Estonian startups increase revenue, pay record amount of labor taxes in Q3

The revenue of Estonian startups totaled €562 million in the third quarter of 2020, growing by 41 percent year-on-year, while employment tax payment increased by 30 percent, reaching €73 million.

According to the Estonian Startup Database, there are 1,110 startups operating in Estonia and 66 new startups have been created in 2020. The number of startups that have been active for at least five years is 257, making up 23 percent of the startups in the Estonian Startup Database.

The statistics from the Estonian Tax and Customs Board show that at the end of the third quarter of 2020, Estonian startups employed 6,329 people locally. A year ago, the employee count was at 6,124, meaning the growth in one year has been 3 percent. The biggest employers among Estonian startups are Transferwise with 939 employees, Bolt with 606 employees, and Pipedrive with 389 employees.

"The global crisis has had a noticeable effect on the Estonian startup sector, but despite the difficult times, the number of employees working in startups has stayed consistent," Eve Peeterson, head of Startup Estonia, said. "Even though it has been difficult to match pre-crisis growth rates, Estonian startups have generally done very well in adjusting and putting up these extraordinary times. As expected, some have also had to shift focus from hiring and expansion and taken on other objectives to accommodate the situation."

In the first nine months of 2020, Estonian startups paid €72.8 million in employment taxes, an increase of 30 percent from last year's €58.3 million. The largest employment taxpayers were Transferwise with €10.6 million, Bolt with €7.8 million, Pipedrive with €7.2 million, Veriff with €2.9 million, and Paxful with €2.7 million.

The turnover of Estonian startups totaled €562 million in the first nine months of 2020, growing by 41 percent year-on-year. The startups with the largest revenue were Bolt with €214 million, Pipedrive with €47.1 million, Adcash with €20.1 million, Fiizy with €11.3 million, and Synctuition with €11.2 million.

"Monitoring the sector is an ongoing process and with new startups constantly added to the Estonian Startup Database, we have to consider that not all startups were included in 2019. Additionally, the monumental impact of Bolt should not be understated when looking at the sector's total revenue," Peeterson added.

The largest sector in terms of active startups was business software and human resources (HR) with 194 active companies, equivalent to 17.5 percent of all startups in Startup Estonia's startup database. The nine-month turnover of business software and HR tallied €103.2 million. Startups in this sector paid a total of €15.6 million in employment taxes for the sector's 1,175 employees - the largest contributors were Pipedrive with €7.2 million, Scoro with €1.1 million, and Testlio with €1 million.

The fintech sector covers 13 percent, that is 141 startups, of all companies in the Estonian Startup Database with a turnover total of €45.8 million. At the end of the third quarter, fintech companies employed 1,692 people and had paid €20.9 million in employment taxes. The biggest employers were Transferwise, Monese, and Paxful.

The third-largest sector was adtech and creative tech with 251 employees across 110 companies. The sector's total revenue was €45.6 million and employment taxes paid tallied €2.4 million. The largest employer was Adcash, followed by Digital Sputnik and NEXD.

Estonian startups have signed 55 funding deals for €175 million in the first nine months of 2020 with 21 startups receiving funding of more than a million euros. The biggest investments throughout the year were secured by Bolt, €100 million, Veriff, €14 million, and RangeForce, €13.6 million.

After announcing the funding in late July, RangeForce co-founder and CEO Taavi Must said that while raising investments has never been easy, there were two additional hurdles during the pandemic.

"First, about a third of the investors focused solely on helping their portfolio companies and even though they might be interested, they didn't have time to consider new investments. Secondly, we didn't have the chance to meet with investors face to face, so gaining trust took more time. In the meantime, our biggest selling point was always our product - our on-demand, cloud-based cybersecurity training platform has been successful in the U.S. market and the increasing number of customers showed the potential of RangeForce to the investors. So, the crisis slowed down the process of funding, but amplified our message," he said.

Startup Estonia unites and supports Estonian startups. Startup Estonia is a national program for the development of the Estonian startup ecosystem, giving impetus to the emergence of start-ups and international success stories. The Startup Estonia program is implemented by the Kredex foundation.


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Editor: Helen Wright

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