Estonian Development Fund
26 October 2015

Estonian Development Fund: “European Startup Act 2020 – great benefits for our startups”

We [Estonian Development Fund – ed.] strongly agree with all of the recommendations listed in the [European – ed.] Startup Act and in some cases see great benefit for our startups. 

Accessible finance for entrepreneurs

In terms of VC investments per GDP Estonia performs quite well. Startups with Estonian background raised an annual of 71 M EUR in 2014 and 10% of it from local investors. So the importance of international capital sources is very high for our startups. If there were incentives for foreign investors, this would help increase the capital flow into European startups, without the need to relocate asap.

Alternative finance regulation

According to a recent study by Ernst&Young and University of Cambridge (Feb 2015), UK strongly leads the way in alternative financing in Europe (75% of the whole European alt. Fin. Market). But per capita Estonia is second in Europe (16,7 EUR), so there is potential there. Currently there is no separate regulation for crowdfunding in Estonia. A simple regulation for all member states would help Estonian crowdfunding industry grow, but also make cross-border deals easier.

Simplified startup creation

Launching a company in Estonia is easy and fast, can be done online and with 0 capital requirement. But A single European Private Company type would make it easier for foreigners to set up a company in Estonia and/or draw in foreign funds. Today the vast majority of startups are incorporated as private limited companies “OÜ” in Estonia, but its format is somewhat hard to understand (because of different nominal value of shares).

Entrepreneurial exchange

In Estonia we are also looking at this matter from 2 perspectives: on one hand to meet the need of our startups (as a small country the talent pool is a growing pain for our startups) and secondly being more open for startup founders from 3rd countries to come and set up a business in Estonia. Today the requirements heavily differ among EU countries, but when we look at EU as a single market harmonisation is needed. What the minimum standard criteria should be – that is the most important question. Make it as easy and less burdensome as possible, while of course also minimizing the possibility for misuse.

 

Rivo Riistop is a project manager from Estonian Development Fund, an organisation that executes the “Startup Estonia” program – governments effort to boost the development of Estonian-bred startups.