The startup visa in Estonia was created for Estonian startups to hire talent globally and fast-track their immigration. Estonian immigration policy is rather strict and there’s a quota on temporary residence permits for foreign talent, which was filled by the 2nd of January this year and startups need more talent to come through bypassing the quota and the stringent requirements.
Case in point, Bolt, Pipedrive, Transferwise are the biggest startups in Estonia and their founders are bringing talent in.
We try not to differentiate between local and international founders, what we do gather is the amount of number 650:130 foreign founders. We don’t exactly track how much funds a given company raises, as seeing we’re a governmental entity, we primarily track taxes paid, employees, hired, and other economic metrics but we do not keep metrics of each of our individual companies beyond that.
Background
The discussion about having a better way for foreign talent to come work in Estonia was initiated in 2016, when our Prime Minister held a roundtable with startup founders, the relative scarcity of talent in Estonia is a well-known fact, and we had to look beyond the borders of the EU. Roughly less than a year later in 2017 the startup visa was launched. with the leaders of the Estonian startup ecosystem to help for startups to bring their talent, as we had an established startup system and there was clearly a need for talent to fuel growth—any successful startup ecosystem is international in impact and accessibility.
A lot of government agencies were involved in making the startup visa happen, as it was developed in conjunction with the public and private sectors, the Minister of Foreign Affairs, Ministry of Interior Affairs, and Ministers of Economic Affairs, and it certainly seems that Estonia is progressive in terms of digitizing government services. While historically governments have been rather conservative and slow bureaucratic beasts, our e-services help us be more effective and quicker—We save 2% of our annual GDP by digitizing basically all services with the exceptions of marriage and divorce proceedings, and real-estate transactions due to a matter of principle.
So we’re leading the curve on that front, and lots of it has to do with the size of our country, if we had 10x or 20x the population rolling out digital services and getting to this level of adoption would have been more challenging. Our leaders in the previous decades certainly made some pivotal decisions that led to this outcome.
How it works
The goal of our program is to have 1000 startups by the end of 2020 both home-grown and international ones. Whether it is an Estonian company looking to bring talent in or a foreign founder looking to establish their business in Estonia as long as meets the criteria being considered a start-up per Paul Graham's definition.
Our startup committee consists of 7 organizations, in many countries the startup visa and who can apply for it is decided by government officials, whereas we believed that it is necessary to have the community involved, so we have consult investors, incubators, and entrepreneurs to determine which companies get “startup status”. After that we begin the temporary residence process.
After startup visa (1 year + 6 month extension), temporary residence is 5 years (+10 year extension). Permanent residence require 7 years and Estonian language exam + cultural assimilation exam.
You can incorporate and run your business online, but banks require you to be physically present in Estonia to open an account. As an alternative, you can use a 3rd party service like TransferWise for instance so it’s a time-consuming process, and most banks require a physical address due to their conservative nature.
It is important to note that we have a zero corporate tax rate. Startups in Estonia only pays taxes on dividends and salaries.
E-residency and the Startup Visa
They aren’t connected in a procedural or operational way, but there is definitely a lot of overlap between the two—a big number of founders that come to startup in Estonia have started with the e-residency program—because it’s essentially the same thing with far less commitment, you get to incorporate and set up operations without actually having to be in Estonia (with the above exception of banking services)—as relocating to Estonia is certainly more commitment so it’s a great way for entrepreneurs to start building their business prior to relocating.
If the founders incorporates through e-residency they can acquire a visa card and a temporary resident permit.
Day to Day life
Our weather is on the chilly side, and we have a lot of forests. People who come from big cities always comment on how long they’d have to travel to get the level of natural scenery that is everpresent throughout Estonian cities. In Tallin everything is super close, it’s a small city. Everyone speaks English in the startup ecosystem, and we have great food!
If someone has a temporary residence permit they get access to all services including healthcare and education. However in the public system not all doctors speak English for example, so you can opt for private healthcare as an alternative. We definitely need more healthcare providers that are in English. We have a couple of international schools and lots of businesses are being established to serve the international community in Estonia.
Eligibility
The Startup Visa program focuses on tech-based companies with high growth potential and are scalable. Their product can be a hardware product as long as there is a software element. We don’t accept idea-phase companies, instant no—however founders can always can re-apply. At the very least prospective applications should build an MVP or a prototype, and have any sort of market validation—revenue, or users. Make sure it’s working on some scale, 35% of companies get in.
Our ecosystem has been successful so far. Some countries don't have existing scosystems and look to seed it with startups, whereas more ideally you would have an existing ecosystem and seek to grow it organically. The founders existing Estonians have a giving back mentality whether that is with innovating in policy, venture capital, and support/mentorship for other founders.
Bootstrapping
Bootstrappers—you are not expected to raise money, but most usually do. Investment helps you grow faster, at the same time if you're boostrapping and do it successfully, you retain full power and control. We also have relations with US/Japan and Chinese investors. We have an Angel network of mostly Estonian startup ecosystem alumni.
One of the problems that come up frequently is that there are not enough startups to invest in, there's more money than startups.
Over the long term, our goal is for Estonia to be the "OS for your business" and since it's a rather small country, you and your company are expected to scale up to larger markets.
