Funding and Investment Estonia

Overview funding (source: own draft)

Estonia has made a name for itself for the innovative application of communications technology, where state-of-the-art technologies are a way of life. Tartu, where BGI project partners from Estonia are located, has always been a trendsetter when it comes to ICT developments – talented minds and ambitious entrepreneurs have led to a rapidly growing ICT ecosystem which has attracted the attention of venture capitalists as well as foreign ICT companies. For example, in 2016, the city hosted more than 60 startup events (from hackathons to Mobile Monday to sTARTUp Day, etc.), with more than 5000 people from the tech industry getting involved.

Game startups can apply for regular national grants provided by Enterprise Estonia for startup development and growth upport. However, currently no specific grants are available for game developers, so in order to apply for these funds, traditional business approach is expected, incl. business plan and significant own contribution – e.g. part-funding of activities

In order to help Estonian start-up companies and well-established and fast-growing companies expand and finance their growth here, KredEx provides venture capital. The activity is aimed at providing sufficient local capital and the comprehensive development of the venture and private equity market. This requires contributing to the development of fund managers and raising interest among investors towards investing in local funds. Only fund managers with a proven track record are capable of involving a sufficient amount of capital from private investors. For investors, in turn, it is important to have constant investment opportunities of a suitable risk level and size.

Within the framework of defined investment strategies, the provider of public capital will choose the fund managers, who, in addition to public funding, involve on the same grounds their own money and that of private investors, and who are responsible for the investment decisions and results of their established funds. KredEx does not interfere directly with the activity and decisions of fund managers.

KredEx does not make direct venture capital investments into companies; therefore, any companies interested in including investments should contact the fund managers directly. KredEx cooperates closely with market participants and international institutions, including the Estonian Private Equity and Venture Capital Association (EstVCA), Estonian Business Angels Network (EstBAN) and their members, the European Investment Fund (EIF) and the European Venture Fund Investors Network (EVFIN).

A company can finance equity through:
Private equity companies financed by institutional investors (such as investment banks, funds, etc.) and private investors. There is a wide array of private equity types and styles and the term ‘private equity’ has varying connotations in different countries. Among them are:

Venture Capital (also known as VC or Venture) is a type of private equity capital typically provided to early-stage, high-potential growth companies. Generally, VC fund investors accept a higher risk of failure than is normally the case for other more conservative investments. The most known VCs in Estonia are: Karma Ventures, Mobi Solutions, Astrec Invest, Tera Ventures, Spring Capital. Also there is EstVCA, which is the representative body of Private Equity & Venture Capital Industry in Estonia. Their goal is to develop a sustainable and attractive ecosystem for the benefit of innovative, ambitious and high-growth potential enterprises, as well as fund managers and institutional investors. Today EstVCA represents 16 member firms and 22 associate members.

Initial Public Offering (IPO) also referred to as a “public offering” or “flotation,” when a company issues common stock or shares to the public for the first time. The money paid for the new shares to the company will be used for new investments, lessening the loan burden, etc. The initial public offering is usually followed by listing the company’s shares on the stock exchange.

First North Baltic is an alternative marketplace for small growth companies, providing a wealth of opportunities on the Baltic financial markets. First North is a part of NASDAQ OMX Nordic Exchange.

Status: 2020