When Indian entrepreneurs Deepak Solanki and Saurabh Garg failed to evoke interest in their startup venture in LiFi technology from local investors, it was an Estonian accelerator called BuildIt that helped them set up their business in Estonia. By signing up for the country’s e-Residency program, Solanki and Garg established their company Velmenni where today, they run offices in Tartu, Estonia as well as New Delhi, India and service clients in Germany, France and select Nordic countries.
It's one example of why Indian startup advisors and investors are strongly recommending that entrepreneurs capitalize on Estonia’s e-Residency program to develop their technology platforms, build an international clientele and gain access to the EU market.
How it works
Becoming an e-Resident entitles applicants to a digital ID card that is issued following mandatory police verification. The card can be used to sign documents, open a bank account or even register a company from abroad, and all this can be done in just a day. Solanki said that in addition to enabling navigation of institutional tasks with ease, e-Residency also permits him to apply for project grants such as Horizon 2020, a €2.5 million grant specifically meant for European SMEs.
By becoming an e-Resident, entrepreneurs also have access to stakeholders, project developers and engineers in the Estonian startup community, who can offer technical and project expertise. During Solanki’s initial stay in Tartu, he hired local technical professionals to work with him, in addition to using Estonian technology platforms for real-time application of his product.
Since its launch in December 2014, Estonia’s e-Residency program has attracted entrepreneurs from several countries. As of January 2017, 1,000 companies have been created. According to e-estonia.com, more than 18,000 applications have been approved so far, with a majority from United States, Finland and Russia.
However, there are only 630 applicants from India. According to Suhas Gopinath, prominent seed investor and CEO & co-founder of retail startup ShopsUp, there isn’t enough awareness about the program. “Moreover, Estonia has a high-risk appetite for disruptive ideas, unlike India where investors tend to play it safe. Startup technology entrepreneurs, especially with disruptive ideas, should definitely consider Estonia as a gateway to the EU market.”
What it offers to young startups
Vivek Srinivasan, founder of Startups Club, a social community for Indian startups, adds that Estonia allows pure technology or research-driven companies to flourish with e-Residency an ideal platform to get there.
Singapore continues to dominate the list of technology startup hubs, especially in Asia. A recent report by Startup Genome has ranked the country 12th in the global startup ecosystem, for the ease of doing business, availability of world-class banking facilities, extensive government support as well as the presence of investors. However, a cost-comparative analysis shows that Estonia is more economical, especially for early-stage startups that are seeking funding.
| Estonia | Singapore | |
| Cost of registration of a company | €145 + notary fee (US$161) | Minimum SG$50,000 (US$35,924) if one wants to apply under Singapore Entrepreneurship Pass. |
| Tax | Estonia doesn’t charge corporate tax on companies without dividends | Up to 17% tax on chargeable income through business |
| Housing | 2/3BHK for €300 to €400/month (US$554) | Studio Apartment upwards of SG$1978/month (US$1418) |
Source: www.investinestonia.com; www.guidemesingapore.com; www.expatistan.com
And it appears the incentives are working. Entrepreneurial culture is thriving in Estonia. With a population of 1.3 million, there are already 400 startups in Estonia, and it continues to produce more successful startups per capita than any other European nation. The high-profile sale of Skype to Microsoft for more than $8 billion in 2011 spurred a steady stream of investments into Estonian startups. Active investors include Richard Branson, Peter Thiel, Seedcamp, Matrix Partners and Intel Capital.
Why Indian startups?
Now, the Estonian government is specifically seeking opportunities with India to facilitate the exchange of information and manpower. Ambassador Rihu Kruuv said that the government is working on a bilateral program titled the India-Estonia Startup Exchange, through which 10 Indian startups will travel to Estonia to develop ICT and smart city solutions and products that could benefit the EU and India. ShopUps' Gopinath, who is also a member of the National Expert Advisory Committee on Incubation, Innovation, Technology & Entrepreneurship of the Government of India, says that he is also in talks with the government of Estonia for collaborating with Indian startups to develop a smart governance programme for India.
Recognizing the potential of startups, the Estonian government is also strengthening measures to enable higher and easier participation of foreign workers in its economy. Estonia’s Ministry of Interior recently confirmed that 339 startups can now hire foreign workers without being obligated to pay them the country’s average gross monthly salary or seek special admission from the Estonian Unemployment Insurance Fund to hire expat workers. In January 2017, the Startups Visa program was launched by the Ministry of Interior in association with the local startup community, which enables foreign entrepreneurs to live and work in Estonia for at least 18 months.
What was supposed to be a three-month stay turned into a year-long stint in Estonia for Solanki, and he made the most of what the country had to offer. “My co-founder and I had great faith in our product, and it was Estonia that helped make our idea a reality.”
