Latvia’s start-up scene: a second fiddle no more

Latvia’s start-up scene: a second fiddle no more
Of late, there’s been a slow-burning sense in the Latvian capital Riga that things might be about to get even better for the city’s tech start-ups. / bne IntelliNews
By bne IntelliNews May 15, 2024

Some key new initiatives look set to help Latvia’s start-up scene move out of the shadow of its northern neighbour Estonia, reported.

That Estonia’s start-up scene owes so much to Skype is no secret. Just ask anyone in the technology and innovation sector in neighbouring Latvia, which has for some time had to play second fiddle to the more northerly of the three Baltic states.  

The investment capital Skype’s various exits created is the reason, they’ll tell you, why Estonia has had so much more success at creating unicorns, and why the country’s international reputation as a hive of tech and innovation surpasses most countries in Europe. 

Not that Latvia is short of start-up success. Indeed, by just about any metric the country is a star. In the most recent edition of Emerging Europe’s Future of IT report, which looks at the tech sector across the 23 countries of the emerging Europe region, the Latvian ecosystem was ranked fourth – up four places on the previous year and behind only Estonia, Lithuania and Poland. It is well set to take an even higher position in the 2024 edition of the report, set to be published later this month.

Print-on-demand giant Printful became a unicorn in 2021 following a $130mn raise. Another custom printing start-up, Printify, is well on the way to joining it: its last big raise of $45mn valued the company at an estimated $300mn – and that was in 2021. 

A Latvian, Linda Strazdiņa, is co-president of the European FinTech Association, a role in which she represents the interests of fintech companies at EU level. 

Of late, there’s been a slow-burning sense in the Latvian capital Riga that things might be about to get even better for the city’s tech start-ups; nowhere more so than at TechChill, the largest technology and innovation event in the Baltics, which this year was abuzz with talk of a new Startup House – a hub for start-ups, investors, talent and expertise that aims to provide the final spur to greatness that the Latvian start-up scene has previously (arguably) been lacking. 

Andris Berzins is one of the co-founders of Change Ventures, set up in 2016 to invest in start-ups across the three Baltic states. Last year it secured €20mn to launch its third fund investing in the Baltic states, focusing on pre-seed investments in founder-driven companies. 

Berzins is part of a group of stakeholders who have been trying to push the start-up agenda politically in Latvia for some time. 

“And there’s actually been a lot of good initiatives,” he says. “We launched a start-up tax some six years ago, which means that if you qualify as a start-up there are various tax incentives to lower the cost of getting a business up and running. We also successfully lobbied for a change in the stock option law – we now have the world’s most attractive stock option law, bar none.”  

“It’s even marginally better than in Estonia,” he adds. 

Berzins believes that one of the things a small country such as Latvia offers is the ability to move fast.

Open just a couple of months, Startup House Riga is a non-profit initiative that aims to have “all the right people in one building, mingling in the kitchen,” says its CEO Egita Polanska.  

Startup House is already home to a couple of exciting firms: Oruga is developing the world’s first all-terrain electric monotrack vehicle, while micromobility start-up Mosphera produces industrial on- and off-road e-vehicles – some of which have been successfully used on the frontlines by the Ukrainian armed forces. 

TechChill was also the scene for the launch of another major initiative that has the potential to drive Latvia’s start-up ecosystem forward – StartSchool, which Anna Andersone, one of the founders, describes as “a new-generation tech business school”. 

“The ingredient most missing in Latvia and the region, and why we don’t get more early stage start-ups popping up, is the lack of technical co-founders,” says Andersone, who is also the CEO of Riga Tech Girls, said.