We talk to startups and investors, you get the value.
We have already reviewed the venture ecosystems of Poland and Estonia, both of these countries created hospitable conditions for startup development, but they have competitors. Latvia, as a neighboring country of Estonia, also decided to bet on entrepreneurship and new technologies — and the results are tangible: according to the European Economic Forum data, Latvia is in the group of three countries with the most favorable conditions for entrepreneurship. In this article, telling about why the Latvian startup ecosystem is interesting and is it hard to get there.
We talk to startups and investors, you get the value.
Latvia has previously relied on technology. Suffice it to say that the Minox microscopic camera, which was used by spies during the Second World War, was created in this country.
In the 21st century, Latvia also strives to be on the wave of new solutions and innovations. Interesting fact: the country ranks fourth in the world in terms of Internet speed, and 800 free Wi-Fi points operate in Riga. Why is Latvia interesting for startups?
The population of the country is 1.9 million people and 30 000 of them are employed in the sphere of informational technologies.
6,500 companies are operating in the IT sector (as of mid-2018). The export of IT services in the overall structure of the export of Latvian services is in third place after transport and tourism services.
As of 2018, more than 350 startups are registered in Latvia, the number of startups per 10,000 inhabitants is 1.8. For comparison, in Estonia, this figure is 5.2, but in Lithuania — 1.4.
Latvia is also attractive in terms of ease of access to the European market. There is an additional plus in the relatively inexpensive cost of living. Renting an apartment will cost half as much as in Berlin, and transport costs are about the same. The average monthly resident of Riga costs 1035.89 euros.
I’ve already written that in Estonia wonderful conditions have been created for the development of startups, including international startups. It turns out that starting an innovative business in Latvia can be even easier. Here are the reasons why Latvia is a good platform for a foreign startup.
Visa. As well as in Estonia, Latvia has a special visa for startups. It is issued for a period of up to 3 years if the applicant proves that he intends to develop an innovative product in Latvia.
Registration. In Latvia, the cheapest cost of registering a company among the Baltic countries is only 34 euros. For comparison — in Estonia, it costs 190 euros, in Lithuania — 57.34 euros. The registration procedure itself takes several days.
Installment plan for the minimum authorized capital. The minimum authorized capital in Latvia is EUR 2,500, both in Estonia and Lithuania. However, when registering in Latvia, it is enough to deposit only 1 euro, the remaining amount must be transferred within the first two years of work.
Taxes. Dividend tax — 0%, VAT on trade transactions with companies from other countries — 0%. For small businesses with a turnover of up to 100 thousand euros per year, a special tax rate of 9% is established. Besides, a special start-up law is enacted in Latvia, which provides for a fixed rate for social insurance contributions that are paid by the employer for each employee.
A Latvian startup ecosystem is intensively developing and many of the projects are well-known on the global market. Remarkably, that Latvian entrepreneurs-innovators try themselves in different industries: from fintech, SaaS and hardware to virtual reality, health care, transport, etc. Here are some of the most interesting startups by industries.
Nortigen project offered a solution for the financial institutions which automate the processing of printouts from bank accounts. The service distributes income and expenses by position and allocates what the lender is interested in: for example, the client’s expenses for gambling, repayment of other loans. Thus, the lender can instantly determine the creditworthiness of the client. Now the startup is working with banks and other financial organizations from 16 countries.
In 2017, Monetha startup held an ICO for the cognominal cryptocurrency and raised $ 37 million in 18 minutes — this is one of the records in the industry. The founders’ ultimate goal is to make global commerce more reliable and affordable.
Sonarworks is soft that allows you to correct the shortcomings of studio speakers that arise due to the room acoustics. The software is used by 30,000 recording companies from 170 countries.
Zeew app — Uber for parcels — helps to quickly deliver goods/parcels/transfers. The service enables anyone to use their car for such deliveries and is already now a part of the Riga logistics system.
Startup Giraffe 360 is a technology developed for the real estate industry, which allows you to present projects in virtual reality. Also, within the framework of the project, cameras for shooting real estate are produced, as well as, all camera components are produced on 3D printers in Riga. This technology has already been appreciated and used by large real estate companies: RE/MAX (USA), John Taylors (Great Britain), City24 (international real estate agency).
A service for creating graphics, diagrams, maps and other illustrations. Infogram is familiar with everything that somehow relates to product creation and content packaging. Currently, it is used by more than a million people, more than 50 thousand new illustrations are created monthly. In 2017, Forbes named Infogram as the best platform for creating infographics. This service is used by such media-giants as The Guardian, The Wall Street Journal, Washington Post, MTV, Al Jazeera.
Grafomap service allows anyone to create their own map of memorable places: places where you lived, studied, where you traveled and where have you met your love. The startup got into Vogue, The Guardian, and Chicago Tribune reviews for maps that help visualize memories.
Funds of the private and venture capitals in this country are connected by Latvian private equity and venture capital association — LVCA, there are 26 full-fledged members and 17 associates.
LVCA goals — to inform entrepreneurs and a community about the venture capital industry possibilities and terms of financing; facilitate the exchange of views and experiences between members of the association; represent the opinions and interests of members of the organization; promote international cooperation in the field of direct and venture investments.
Therefore, private investors are assembled in Latvian Business Angel Network — LatBAN, founded in April 2014. Association counts more than 50 people, who invested in startups 9 million EUR altogether.
Let’s see which investors have been active in Latvia in recent years and in which startups they have invested.
Total funds raised: 260 million EUR
Total number of investments: 100
This is a venture capital fund that operates in three Baltic countries: Latvia, Lithuania and Estonia. BaltCap accumulates the funds of several funds at once.
Among the most interesting Latvian projects in which BaltCap invested, there are the Kool startup — a chain of stores and gas stations, the Energia Verde power station and the largest private postal operator in Latvia, the leading operator of automated parcel delivery and dispatch terminals — PostService Group.
Total funds raised: 83 million EUR
Total number of investments: 15
The fund specializes in investments in startups of the Baltic countries. Of greatest interest to him are projects in areas such as manufacturing, IT and telecommunications, business services, energy, and healthcare.
The fund invested in the Latvian project Fima, developing modern engineering solutions for security systems, urban infrastructure, energy; as well as the Santa Monica Networks (SMN) corporate data network project.
Total funds raised: 15,9 million EUR
Total number of investments: 12
The fund was founded by technology investment company Imprimatur Capital Ltd from London and a team of local managers from Riga. Imprimatur Capital invests in startups focused on the following areas: B2B Software & Data, Digital Health & Lifestyle, education, robotics.
Among fund projects, there is an infamous Anatomy Next, a startup on the anatomy of the human body. The application shows all the organs, nerves, blood vessels, bones that are in our body in 3D format and from different angles. If you point the phone with the application running at a real person, you can see an image of his organs. When a person moves, the image on the phone repeats his movements, you can see how the muscles contract, which of them are involved in each movement. The project also has a website with text and graphic information on anatomy.
Interestingly, the startup was originally conceived as an anatomy book for sculptors. The publication was translated into several languages, and in Japan, the book became a bestseller.
Total funds raised: no data
Total number of investments: 12
The fund offers not only cash investments but also expert support, experience and technology. “We offer startups our professional technical team, our own technologies and financing,” says the fund’s website. The company invests only in B2C projects, in particular, in such areas as social networks, communication, content exchange, crowdsourcing.
Among the projects is Qfer, a Latvian service that helps saving money on food and drinks, as contains information about all discounts and promotions in catering establishments.
In Latvia, there is a specialized organization that represents the interests of startups — the Latvian Association of Startups. It unites 89 members (these are startups, accelerators, investors), its goal is to help startups in solving common problems, to establish cooperation with various participants in the startup ecosystem, and to provide information and consultation support.
Talking about consultancy, many incubators and accelerators are operating in the country. Here is a shortlist that I managed to make:
Startup Wise Guys — “originally” from Estonia, has been working in Latvia since 2016, helping startups whose projects are implemented in the B2B and fintech fields.
The commercialization reactor is an international accelerator headquartered in Riga. Helps startups work on intellectual property issues, find a way to achieve product-market fit, build effective teamwork.
BuildIt is an accelerator based in Estonia, but it also works in Latvia. It accepts startups working in the fields of IoT and hardware in its programs.
Overkill Ventures is a venture investor and accelerator that was established in 2018. As part of the acceleration program, startup founders are pumping their knowledge on business development and finding investors.
In Latvia, there are co-workings for startups, where specialized events are also held. This is TechHub Riga — the oldest coworking, founded by business angels in the capital of Latvia, The Mill — a coworking and platform for programmers and designers, Igloo — a business laboratory that assists in the development of startups and acts as their technical co-founder.
Latvia is inferior to Estonia in terms of venture capital funds and the popularity of startups, but this country is at the same time considered as one of the most advanced and developed in the region in the field of entrepreneurship development. The Latvian government is making concessions to the private sector, realizing that the development of the startup ecosystem will help the development of the country in general, therefore startups, including foreign ones, have many opportunities in Latvia: from getting a startup visa, quickly registering a company to attracting investments from local and international venture capital funds, as well as, promoting your project in the pan-European market.