The prominence of Estonia as a startup destination has emerged almost out of nowhere. While Tallinn has always held some appeal as a source of skilled staff, the Estonian capital is now at the centre of a startup revolution. Estonia has quietly emerged as not just a hotbed of local talent, but one of the most attractive destinations for European entrepreneurs and digital nomads alike.
Despite its modest size and population, this small Baltic country is punching well above its weight thanks to some canny investment and encouragement from the national government. Its strong digital infrastructure, business-friendly policies, and focus on simplicity and accessibility have made Estonia a magnet for anyone looking to launch a business in Europe.
A burgeoning startup ecosystem
Estonia has always been near the top of lists for digital nomad destinations. The country boasts a high quality of life while also being relatively cheap, and having excellent quality digital infrastructure. While this had spawned some startup success stories such as Bolt and Wise (formerly TransferWise), there was still a sense that companies would quickly outgrow the country, and move much of their operations elsewhere.
The picture today feels very different. Estonia boasts one of the highest numbers of startups per capita in Europe, with the capital, Tallinn, becoming a bustling hub for startup innovation. The city is littered with coworking spaces and full of tech incubators, with a tight-knit community of entrepreneurs and startups that have shared their knowledge and support.
Yet for all that Estonia is suddenly being talked about, this is far from an overnight success. The government has played a central role in fostering a thriving startup environment, with measures going back more than a decade. Through initiatives like Startup Estonia, the country offers resources and coordination to help foreign and local entrepreneurs navigate local laws, access investment, and connect with mentors.
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Part of this stems from a concerted attempt to encourage business success and attract entrepreneurs. Yet Estonia is far from the only country to have tried this, or to find some degree of success with it. Ireland is a similar business mecca, with large corporations attracted there in particular.
What Estonia has built however is more of a groundswell of innovative businesses, all working to raise each other up. The country’s small size and flat hierarchy mean that it's often easier to get meetings with decision-makers, even at the government level—and the decisions they’ve made have given small startups a huge platform for success.
The enviable e-Residency system
The most significant contributor to the rise of Estonian startup culture might be its e-Residency programme. First launched in 2014, e-Residency is a digital identity service that—among other things—enables non-residents to establish and manage an Estonian company entirely online. By signing up for this encrypted digital ID card, ‘e-residents’ of Estonia can not only start a business there, but access almost every public service you might need, from opening a bank account, to filing your taxes, to signing documents or even managing your healthcare.
The e-Residency programme is part of Estonia’s broader ambition to create what it calls a borderless digital nation. More than 100,000 people from over 170 countries have applied for e-Residency to date, and thousands of companies have been founded by these digital citizens. The programme is especially attractive to freelancers, remote teams and digital nomads, who value the benefits of operating within the EU without needing to physically relocate, or at least to be permanently based out of Estonia.
While the ability to run a fully-compliant EU business without setting foot in Estonia (or even Europe) appeals to many entrepreneurs, this doesn’t mean that the actual startup scene in Estonia is all smoke and mirrors. Instead, it’s just one complementary aspect of a broader slate of startup-friendly policies that have made Estonia such an attractive destination for entrepreneurs.
Tax breaks and tech visas
One of the most compelling financial advantages for anyone looking to start a business in Estonia is the country’s tax structure. The 20% corporation tax rate may not seem that compelling at first glance, given that the European average sits around 21.5%. Critically however, this is only applied to distributed profits. In other words, if you reinvest your profits into the business rather than paying them out as dividends, you won’t pay any corporation tax at all.
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This approach is a natural incentive for companies to grow and scale up within Estonia, rather than moving to trendier locations, or in search of seed funding. Entrepreneurs can put money back into areas like product development, marketing, hiring, and expansion without suffering the typical tax penalties. Estonia also benefits from a highly streamlined tax filing system, with a process that can be completed online in minutes, and which offers integrations with popular accounting software.
Despite its small population, Estonia also has an enviable tech talent pool, with a population that’s both highly educated and internationally orientated. Many Estonian developers and engineers speak fluent English, and the country's universities maintain strong links with local industries. This local talent is ably supported by the Estonian Tech Visa, which makes it easier for startups to hire skilled professionals from outside the EU. Companies accepted into the programme can fast-track the visa and residency process for non-EU employees, helping them to quickly expand and form talented international teams.
Finding funds and living life
The prominence of the Estonian startup scene is attracting more and more funding, with angel investors and accelerator funds meaning that London, Paris or Silicon Valley aren’t always the endgame. However, the local funding that helped kickstart the scene is still available for startups, with a range of domestic funding options. Entrepreneurs and small businesses can tap into financial and logistical support from Startup Estonia and Enterprise Estonia, including €109 million of new funding guaranteed by the European Investment Fund.
Estonia is also becoming a more popular choice for major international business events, while the country’s own Latitude59 tech conference is growing rapidly, providing a place for startups to pitch to investors and network with other founders. While not the right model for everyone, crowdfunding is also gaining traction, with unique equity-based campaigns allowed under Estonia's legal framework.
Along with the funding opportunities and easy administration, Estonia is also just a great place to live. Tallinn is still the centre of Estonia’s startup scene, but Tartu is also a major centre of commerce. The country is around a three-hour drive from end to end, meaning that it’s easy to find an equally picturesque village to live in outside of the picturesque cities. The standard of living is high, while public transport is efficient and often free, and the country consistently ranks well when it comes to safety, cleanliness, and digital access.
Estonia has managed to succeed where many larger nations have failed: creating a modern, digital-first economy that welcomes the world’s entrepreneurs with open arms. Through smart policies and a focus on breaking down some of the traditional barriers to entry, Estonia has quickly built one of the most efficient and attractive environments for startups in Europe (and possibly the world). To learn more about the formation process in Estonia, take a look at our Estonia company formation page.
