Too many states greet every unicorn as a national triumph. However, the louder a country cheers a start-up, the smaller it starts to sound.
There’s no doubt that possessing one of the world’s smartest and most advanced systems of digital public services helped put Estonia, by no measure a big country, on the map. Meet an Estonian (especially in a business context) and the fact that the country’s lucky citizens can do just about everything online will be mentioned almost immediately. Also, that the country boasts more unicorns (per capita) than just about anywhere on the planet (one for every 137,000 citizens. Germany would need about 600 to meet a similar ratio. It has 46).
By now, building a successful tech start-up in Tallinn is no more a surprise (or, indeed, achievement) than doing so in Berlin. And yet it remains a badge of honour, a feature of press releases and breathless announcements. It shouldn’t be so. Given the outstanding tech ecosystem in Estonia and start-up friendly regulations the country boasts, it might even be easier to start out on the Baltic sea than the river Spree.
Estonia is not alone in making great play of its ability to grow and nurture successful start-ups. Its Baltic neighbours, Latvia and Lithuania, do much the same. Larger countries are guilty too. Polish and Romanian start-ups have a habit of making announcements that suggest their country of origin is somehow a handicap that had to be overcome. While that may have been true in the past, it no longer carries much truth. Talented people can launch successful businesses just about anywhere, and frequently do. You built your start-up in a country in Central and Eastern Europe? Good for you, but that’s not a story anymore. It’s not surprising, and certainly nothing out of the ordinary.
Europe now holds close to 40,000 funded tech companies, against 13,000 a decade ago, and more than 27,000 people started one last year alone, a record. Tom Wehmeier of Atomico, which publishes the annual State of European Tech, treats the old anxiety that the continent cannot breed founders as settled: of course it can, in bulk. Building a company, even a good one, even a one billion US dollars one, has become a perfectly ordinary thing to do.
And yet the counting of unicorns goes on, and on, as if the numbers are be all and end all, in and of themselves. Back in 2022, Andres Sutt, then the Estonian minister responsible for entrepreneurship, announced a target of 25 unicorns by 2025. The deadline came and went with the count stuck at 10 but nobody appeared particularly embarrassed or considered this a failure. Sandra Särav, a deputy economy minister, still explains to interviewers that Estonia digitised early because it was “too poor to afford anything else”, a good line, and a revealing one. Invest in Estonia, the state promotion agency, still markets the country as a ‘Unicorn Factory’ and invites foreigners to buy in. Germany, which makes rather more unicorns in absolute terms, has somehow never felt the need for such a factory, nor does it obsessively count unicorns.
Holding on
Perhaps the real challenge for the region is not creating unicorns and obsessively counting them, but making a better fist of holding on to what it has built. For all its founding, Europe is generally poor at keeping much of the value of what it produces. Atomico’s latest report has the continent generating 17 per cent of the world’s new company value while banking only 10 per cent of the money realised when firms are sold or floated. Fifteen per cent of the founders it surveyed had already shifted their headquarters abroad, most of them to America, numbers which, among those on a second or third venture, have climbed from 10 to 18 per cent since 2016. While the talent and some (if not all) operations still tend to stay put, a lot of the capital takes flight.
Romania, in the popular local idiom, has seen this film. Daniel Dines started UiPath in Bucharest in 2005 but floated it on the New York Stock Exchange in 2021 at 29 billion US dollars, the headquarters having crossed the Atlantic long before the IPO. (Its value has since dropped considerably, but that’s another story). Estonia is now watching a similar film. Skeleton Technologies, founded in Tartu in 2009, closed the first 33 million euros of a pre-IPO round in May, money that goes towards a flotation planned for 2027 on, yes, an American exchange. Estonia claims it as its own despite its supercapacitors being made in Germany, its battery plant in Finland, and a new factory planned for the United States.
None of this is a reason for opprobrium, nor a reason to stop being proud of a local tech ecosystem (nor a reason to stop promoting it). But it is, arguably, reason enough to stop acting surprised. ‘Punching above its weight’ has become an almost religious mantra, a phrase the region cannot resist, but it by now fits so much of Central and Eastern Europe that it flatters precisely no one, and impresses fewer still. Given their track record, a few of these countries might now, if we’re being particularly critical, be punching below their weight. Instead, it is surely time to stop counting unicorns, and just get on with the job of holding on to the value that they have created.
Photo: Dreamstime.