Turnover of Estonian startups grows to €196.5 million in first quarter

Startup Week Tallinn festival 2019.
Startup Week Tallinn festival 2019. Source: ERR

The aggregate turnover of Estonian startups grew to €196.5 million in the first quarter of 2020, which is 66 percent more than in the first quarter of 2019. But some companies are already starting to feel the effects of the coronavirus crisis.

State taxes were paid in the total amount of €26.3 million, or 47 percent more than in the first quarter of last year. Altogether €25.4 million were paid in labor taxes - 49 percent more than in the same period last year, Startup Estonia said.

The highest turnover in the first quarter of this year, €84.9 million, was registered by Bolt, followed by Pipedrive with €12.2 million, Adcash with €9.2 million, Starship Technologies with €5.4 million, and €Fiizy with 4.8 million.

Maarika Truu, head of Startup Estonia, said the Estonian startup sector grew strongly in the first quarter, as the effects of the crisis are not yet reflected in the statistics. To assess the effects of the crisis, we have to wait for the results of the current quarter, Truu said in a statement.

"Unfortunately, a survey conducted by Startup Estonia among startups in April showed that the impact of the crisis has hit a significant number of startups and 48 percent of respondents predict a decline in income by half or more," she said.

Statistics available from Startup Estonia show there are 1,019 startups operating in Estonia at present and 10 new startups were established in the first quarter of this year. There are 285, or 27 percent of all startups in Estonia, that have been operating in Estonia for five years or more.

Statistics from the Estonian Tax and Customs Board show that as of 31 March, 6,316 people worked in Estonian startups, which is 5 percent more than at the end of 2019 and 31 percent more than in the first quarter of 2019, when a total of 4,836 people were employed in the startup sector.

The biggest labor tax payers in the first quarter of 2020 were Transferwise with €3.37 million, Bolt with €2.8 million, Pipedrive with €2.54 million, Veriff with €1.13 million and Paxful with €920,000.

The companies which increased their workforce most in the first quarter of this year were Transferwise, by 64, Bolt, by 38, and Starship Technologies, by 53. At the same time, a survey among startups showed that by April, 19 percent of startups had to lay off workers due to the coronavirus crisis.

Startup Estonia said approximately 22 percent of the employees of Estonian startups are foreigners, while in a survey conducted by Startup Estonia and the Estonian Startup Leaders Club, 14 percent of startups admitted that their foreign employees have decided to leave Estonia or have not been able to move to Estonia due to the coronavirus crisis.

"This is a worrying fact, because due to the restrictions on movement between countries, startups cannot bring the necessary talent to work in Estonia at the moment," Truu said, adding that it is also possible to use teleworkers abroad, but then Estonia will not receive tax revenue from these jobs.

In the first quarter of 2020, Estonian startups raised altogether €10.7 million in investment and 14 transactions were carried out. The average size of a transaction was €770,000. Altogether four startups raised investments larger than one million euros - Katana, which raised €1.98 million, Viveo Health, which raised €2 million, High Mobility, which raised €1.5 million, and Speys, which raised €1.05 million.

Sten Tamkivi, vice president of the Estonian Startup Leaders Club, said that while in March, one could celebrate that Estonian startups have never had such good times, the situation has changed dramatically by now.

"The costs of startups are one step ahead of their revenues in terms of time and they therefore need external capital on a regular basis. Investors are more cautious and critical in the crisis situation and it takes more time to raise capital. Our study showed that many companies may experience liquidity problems this summer," Tamkivi added.

According to a survey conducted in April, 18 percent of startups are currently in the capital-raising phase and are facing the rejection of several investors. Another 22 percent of respondents planned to start raising new capital in the spring or summer of this year. In addition, according to Tamkivi, it is currently unknown what the opportunities for raising capital will be in the second half of the year.

In the first quarter of the year, startup visas were granted to 178 employees and 44 founders. In the first quarter, startups that have used the startup visa paid the state €500,000 in labor taxes and increased their turnover to €7.5 million, up 148 percent from the first quarter of last year.

Startup Estonia is a governmental initiative aimed to develop the local startup ecosystem. The program of Startup Estonia is carried out by KredEx. 


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Editor: Helen Wright

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