A survey conducted by Startup Estonia and the Estonian Startup Leaders Club in April shows the pandemic has reached many startups and 48% of respondents estimated their revenue will drop by a half.
The good news is the revenue of Estonian start-ups totalled €196.5 million in the first quarter of 2020, growing by 66% year-on-year. Tax payment to state coffers increased by 47%, reaching €26.3 million, Startup Estonia announced.
In the first quarter of 2020, the Estonian startups with the largest revenue were Bolt (€84.9 million), Pipedrive (€12.2 million), Adcash (€9.2 million), Starship Technologies (€5.4 million) and Fiizy (€4.8 million). In the same period, the startups paid €26.3 million in taxes, most of it – €25.4 million – in employment taxes. The largest employment tax payers were Transferwise (€3.37 million), Bolt (€2.8 million), Pipedrive (€2.54 million), Veriff (€1.13 million) and Paxful (€0.92 million).
The impact of the coronavirus
However, the numbers do not yet reflect the impact of the COVID-19 pandemic on the economy. “It is too early to estimate the impact the crisis has had on Estonian startups; we have to wait until the Q2 results come in. The survey conducted by Startup Estonia in April shows the pandemic has reached many startups, and 48% of respondents estimated that their revenue will drop by a half,” Maarika Truu, the head of Startup Estonia, said in a statement. The survey showed that 19% of startups had to lay off staff due to the pandemic.
The survey, conducted by Startup Estonia and Estonian Startup Leaders Club in April, also showed that 14% of startups have had problems with their foreign staff deciding to leave Estonia or not being able to move to Estonia because of the pandemic. “This is a worrisome fact, because startups are currently not able to bring talent to Estonia,” Truu said. “Although in some cases it is possible to work remotely from abroad, Estonia will not receive employment taxes if the person’s place of work is in another country.” Twenty-two per cent of the employees at Estonian startups are foreign citizens.
Cash flow problems
Then there are concerns about funding because of the coronavirus crisis. “Startups have to invest before they can start earning and therefore, they need a regular influx of capital. Investors are more cautious in times of crisis, and thus, raising funding takes more time. Our survey showed that many companies will experience cash flow problems during this summer,” Sten Tamkivi from the Estonian Startup Leaders Club said in a statement.
There are currently 1,019 startups in Estonia. According to the Estonian Tax and Customs Board, the Estonian startups employed 6,316 people as of 31 March 2020.
Startup Estonia is a governmental initiative financed by the European Regional Development Fund, aimed at supercharging the Estonian startup ecosystem.
For the latest developments in Estonia, follow our special blog on coronavirus.
Cover: A delivery robot manufactured by Tallinn-based startup, Starship Technologies, and a passerby (Starship Technologies).