Estonia has enjoyed success stories in ICT implementation in a broad field of public and private sectors for last 15-20 years. The key event for that development was the launching of the Tiger Leap program in Estonian schools, 1996. The program fully equipped schools with computers and Internet access and other ICT services. Computer science classes were provided in 84% of schools in the following eight years. Since 2014 World Economic Forum considered Estonia among innovation-driven knowledge-based societies, and some years later – being hidden entrepreneurship champion in Europe. Besides, Estonia has become one of the developed start-up ecosystems where young ICT companies are booming. These events mentioned above refer to the successful combination of educational and entrepreneurial ecosystems in Estonia. The presentation aims to disclose the role of ICT start-ups as the engine of the innovation-driven development in a small society. Case studies analyse the entrepreneurial process and journey of ICT start-ups suggesting dynamic stage model approach. This approach discloses complexity of the entrepreneurial journey from opportunity recognition to venture launch. Findings of studies show growing importance of digital technology, ICT start-ups and the entrepreneurial ecosystem in the welfare of Estonian citizens.

1. The process of new venture creation –
towards the booming ICT start-ups
Prof. Tõnis Mets
Klagenfurt, April 24, 2018

2. Estonia

3. 3
185 km
Raagmaa et al
2013

4. Estonia - basic facts
• Population – 1 300 000
• Area – 45 226 km2
• Currency – EURO
• GDP per capita $29,500 (WB 2016 PPP), 1987: ~ $2,000
• Member of WTO – 1999; EU and NATO 2004, OECD -
2010 (Dec), Eurozone 2011
• The Wall Street Journal’s Index of Economic Freedom
for 2018 Estonia ranks 7th
• World Economic Forum's (WEF) Current
Competitiveness Index 2016 Estonia ranks 29th
• WEF 2017/18: Higher education and training – 19th
• Ease of Doing Business Index 2018 ranks Estonia 12th
• Networked Readiness Index 2016 ranks Estonia 22nd
• E-residency law, 2014

5. Important milestones, selected
facts, Estonia:
• Own state: 1918-1940, Soviet occupation 1940
• „Singing Revolution“, regaining independence, 1991,
disconnecting from the East
• Restart of private business initiatives, 1987
• Tiger Leap program, 1996, followed by e-government
– political entrepreneurship
• Entrepreneurship development programs, 2000
• Estonian Development Fund: > €5M investments per
year into startups, since 2006
• Member of GEM, 2012; TEA Index, 2016: 16.2 %

6. 6

7. 7

8. Content:
• Entrepreneurial/startup ecosystem in
Estonia: http://www.startupestonia.ee/
• ICT as the source of knowledge economy
• Trends in ICT startup development
• Case studies: New startups and investors
replacing foreign direct investment (FDI)

9. Development stages of Estonia and
GDP per capita, current prices, EUR
(based on Schwab 2014, Statistics Estonia 2016)
9
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
Innovation-
driven stage
Efficiency-
driven stage
Transition from
efficiency- to
innovation-
driven economy
Recourse-based Knowledge-based
Catching-up period

10. Ecosystem for development:
New type of investors
• Old Soviet industry was not sustainable anymore
after 1991
• Estonia has been successful with FDI, but this FDI is
not interested in knowledge creation (R&D)
• Now: money is moving out – negative FDI balance
since 2011
• Seed capital comes to Estonian startups after moving
HQ to global centres
• New businesses to be sold ASAP?
10

11. After-crisis developments in Estonia
• Fewer employees – productivity growth in old
industries
• New startup programs and entrepreneurship
booming
• >10% of new ventures come from software field
• World Economic Forum: Entrepreneurial economy
in Estonia
• Doubts from industrialists – support of traditional
(oil shale, furniture production, etc.) industry!
• Forbes: any use for ordinary Estonian people?11

12. ICT sector in Estonia (Statistics
Estonia 2016, current prices)
12

13. Why ICT and entrepreneurship?
Some milestones:
• Tiger Leap program in Estonia, 1996
• E-governance – paper-free assemblies, 2000
• Electronic ID-card, 2002
• E-services: https://www.eesti.ee/est/teenused
• Crises 2007-2009
• Entrepreneurship policy, since 2000
• The role of ICT as the engine of the
innovation-driven development in a small
society?

14. ICT and entrepreneurship
Entrepreneurship skills should be a part of
literacy – 3rd literacy after reading and writing,
and computer proficiency.
Anzori Barkalaja, Director of the
Culture Academy

15. Number of employees by the size of
software development companies
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
1-9 10-19 20-49 50-99 100-249 >250
Statistics Estonia and Commercial Registry, 2016

16. Number of people employed, sales,
export, profit and value added of
software companies
-200
0
200
400
600
800
1000
1200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EmployedX10 Sales, m eur Export, m eur Profit, m eur Value added, m eur
Statistics Estonia, 2017

17. The export-import balance of Estonian
service export 2013-16, million euro
Statistics Estonia, 2017
185.1
217
256.3
286
958.7 980
940.7
826.4
102 116.1
161.5
218.3
2013 2014 2015 2016
Balance
ICT Logistics Building

18. Unicorns - startups from Estonia,
see also: http://www.startupestonia.ee/startups
http://hub.garage48.org/estonian-startups
• Playtech, 1999: FTSE 250 Index, London
Stock Exchange
• Skype, 2002: investments $25m, acquired by
eBay for $2.6 billion, 2005
• TransferWise, 2011: investments $396.4m
Expected soon:
• Taxify, 2013: investments $2.2m

19. The number and share (%) of entrants
to ICT studies in HEIs by study years
Ministry of Education and Research, 2017
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
200
400
600
800
1000
1200
1400
1600
06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
ICT intake ICT %

20. Investments into Estonian startups,
million euro
martin@garage48.org, 2018

21. Ecosystem and welfare:
concluding remarks
• Statistics Estonia: GDP growth from software
• Highly paid jobs in ICT/hitech startups => jobs
in traditional sectors
• Conclusion: Integration of Estonian and global
entrepreneurial ecosystems?
• Warning signal: not following national smart
specialization strategy, government
compromises the future of innovative
knowledge-based Estonia 21

22. Main conclusion
In the socioeconomic context, Estonian ICT
startups remain a success story, not
depending on the venture capitalist or
traditional industrialists’ view

23. Some examples
ICT+

24. 24
Click&Grow (C&G), inventor of intelligent
houseplant pot Mattias Lepp, 2009
Experienced IT entrepreneur, participant of “Brainhunt”
• Pre-history: own software development company
• Opportunity recognition: from inception, based on product
idea from NASA
• Globalization: USA, United Arab Emirates, Russia, Great
Britain, Germany, France, Sweden, Canada, Brazil, China
and Japan
• Funding: Estonian venture/angel capitalist already in the
intial phase of product development, Kickstarter campaign
• IP portfolio&strategy: Patenting; involving university
researchers; involving customers in Kickstarter campaign
• Competitive edge: First-mover, emotional attractiveness of
the product for the customer
• Bus. model and strategy: B2B; Leverage via networking
with traders, no market pressing

25. From smart pot to smart
garden

26. Click & Grow

27. Click&Grow
• The Hands-Off Hydroponic Garden
• http://www.clickandgrow.com/

28. Fits Me / Massi Miliano
• Massi Miliano was founded in June 2006 by Heikki
Haldre with the idea to create robotic mannequins
for virtual tailoring fitting rooms. The firm started as
technology developer with the support of the state
agency Enterprise Estonia and private and
institutional investors.
• Researchers of the University of Tartu and Tallinn
University of Technology were involved to
development process from the very beginning; the
first patent applications were dated from the year
2007.
• Heikki Haldre & Paul Pällin are co-founders of Fits
Me registered in London, 2009.
28

29. Fits Me, cont.
• The company has designed a virtual fitting
room for e-shoppers to fit and suit clothes
before making a purchase in e-shops.
Technical solution for that is flexible bio-robot
mannequin adjusted to mimic of the buyer’s
body and visualizing to a person how a piece
of clothing fits her/him. In 2012 Fits.me moved
headquarter to London and in 2015 it was sold
to Japanese e-commerce giant Rakuten
(Lunden and Lomas 2015).
29

30. Fits Me
30

31. Main facts: Fits Me
• Total capital raised: 15.42 M€, 15% from
Estonia
• Price of sales not known, some doubts about
investors’ happiness
• ~50 highly paid jobs created, value added
~80000 € per employee year
• 0.7 M€ taxes from labor annually
• Competencies created and remained in
Estonia 31

32. 32
Feature of the
model
Description of observed features of the journey RemarkEntrepreneurialprocesspattern
(Re-shaping)
Propositions
Pre-incubation
Experienced in e-commerce and fashion shops, Heikki
Haldre initial idea is to create scanning technology for
human body for tailor purposes
Start-point based
on former
competencies
Intention Interest in creating innovative technology for garment fitting
services for e-shopping; founding Massi Miliano OÜ
Idea, 2006; Early
funding: loans
Idea
Development
Feasibility study of technology, R&D, prototype of robot-
mannequin, first tests, 1st patent application 2007
2006-2008
New Venture
Idea (NVI)
Idea of virtual fitting room 2008
Concept
Development
The concept of virtual fitting room SaaS, development of
robot-mannequin, customer tests in the UK, USA 2009-10,
Fits.me Holding 2009: virtual fitting room solutions on a
software-as-a-service (SaaS) basis
2009, EE: €0.7m,
involvement of
new owners
Opportunity
Confidence
Starting sales of services in UK, USA, Germany, Italy,
Estonia
2010-2011
Business
Development
Continuous development with customer tests. Fit Advisor
service 2013.
HQ in London,
2012
Venture Launch Sales 2013: ~2.8 m€, profit 0.27 m€ declared, 57
employees
Massi Miliano
Post-Launch Merge of US startup Clothes Horse Dec 2014. Acquired by
Rakuten, July 2015; positioning as data acquisition and
analytics company 2017: Fashion IQ – insights tool

33. Entrepreneurial journey: Fits.me
Venture maturity
Stage
Intention
New Venture
Idea
Opportunity
Confidence
Venture Launch
Pre-incubation
Propositions
Idea Development
Concept
Development
Business
Development
Time
P2006
2008 2012 2014 20152011 20132007 2009 2010
R&D Robot-
mannequin
1st patent
application
HQ in
London
Loan: €23k
Widening
ownership
€2.6M seed
investment
Acquired by
Rakuten
Loan+subsidy:
€102k
Virtual fitting
room, first
tests, variaty
of instruments
€5.5M A
round
investment
€4.2M B
round
investment
Merge of
Clothes
Horse
Founding
Fits Me
Holding
Ltd
Virtual fitting
room,
continuous
tests
1st Robot-
mannequin
Fit Advisor

34. Fits Me, some conclusion
• In the entrepreneurial process, initial body
scanner idea was replaced by bio-robotics,
integrated further to the virtual fitting room.
The latter was complimented with the Fit
Advisor. And finally, in the Rakuten
corporation Fits Me became the advisor for
brand owners and retailers. This is a long
journey of learning and competence
development, but this is also the story of
reshaping business idea and its technological
embodiment. 34

35. 35
Mobi Solutions – M-business
Mobile payment services (web): Fortumo, 2007
• IT & business students, Oct. 2000 – just a moment EMT
(Estonian Mobile Telephone) launched mobile-parking
service model => Intel (2010), Microsoft, ….
• Pre-history tech-learning: 2000-2008, searching for M-
service (and) business models, testing on local markets
• Opportunity recognition: from inception, implementing
Living Lab methodology,
• Globalization: 81 countries (2014, 4 billion mobile users),
2015: digital market prognosis 268 billion US$.
• IP portfolio&strategy: no special measures and strategy
• Competitive edge: Easy to use; no fees (from concrete
service only), 80000 developers worldwide (21.02.2013)
• Bus. model and strategy: B2B; Leverage via subsidiaries
and BM replication (offering own ready BM for clients)

36. Case: Mobi Solutions, mobile payment
36
Model feature Description of observed features Remarks
Entrepreneurialprocesspattern
Propositions Business and IT students starting their specialty; Rain
Rannu had a little international & business experience
Tartu, Estonia
Intention Interest in growing mobile technology and business Initial idea, 2000
Idea
Development
~200 different products & services tested; earning for
NPD; mobile payment “Every-Man M-Business” 2003
Started on
growing market
New Venture
Idea (NVI)
After 5 years sales of different products idea to globalize
the platform “Every-Man M-Business” 2006
Longer prepa-
ratory period
Concept
Development
From local to global service & business model (BM) Both models
used
Opportunity
Confidence
Local/regional OC reached very early, 2001 as service
provider; bootstrapping for NPD; Global OC 2006
Two related
opportunities
Business
Development
Start without BP, from local/regional to global strategy;
Fortumo’s offices: Tartu, San Francisco, Beijing, Dehli
Mobi HQ: Tartu
Venture Launch First products locally in 2001; mobile payment platform &
BM to rent out: Global spin-off Fortumo, 2007
Serial events
Post-Launch Bootstrapping from inception; profitability of Global
business, 2009; sales ~$30M, 2014
Fast growth
2008-

37. http://www.mobi.ee/; http://mobisolutions.com/
Your
company
here?

38. Entrepreneurial journey: Mobi
Solutions
Venture maturity
Stage
Intention
New Venture
Idea
Opportunity
Confidence
Venture Launch
Propositions
Idea Development
Concept
Development
Business
Development
Time
P2000
2000
P2006
Global
Spin-off
Fortumo
2006 2007 2013
Over 200 products tested, most
launched for some period
Involving
Global
investors
International
sales
2003
NPD project
supported by
EE
2005
Subsidiary
in Latvia
2011
Office in San
Fransisco
Pre-Incubation

39. GrabCAD, platform creator, revolutionary of
engineering industry
39
Feature of the model Description of observed features Remark
Entrepreneurialprocesspattern
Propositions Young engineers Hardi Meybaum and Indrek Narusk had
already prior professional competencies
Started with
Futeq, Tln
Intention Interest in selling engineering services, 2007 Initial idea
Idea Development From own needs as service provider spun out
crowdsourcing idea, first success cases
2009
New Venture Idea Initial CAD library idea transferred into virtual plat-form
for collaboration and knowledge crowdsourcing
Seed fund
€260k, 2010
Concept
Development
Library 2010, sharing, collaboration; public and private
domains of the crowdsourcing web platform, 2011
Opportunity
Confidence
Reached by HQ moving to Boston 2011 + winning the
competitions of SeedCamp and TechStars + investors
Business
Development
Engineering 2007; Platform 2009; Workbench 2013, teams
in Estonia, UK (Cambridge) and USA (Boston)
Venture Launch Ongoing process; 1M users, success cases; biggest client:
General Electric, 2014
Post-Launch Acquired by Stratasys for ~$100M, Sept. 2014

40. 40
GrabCAD, revolutionary of
engineering industry

41. 41
GrabCAD, revolutionary of engineering industry

42. Entrepreneurial journey: GrabCAD
Venture maturity
Stage
Intention
New Venture
Idea
Opportunity
Confidence
Venture Launch
Propositions
Idea Development
Concept
Development
Business
Development
Time
P2007
2008
P2008
2012 2014 2015
HQ in
Boston
$1.1M
investment
2011
$8.15M
investment
20132007 2009 2010
Workbench
Period of
Futeq
Founding
GrabCAD
Eng.
Design
Service
Library
concept
GrabCAD
sold to
Stratasys
Meybaum left
GrabCAD
Pre-Incubation

43. GE and GrabCAD asked designers to improve
upon this bracket. It weighs 2,033 grams (Photo
Courtesy of GE and GrabCAD)
43

44. GE Announces Winners of 3D
Printing Design Quest, Dec. 11, 2013
• The redesigned brackets reduce engine weight and
fuel consumption. M Arie Kurniawan, based in
Salatiga, Indonesia, won the first place prize of
$7,000.
• Phase II winners include:
• 1st Prize Winner- $7,000 cash
• M Arie Kurniawan, based in Indonesia.
• 2nd Prize – $5,000 cash
• Thomas Johansson, Ph.D, based in Sweden.
• 3rd Prize – $3,000 cash
• Sebastien Vavassori, based in the United Kingdom.
44http://additivemanufacturing.com/2013/12/11/ge-announces-winners-of-
3d-printing-design-quest/

45. M Arie Kurniawan was able to slash the original bracket
weight by nearly 84 percent to just 327 grams (0.72
pounds). His design is inspired by the H-beam profile.
(Photo Courtesy of GE and GrabCAD)
45