‘Payback, sustainability, independence’: The ‘radically different’ model that works for Vilnius start-ups

Start-ups in Vilnius, the Lithuanian capital, are growing – and are on the lookout for talent from around the world.

Facebook’s owner Meta recently laid off 11,000 workers – the first reduction of such a scale in the company’s history – and is only one of many tech giants currently making touch choices about staff cuts.

But while a significant number of tech firms deal with slowing growth, high inflation and rising interest rates by downsizing, many of those based in the Lithuanian capital Vilnius are witnessing the opposite trend. So much so that the city even launched a rather cheeky guerrilla marketing campaign close to Meta’s London offices.

A quick glance at the stats reveals that Vilnius can back up its cheek.

The so-called Vilnius TechFusion ecosystem (encompassing the ICT, fintech, biotech and laser industries) shows no signs of slowing down. Quite the opposite, according to Inga Langaitė, head of the Lithuanian Start-Ups Association.

“Lithuania’s startup sector is growing rapidly and strengthening its value,” she says. “In the third quarter of this year, the 700 start-ups active in Lithuania paid 74.4 million euros in taxes, 45 per cent more than in the same period last year. The sector’s average salary grew by a fifth to 3,200 euros, and the total number of employees in the ecosystem has already reached 16,400.”

This growth means that Vilnius is experiencing high demand for tech specialists: the Lithuanian unicorns Vinted and Nord Security are alone currently looking for more than 350 people, while the total number of vacancies in the country’s most successful start-ups exceeds several hundred.

A radically different business model

While globally the situation on the financial markets is far from ideal (and Lithuania is no exception), growth without external investment is an important part of the Lithuanian start-up ecosystem, says Karina Dirvonskienė, human resources executive at the leading Lithuanian digital security and privacy start-up Nord Security.

“We believe that we could have even more official unicorns in Lithuania, although they prefer growing in a more sustainable way and focus on profit in the early stages. It’s the more sustainable business approach that allows [us] to withstand unfavourable economic circumstances.”

Inga Langaitė agrees. “Yes, we are facing more cautious investment planning, slower growth and hiring. But when you live with ‘winter’ in mind, you follow a radically different business model,” she says.

“You are not thinking about beastly growth at any cost, but rather about payback, sustainability, independence and residual value. Having followed the American business model and been dependent on investment, some of the world’s start-ups will have to learn to turn back to European or even Lithuanian conservatism.”

Gerda Sakalauskaitė, managing director of Lithuania’s venture capital association, agrees that there will be good opportunities for growth in the times to come: “In many regions, start-ups were overvalued. It hasn’t been the case in Lithuania yet, so we have room for manoeuvre. In addition, our local VC market has successfully fundraised new funds for the upcoming period, so we have resources to support local start-ups, especially in the early stage.”

The principles of conservatism and sustainability have ensured that the growth of Vilnius TechFusion has not slowed down, even in a difficult year such as 2022.

According to Ilona Bernotaitė, human resources executive at digital health product company Kilo Health, “the growth of the business itself has not slowed down this year, because we have put the right processes in place and done our homework before taking the next step in the growth of the team.”

Disrupting traditional markets

Vinted and Nord Security, the unicorns that have attracted millions of dollars in investment, have already demonstrated that the professionals working in the Lithuanian capital meet the needs of the international market.

Now the Vilnius unicorns face up to a new challenge — a possibility to prove that Vilnius meets the demands of an increasing amount of talent coming from all over the world.

“There is no doubt that Vilnius has a lot of advantages compared to the big megacities — it is a very clean and green city with convenient transport links, and the conditions for doing business are improving. Another important difference is the work culture,” Bernotaitė adds.

“A lot of team members leave companies because of the highly toxic atmosphere. The culture of Lithuanian start-ups is friendly, open to opinions and talent initiatives. We see this as one of the biggest advantages.”

Vilnius also promotes a government initiative to compensate 3,000 euros to arriving talent in order to cover relocation costs and 5,000 euros to companies that employ talent from around the world. But even without such incentives, most Vilnius tech firms have already started designing their recruitment strategies based on international talent themselves.

According to Toma Dile, executive director of a solar photovoltaic system design tool start-up PVcase, “our company currently has 130 employees internationally. In just one year we have doubled in size. And we do not plan to stop in 2023 — we have a goal of expanding our team to 250 employees. We will be hiring mainly in Lithuania, Spain, Germany and the US, and this is a very important part of our recruitment strategy — we already have and will be actively recruiting abroad.”

Meanwhile, Nord Security plans to increase its headcount by 40 per cent.

Start-ups and unicorns that emerge from these difficult times are disrupting traditional markets, changing habits, and at the same time are creating global trends and radically new value propositions. The lessons learnt and the experience gained can help to absorb the challenges ahead.

“The winners are those that can respond to change flexibly, plan responsibly, manage costs wisely and stick together,” says Inga Romanovskienė, director at Go Vilnius, which promotes investment in the city.

“Such start-ups can turn a crisis into an opportunity rather than a verdict. Professionals are invited to discover those opportunities in Vilnius.”

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