doors in Q4 and should become a key driver in the ecosystem, helping to have a more vibrant and integrated ecosystem overall.

What to expect from 2017?

The number of start- ups continues to rise in the region, mainly in Latvia and on a lesser extent Lithuania. Some VCs from UK, Germany, and Scandinavia that have been eyeing and scouting out the region for several years will make their first large seed and/or series A in the region.

There are a number of medium size exits.

If accelerator tenders from local governments (leveraging EU money) are in place by Q3 2017, we will see a very strong end to the year.

The number of startups from Ukraine, Belarus, and the region will move headquarters to the region.

And this is a hope but also a belief — much more collaboration between the leaders and drivers of the three Baltic countries to achieve things together and stop the nonsense of competing against each other.

What is on your wish list to the Baltic States’ governments in terms of legislation and taxation?

First, make sure accelerator funds are awarded no later than Q3 2017; second, e-governments in all three countries should stay at a minimum at the level of Estonia; third, a social flat fee in all three countries is needed; fourth, startup visas to attract non-EU talent are required; fifth, maintenance of the current TAX structure is mandatory; and sixth, everything in English ought to applicable across the entire region.