Even though the total amount of investments in Estonian startups has decreased, they have generated over €1 billion in turnover, employ nearly 10,000 people and have paid €108 million in employment taxes.
According to Startup Estonia, to date, its database is home to 1,530 startups. So far, 36 new startups created in 2023 have found their way into the database; 40% of the startups in the database have been active for five or more years.
The largest sector in terms of active startups is business software and human resources with 267 active companies (18% of all startups in the Estonian startup database), followed by financial technology with 203 active startups (13%) and consumer products and services with 176 active companies (12%).
“The first half of 2023 shows the employment count increase has slowed down in the Estonian startup sector. According to the Estonian Tax and Customs Board, the employee count of Estonian startups has risen 1% in a year, from 9,787 to 9,927 at the end of the second quarter of 2023,” Startup Estonia said in a blog post.
The money transfer startup, Wise, remains the top employer with 1,899 employees and 114 new hires this year; rideshare company Bolt is the runner-up with 1,290 employees and 20 new hires. A significant 59% of the whole employee count is taken up by the top 20 employers of the Estonian startup sector.
Almost a third more paid in employment taxes than in H1 2022
In terms of the demographic, there are still more men than women in the Estonian startup sector and the majority of the employees are rather young.
“Once again we can notice a slight increase in the number of female employees – 61% of employees working in startups are men and 39% are women (in the first half of 2022, 38% were women). A big part of all employees in Estonian startups are relatively young: 44% of employees are between the ages of 31-40 and 41% are aged 21-30.”
The first half of 2023 has shown a great increase in employment taxes paid and a noticeable growth in salaries. There was a rise of 29% in employment taxes paid by Estonian startups, having paid a total of €108 million worth of employment taxes, compared with €84 million at the end of the second quarter of 2022.
The largest individual contributors were Bolt with €17.5 million, Wise with €17 million, identity verification provider Veriff with €4.9 million, and banking app Monese with €2.8 million. The top 20 startups with the highest employment tax payments make up 61% of the whole startup sector’s employment taxes.
The average monthly gross salary in Estonian startups over the first half of 2023 was €3,243, which is close to two times higher than the Estonian average. It shows a 14% growth compared with the same time last year (the average monthly gross salary in the first half of 2022 was €2,840), which indicates startups are offering one of the most competitive wages in Estonia.
The turnover generated by the Estonian startups has grown to a new high of €1.1 billion in the first half of 2023. This shows a bit slower yet noticeable increase of 17% compared with the same period last year.
Focussing on efficiency
Although the first half of 2023 indicates a decrease in total investments received by startups, the Estonian startup sector still attracts investors. The total amount of investments in the first half of this year was €113.2 million, which reflects rough times in attracting investments.
In total, there have been 22 new investment deals this year averaging €5.1 million each, and 15 of those worth €1 million or more.
Startup Estonia also points out that while Estonia’s startup sector continues to grow, the instability in the global economy and security also impacts startup companies.
“A new trend is currently emerging where Estonian entrepreneurs, instead of pursuing rapid global expansion, are focussing on increasing efficiency and ensuring profitability, a sentiment echoed by investors. This demonstrates the maturity of our ecosystem – startups possess the flexibility and experience to respond to changing circumstances and adjust their strategies. To sum it up, by successfully overcoming challenges and being resilient, the Estonian startup ecosystem is staying on course for growth and development.”
Startup Estonia connects and supports Estonian startups and develops the sectoral ecosystem. The Startup Estonia programme is financed from the resources of the European Regional Development Fund.