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The BalticVC team studied the startup ecosystem in Estonia, Latvia, and Lithuania for its Baltic Startup Survey. We sent questionnaires to startup founders from these countries.
The main goals of the Baltic Startup Survey are to describe the current state and development trend of the startup ecosystem in the Baltic countries, to identify the pros and cons of local innovative companies, and to review the following areas such as team and business development, sales, and fundraising. The main study objectives are startups and founders, their socio-demographic parameters, professional and entrepreneurial experience.
Another important goal of the Survey is to show the investment attractiveness of the Baltic region for investors from around the world.
We asked more than 280 founders to fill out questionnaires, and 107 of them agreed to participate in a 23-question survey. We did not range the results by country if they fit the overall Baltic results.
Baltic startup founder’s profile
- 39 y.o.
- university degree
- entrepreneur with experience of managing his own business
Despite the stereotype that young people and yesterday’s alumni are launching startups, Baltic founders start their companies at a more mature age. The average age of a Baltic startup founder is 39 years (in Estonia - 39, in Latvia - 37, in Lithuania - 40).
Almost all startup founders (around 90%) have a university graduate. 11% have a PhD, which is reasonable given the age of the founders. These data show that entrepreneurs spend years in education before starting their business.
“The education level of founders of Baltic startups is notably high, reflecting a strong focus on formal education in the region. This equips founders with the necessary skills, knowledge, and network to begin their entrepreneurial journey. Universities in the Baltic region encourage entrepreneurship through incubation programs, expos and entrepreneurship specialisation courses, which is a welcome step for the Baltic startup ecosystem. An education level is not something we look at when choosing our accelerator participants or choosing what startups to invest in. The main factor is their experience and expertise and the way the founders complement each others' skills. Most of the real life learning happens outside of university anyway, but it's a great place to begin building a network that can eventually lead to creating a startup”, said partner at Katalista Ventures Elena Salamandic-Alijosiene.
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The founders of Baltic startups are mostly serial entrepreneurs, having experience in business. Before establishing their current company, 48% of respondents had already been engaged in their own business. 34% are employees, who were occupied in a corporation before launching their startup. Fewer people were employed in small companies - 27%.
Looking at the results by country, only 19% of Lithuanian startup founders previously ran their own business. Lithuanian founders are mainly former employees of large enterprises (33%).
In Estonia, on the other hand, only 16% of founders are former employees of large enterprises. Those who worked in SMEs and serial entrepreneurs account for 22% and 33% respectively.
Startup profile
- Founded 4 years ago or less
- Team of 2-5 employees
- At the pre-seed stage
The average age of a Baltic startup is 1-4 years. Only 36% of the participating companies are 5 years old or more.
The average Baltic startup team is mostly small – 2-5 people (46%). Only 5% of the companies have large teams of 31 or more employees.
Almost half of startups are in the pre-seed stage (46%), 26% of companies are in the seed stage, and 17% - in the early growth stage.
To classify the startups, we asked the founders to name the industry in which they work. Most startups in the region work in the fintech sector, followed by medicine and health, with EdTech startups coming in third place.
The majority of technology companies are developing a B2B product (82%), and 29% are developing a product for end users (multiple answers were possible). 12% of startups are working for the government.
Startup industry scene
More than half of Baltic tech entrepreneurs (54%) say that their business has improved over the past year. 28% of respondents said that the situation in the industry had not changed, while 18% of founders felt that it had worsened. At the same time, 39% of respondents said that their company was close to shutting down in 2023.
Ranging the responses by countries, 61% of Estonian startups felt that the market situation had improved, 29% did not notice any change, and 10% felt that the market conditions had worsened. At the same time, 35% of Estonian startups admitted that they closed to shutting down in 2023.
The situation is different in Latvia. 52% of local startups were close to shutting down in 2023. The Latvian startup community can be divided into three almost equal parts: 36% believe that conditions in the industry have changed for the better. 32% have not noticed any changes or feel that market conditions have worsened.
Lithuanian startups are more optimistic. 53% of respondents say the situation in their industry has improved. 27% said they had not noticed any change, and 20% felt that market conditions had worsened. Only a third (33%) of Lithuanian startups admitted that their business was close to shutting down last year.
Sales
Although 46% of startups are at the earliest stage, only 18% do not make any income. Moreover, this is relevant for all three countries (Estonia and Latvia both have 18%, and 20% of Lithuanian startups report that they do not have income). Last year 9% of Baltic companies earned up to €10K, 28% each earned between €10K - €100K, and €100K - €1M.
In terms of sales geography, the survey shows that the majority of Baltic startups focus on the local market (77%) and the European market (80%). Fewer startups are active in the North American market (24%). 22% of projects are active in the Asian market and 18% in the MENA region.
Most Baltic startups (45%) generate a prevailing part of their revenue in the Baltic countries. At the same time, 39% of companies generate 0-25% of their sales revenue in the local market. It turns out that Baltic startups are divided into two almost equal parts, the first focused on the local market, and the second on the global market.
Among others, Lithuanian startups are the most internationally oriented in terms of their sales. The average Lithuanian startup generates only 43% of the revenue in the Baltic market, while Estonian startups are more focused on it. On average, they generate 60% of their revenues in the Baltic markets. Latvian technology companies generate about half of their revenues in local markets.
Funding. Startup’s investment profile
Baltic entrepreneurs tend to believe that investors have become more cautious – 60% of respondents think so. 18% of respondents have not noticed any change in investor behavior, and a remaining 22% have noticed an increased interest in startups.
Ranging the results by country, Latvian founders seem to be the most pessimistic about the investment situation. 70% of them felt less interest from investors.
59% of founders started companies with their own money. Another 9% used funds from an accelerator. The smaller amount of investment was in the form of grants and money from both professional business angels and non-venture investors.
We found that many startups continue to bootstrap (23%). And 19% of startups develop their business through sales revenue and venture capital funding.
“The not so easy times on the funding market is clearly reflected on the source of funding for startups at the time of launch. Bootstrapping has become a much more preferred option, both own funds and as startups progressed with revenue sales. Boosting accelerator and angel investment could be a boost to the region in upcoming quarters”, said CEO of Startup Wise Guys Cristobal Alonso.
Baltic startups that started the business with their own money continue to bootstrap (33%), relied on sales revenues (22%), or have already raised money from venture capital funds (22%).
One in four Baltic startups that received early-stage investment from an accelerator went on to raise funding from a non-core private investor.
65% of surveyed startups from the Baltics have external investors.
In Estonia, as in all the Baltic countries, the survey found that 65% of startups have investors. In Latvia, the figure is even higher - 71%. And only in Lithuania, the ratio of startups with and without investors was 50% to 50%.
55% of the investments received by Baltic startups can be classified as pre-seed and 38% as seed. A minority of companies have recently raised round A (4%).
Most of the surveyed Baltic startups raised up to €300K (41%) and between €300K - €1M (41%). 14% of startups with external investors raised between €1M and €5M.
Ranging responses by country, almost half of the Estonian startups and more than half of the Lithuanian IT companies that raised investment secured between €300K and €1M (47% and 57% respectively), while the majority of respondents in Latvia raised up to €300K (45%).
BalticVC would like to thank Katalista Ventures, Startup Wise Guys, and Baltic Sandbox for their help in conducting the survey.
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