Tallinn, Riga, Vilnius, Helsinki – We Have A Problem – Or Do We?

Thanks to our member Edmundas Eddy – we have another great post. This time it concerns Baltic startup scene. What’s your opinion? Please share and comment.

Baltic region[1] needs to come up with one main startup accelerator[2] if we want to create and sustain a serious traction in the development of our startup community. An accelerator with really strong team and sufficient financial backing to attract critical mass needed to support resource costly startup creation process. Because as Natasha Starkell from TechCrunch Europe put it:s to our active member Edmundas Eddy – we have another post on Baltic startup scene. Enjoy it and, please, do comment.

„With the rise of numerous accelerator programs in Europe one cannot help but wonder whether jumping through the application process hoops, sweating through the mentoring sessions and flirting with investors at demo days are all worth a founders’ time.“

And the same thoughts may soon start coming (or already are) to heads of variuos accelerators teams, mentors  and  investors.
Well, at least that’s how I would sum up the main points from the discussion, that was recently started in Facebook by investor from Estonia (co-founder of MTVP) Allan Martison after email conversation with Mindaugas Danys (director of Lithuania’s SME dep. at Ministry of Economy, co-founder of Hub Vilnius). This topic was later on picked up byArticStartup (the biggest technology and startup website in Nordic and Baltic countries), siimteller.com and others.

To give you a better idea about the issue, here is a short extract from the original post by Allan that stirred the water:

„The only point of having accelerators is to produce early-stage startups. Simple criteria of success here is number of startups who have exited the accelerator and raised funding (minimum 100k EUR per startup in 12 months). An accelerator shall be able to produce at least 10 such successes a year (let’s say in 2 batches). If the success rate is 30% then you need to pass 30 startups through the accelerator per year and have pool of 300-500 good quality projects per year.This is impossible to achieve in one country only. We need a pan-Baltic thing.

If I had to summarize comments and reactions that came from social media, blogs etc., I would break it down to these 3 points:
  1. Most people (who participated in the discussion online) agree that there is a problem due to dispersion and lack of resources. And that some kind of Baltic region accelerator co-ordination hub is definitely the logical way out of such situation;
  2. Bunch of observations were made, that competition, diversity, targeting different niches and all that other good stuff that differentiates accelerators is also still needed;
  3. The main barrier stated for having this Baltic region accelerator – „nationalistic interests“, „some still believe that entrepreneurship has a nationality“ etc.

Now, I have not been active in this discussion, nor in Baltic region  (or Lithuanian for matter) startup scene, because of traveling and other work. Thus, I believe I am neutral enough to share my opinion with the world 🙂 Firstly, I would like to come back to those 3 points stated above:

  1. Yes, of course Baltic region countries are too small to compete with their startup accelerators globally one by one – not enough startups, not enough funding, very limited amount of really good mentors etc. We are all on the same page here, no additional proof need, which is ery nice.
  2. To tell the truth, I was kind of annoyed by those comments. Yeah, thanks for pointing this out guys -competition is good. Who could have guessed. Good, that someone is bringing up these points, because everybody was ready to drop what they were doing and start creating government-like institution with startup making monopoly for whole Baltics. I don’t think one could miss the point more with those kind of reactions.
  3. National interests are not the main problem that stops creation of some kind of united accelerator. It is a bunch of common characteristics that we, people from Baltic region usually share. Firstly, it is pride and ambitiousness in general. And its fine, because we do get shit done. But then mix it up with lack of communication and cooperation skill and voilà – we have Startup SaunaGarageTehnopolStartup EstoniaTechhubStartup HighwayStartup MonthlyGamma and others popping up in very short period of time with little or no attempts work together. We have to admit, that for such small countries, which are right next to each other it is kind of strange. Don’t agree with this? Just go to any website (or FB page etc.) of previously mentioned accelerators and try to find at least 1 link to partner or recommended institution in neighborhood Baltic country. Then go and check out their team members and mentors/couches – 95% will be accelerator’s home country nationals, with maybe 1 intern from another Baltic state and some western mentors.

At least the first right step is made by starting this discussion. And for example Startup Sauna made progress by harnessing Russian talents and has their site in Russian too. Hope fully, there is bigger potential therefor cooperation in Baltic region, in order to attract competitive teams to the accelerators. In Lithuanians case, there is possibility to target Belarus, Kaliningrad or even Ukraine. I think we could easily think of a single regional brand for several acceleration programmes. Follow the example of Startup Bootcamp, that spans across Madrid, Amsterdam, Dublin and Copenhagen? Maybe there is room for involvement of the our states and EU funding? Recently European Investment Fund (EIF) announced plans to raise 200 million Euro fund for development of private equity and venture capital market in Baltic region.

Ultimately the fittiest survive, and cooperation is the best among equal partners. So let’s keep communication chanels open, coordinate activities but strenghten capacity to attract and retain startups and capital at the same time. However, personally I don’t see us taking advantage of this situation in short term. Coming above these ambitions, pride and lack of communication / cooperation skills that we face now in Baltic region? We  need serious facilitation from the side and I put a lot of hope in upcoming Techcrunch Baltics in Riga and Startup Monthly in Vilnius – hopefully these events will become the platform for leaping forward towards strong Baltic region cooperation.

[1] I want to be really clear, that then I write „Baltic region“, I literary mean all countries surrounding the Baltic see: Denmark, Estonia, Latvia, Finland, Germany, Lithuania, Poland, Russia, Sweden and etc., though Mr. Allan Martison referred only to Baltic states (Lithuania, Latvia, Estonia) and Finland in his post. For me that kind of concentration of thought on 4 countries represents exactly the reason why every village with internet connection and population over 50 is making its own accelerator now, just on a little bit larger scale. Clearly, if something worth comming takes place in anywhere in the Baltic region, participants want to and come from all previuosly mentioned countries. So why make these barries in our heads?

[2] „Startup accelerator“ (also known as seed accelerator) – is a type of startup incubator, but has 3 major differences. 1) they begin with a cohort intake process whereby they accept applications for entry and pick a set number per round. 2) they make an equity investment in the startups, usually sub $150,000 USD, but often sub $20,000 range. In-turn, the business model is based on generating venture style returns, not rent, or fees for services. 3) the primary value to the entrepreneur is derived from the mentoring, connections, and notoriety of being chosen to be a part of the accelerator.