"DotEEBubble is one of the most controversial startup blogs in the world and you've probably never heard of it." -TechCrunch

Monday, April 22, 2013

The Murky World of Defining an Estonian Company

Taking Credit Where It's Not Always Due : What is an Estonian Company?

Does Vladimir Putin celebrate the success of Google?

Is Paypal a South African success story?

Is Youtube the pride of Taiwan?

Is Instagram a triumph of the Brazilian "startup mafia"?

If you follow the logic of  the cheerleaders of Estonian startups, the answer is Yes.

Google founder Sergey Brin was born in Moscow; Paypal founder Elon Musk hails from South Africa; Youtube founder Steve Chen is from Taiwan; and Instagram founder Mike Krieger is Brazilian.

Most people would call the companies listed above American, and so would we.

So what gets us confused is when companies with even the most tenuous of ties to Estonia are still classified as Estonian startups. Let's take the example of Transferwise, since they were in the news lately:

If you just read the information above, you'd assume this is an Estonian company, right? Actually, they're a UK company. A recent interview with the founders, who are Estonians, confirms that they are based in the Shoreditch area of London. Further confirming this, they were listed as one of the top 20 tech startups in East London, and were listed on the top 100 list of UK startups.

Some in the Estonian startup community seem really desperate to claim this company as their own. Last week, Transferwise was even given the award for Estonia's Best E-service!

(Astute readers will note the EU logo in the background. Yes, taxpayer money was used to run an awards program.)

Our critics will point out that Transferwise does have a subsidiary in Estonia. That is correct, however according to public records, that was founded almost a year after the UK company was founded.

So given all this confusion, we thought we'd do our own research and come up with our own decisions about which "Estonian" companies are really Estonian. We picked a few companies that have been prominently featured lately.

In some ways, it's difficult to classify a company as Estonian or not, especially when they have offices in both Estonia and abroad. We looked at several factors when making our determination, including company addresses, employee locations, and how the company represents itself.



In an article about the investment mentioned above, it states: "Realeyes, a Boston, Massachusetts-based technology company" and later the same article states that, as part of the new investment: "The cash will go towards the company’s relocation from Boston to New York City, and to quadruple its sales force."

Here's what else we found:
  • Official corporate filing documents show the company is registered in Massachusetts.
  • The company's own website only lists addresses in the US and the UK.
  • The company's website states they are London-based.
  • EAS records show the company has an Estonian division that received over half a million euros in taxpayer funding, some as recently as a few months ago.
  • Of the company's open positions, 7 are in Hungary, 1 in London, 0 in Estonia or the US.
  • Of their entire management team (click on each country), 2 out of 7 appear to be Estonian, and both have UK phone numbers listed.
  • 5 of the 7 members of the management team are listed as part of the London tem.
There's some conflicting information here, but most of it seems to point to the company being UK-based, especially when added weight is given to statements on the company's own website.

Our Verdict: RealEyes is a UK company.

Click and Grow

Here's what we found:
Again we see conflicting information, but we think the Kickstarter page lists them as a US company because Kickstarter is only open to US and UK companies, so they listed it that way in order to be eligible to raise money.

Our Verdict: Click and Grow is an Estonian company.



Our findings:
Based on how the company represents itself, as well as statements about their operations, it looks like San Francisco is their main base of operations.

Our Verdict: Zerply is an American company.



Here's what we found:
  • Recent TechCrunch article refers to the company as "Estonian startup, which is based in London"
  • Company's Twitter profile lists them as being based in London, New York, Tallinn
  • Company's contact page lists addresses in the UK, France, and Germany only.
  • Of the 5 members of the executive team, 3 appear to be based in the UK, and 2 in Estonia.
This was a tough one, but the company clearly is representing itself as being in the UK more than Tallinn, to the point of not even listing an Estonian address on their contact page.

Our Verdict: Fits.Me is a UK company.



(Side note to our friends at EAS: It's Grab not Crab. Remember that next time you send out a press release in response to our blog, where you justify wasting taxpayer money.)

This one was easy:

Our Verdict: GrabCad is an American company. Crabs are tasty.



What we found:
  • A recent TechCrunch article, where the CEO was interviewed, states: "New York City-based Erply"
  • The company's Twitter profile lists them as being based in "New York - Tallinn"
  • The company's website states: "Headquarters in New York, London and Tallinn". Isn't the point of a headquarters that you have only one?
  • The company is hiring for 3 positions: 1 in New York, 2 in Tallinn
  • The company's addresses are listed as New York, London, Tallinn, Sydney, in that order.
  • The company's LinkedIn page lists headquarters as New York.

The predominance of information, particularly the most recent TechCrunch article, indicate New York.

Our Verdict: Erply is an American company.



Our findings:
  • From the company's website: "The company’s commercial heart beats in Boston, Massachusetts, while our development feet are firmly planted (and rapidly growing) in Estonia"
  • Around half of the entire company's workforce is based in Boston, based on this article stating there were around 40 employees in Boston, and a company press release stating the company has just over 80 employees.
  • The company's contact page lists the Boston address as their North American Headquarters, and the Tartu address as their European Headquarters.
  • The company's Twitter profile states they are based in USA, Estonia, Czech Republic.

We'll admit it. This was the toughest decision of all the companies. It looks like the Boston office has a slightly higher number of workers than any other locations, and it's indeed a key location for company operations, based on this video from ERR where they visited the Boston office. We're going to decide in favor of Boston on this one, as the company's website states it's their commercial center.

Our Verdict: ZeroTurnaround is an American company.

Does it Matter?

Some may say that the misrepresentation of companies as Estonian when they're not is OK. After all, what harm does it cause?

We think there are three problems with this.

First, we often see the Estonian startup cheerleaders pointing out the many great benefits to the startup nation that is Estonia. That's misleading, if many of these companies are moving abroad to be successful. We don't blame these companies for setting up outside Estonia or moving their operations from Estonia to other countries. They are doing what they feel is best for their companies, and it appears that often their best path to success is outside Estonia.

However, what that shows is these companies are taking advantage of what makes these other countries great for startups, whether it be the talent pool, availability of financing, proximity to customers, or any other factor. As we said, we don't blame the companies for doing this, but it just makes the claim that Estonia is a great place for startups quite weak.

Second, a number of the companies listed above received some support in the form of taxpayer money, from EAS and/or the Estonian Development Fund. Taxpayer funding, unlike typical private equity funding, is usually made with some specific societal goals. These funds are intended to promote and improve the economy within Estonia, as well as create jobs in Estonia. A number of the companies that received funding later moved outside of Estonia. So not only is taxpayer money being potentially wasted on companies that may not need the funding, but it's not even helping the economy and people of Estonia.

Finally, these companies outside Estonia provide most of their economic benefits outside of Estonia as well. They create jobs there, have investors there, and pay various taxes there. These companies should not be celebrated as Estonian companies when their operations are predominantly outside Estonia, and their benefits are being provided predominantly outside Estonia.

It's looking to us like the trend is that startups with only minor links to Estonia are being lauded as great Estonian success stories when these companies aren't really Estonian to begin with. A company based outside Estonia, with a founder or two who are Estonian, does not qualify to us as an Estonian company.

Russians don't celebrate the success of Google as a Russian company, but instead focus on companies that are real Russian success stories, like Kaspersky Labs. It's unfortunate that Estonians can't focus on their own home-grown successes in the same manner.


  1. It's not uncommon that Estonians cheer Skype as an Estonian company. The founders were a Swede and a Dane. The headquarters were never in Estonia. Estonians argue that the technology and the brain were Estonian. The key technology was designed by the Dane. A few Estonians got a small share from the founders when Skype was sold; the founders were fair - and, as the transaction was big, the tiny share was a lot of money.

    1. skype headquarters was never in Estonia?

    2. You can easily Google several sources, but here's one link:


    3. The key patents and inventions were Estonian: http://v3.espacenet.com/inpadoc?DB=EPODOC&locale=en_EP&FT=D&CC=EP&NR=1649676A2&KC=A2

      Otherwise it was a brainstorming from second 1 together with the Estonian team on which product to actually create, so it was a team decision (that actually took months and months to make).

    4. The key P2P framework was designed by the Dane. It had applications (like file sharing) prior to Skype - and it has had applications also after Skype. This is why eBay had to deal with Joltid after acquiring Skype.

      The Estonian team certainly was important for Skype, I wouldn't argue the opposite. However, trying to label Skype as an Estonian company is lame.

    5. As an Estonian, I could not care less whether Skype is called Estonian or not. National identity can not be built upon such fragile things as success of private companies.

      My friends and I talked of how the Estonian official propaganda machine went off the rails / lost common sense overtly promoting Skype, the local start-up scene etc.. already in 2006. That is 7 years ago. Why should we, men of intelligence, be concerned with the propganda machine that is present in every country, entity like cosmic noise?

      This is an old story of middle men trumpeting old stories. You mistake the official propaganda for what Estonian people feel in their gut, not to speak of how we think more intellectually - but I do not think statements like "company x or z is estonian or not" reach the level of intellectual discourse.

      This entire post is a solution searching for a problem that does not exist. Let's be friends and forget this nonsense.

    6. http://en.wikipedia.org/wiki/FastTrack
      Lame my ass ;)
      Calling all it as Dane invention and founding is nothing less than lame.

      and http://www.bluemoon.ee/bluemoon/index.html

  2. Kind of like how Skype's founders all became Estonian. Niklas and Janus who?

    One study had 52% of start-ups in Silicon Valley being founded by immigrants -- Indian immigrants founding 13.4% of them.

    According to Estonian start-up cheerleader logic, 13.4% of those SV start-ups would be "Indian" companies.

  3. I would also bring out the negative aspect of being from "eastern Europe" and all the bias that goes with it. It's not good for start-ups public image. Think when someone comes to you to sell his service and they say "We are a start-up from North Korea". Would you trust them? This is how big markets see companies from Eastern-Europe. So for transferwise (as money related start-up) it's definitely good idea to keep their image as separate from fishy eastern-Europe.

  4. There's a rather big difference between "Google is a Russian company" and any of those listed as "not Estonian". Google founders were just born in Russia. I'd say all the companies listed above were actually founded in Estonia. They might not have/had HQ address in Estonia but the main ideas/brains came from Estonia/estonians.
    I'd say several companies listed as US-based have just a legal and sales departments in US, while the engineering is done in Estonia. Sure, legally they may be US/UK/etc, but saying they don't give anything to EST and so taxpayers money was a waste - not true. Engineers are still mostly employed in Estonia and payed quite well and the resulting "product" is mostly exported (which was the aim of the grants) .
    Disclaimer: I'm an Estonian myself and know several of the "mobsters" personally so I'm biased :)

  5. Skype is originally Estonian:

    Skype was first released in 2003 written by Estonian developers Ahti Heinla, Priit Kasesalu, and Jaan Tallinn, who had also originally developed Kazaa.[14] It developed into a platform with over 600 million users and was bought by Microsoft in 2011 for $8.5 billion.[15]


    1. No it's not. Owners - not Estonians. Headquarters/registered - not in Estonia. It's like saying H&M is Indian - and not Swedish - company 'cause all the products are made in India/Asia. Funny how 99 percent of Estonians take Wikipeadia as the Ultimate Truth, not knowing anyone can write/edit the texts. According Wikipedia Estonia is a prosperous & ultra democratic country...

    2. From the same Wikipedia entry:

      "Skype was founded in 2003 by Janus Friis from Denmark and Niklas Zennström from Sweden.[24]"

      So Skype is not Estonian. According to Estonian logic, it's actually Danish-Swedish. Sorry Estonians.

    3. "written by Estonian developers..."

      Oh yes. There are lots of best-of-class photos "captured by" Canon/Nikon and "printed by" Epson. The Japanese are good photographers, but still - let's not mix things up.

    4. You sir just made my day with this analogy.

  6. Oeh, http://imgs.xkcd.com/comics/duty_calls.png

  7. http://sport.delfi.ee/news/jalgpall/eesti/ullatav-fakt-eesti-suurimapalgalisem-jalgpallur-on.d?id=66018258

    Same story in every sector :)

  8. Given the otherwise reasonably smart posts in this blog, I find the particular rant somewhat unexpectedly shallow.

    Whether something is "Estonian" or not, is, of course, a matter of definitions and everyone is free to pick one definition of the other. Hence, the whole attempt of stamping "Estonian" or "American" on particular companies seems, if you'll excuse me, dumb.

    What you could do instead is try to understand *why* those companies are regarded as "Estonian" and, well, you'd probably immediately find the obvious answers (but then you'd lack the opportunity to write a provocative post, which is what you aim at, right?).

    Where did "Google" come from? Well, presumably it came from the combination of American-educated brains within an American university/business ecosystem and funded by American money both initially and later on. Hence, even if some crazy country decides to buy Google at some point, it will still proudly carry the "made in America" sign on it with the particular meaning that "America has the ecosystem to produce such companies". Of course, you are also free to discuss whether the fact that Brin is from Russia gives bonus points to Russia or whether the fact that he is Jewish should be regarded as another plus point towards the popular "Jewish have all the brains" meme. If you find enough examples, you can make a compelling case to praise any of those facts *in addition* to the American origin.

    Now it is obvious that Estonia *does* have a particular ecosystem which seems to push more people towards creative entrepreneurship than in some other countries. All of the founders of the companies you named above know each other, many of them have had education in the nearby buildings, they stem from the same "ideasphere", if you will, and were it not for this combination of factors, many of them might not have decided to go for building their business instead of settling down at a nicely paid cubicle position. For this simple reason it makes sense to single out the fact of those companies having been "made in Estonia" (among other factors, of course)

    Does the fact that the company has outgrown its Estonian market (or maybe never even aimed at it) and is now based in the UK or funded by US investors, or even simply "prefers to list UK addresses in Twitter" diminish the significance of the observation that it was founded in Estonia? I do not think so.

    Did the listed companies give nothing back to the Estonian state? Oh yes they did, and most of them continue doing so.

    1. So taking Estonia's pride and joy, Skype, who was Niklas and Janus?

      How was Skype founded by Estonians exactly when the founders are Danish and Swedish?

    2. KT: The line has to be drawn somewhere. When does Grabcad finally become an American company then? The majority of their employees are based in the US, are American, and were (probably) educated through the US university system. What percentage does it need to reach before they finally become an American company?

      Or what about a company where 2 out of 20 employees are Estonian, including one of the cofounders, and they are based in the UK. Are they Estonian? It seems like that's the story with some of these "Estonian" companies. It gets nauseating to hear every company where an Estonian was even slightly involved trumped up as some "Estonian" company.

    3. [Now this is dumb, the combination of the moderation policy, blogger commenting functionality and a broken internet makes it impossible to understand whether the last comment went in. Do ignore this retry if it did. Drop this header if it didn't]


      Short answer: Niklas and Janus were the guys that gave the money and founded Skype-the-company. They certainly deserve a lot of credit for its success. Estonians are the guys who developed the tech. Funding is important, but in general a replaceable aspect of a tech company.

      Long answer: You see, Estonia is a small country and everyone in IT knows everyone. In particular, most IT guys here have had a chance to exchange a beer or two with Ahti, Jaan and other guys behind Skype tech. Moreover, most people here know the full story of a small game-coding shop BlueMoon interactive that started sometime in the eighties and produced brilliant software already at that time (I still long for SoundClub). In the nineties they went on to producing revolutionary brilliant peer-to-peer tech, and later on in the naughts managed to finally monetize it in the form of Skype. Skype was not born in a year or two "after the swede and the dane came". There are literally *years* of cultivation and development of brilliance in that particular Estonian team hidden before it came up with Skype as-yet-another-application-for-FastTrack-like-things.
      Would Skype be different if the guys from BMI found other friends? Most certainly, but it would still be a brilliant piece of technology. Would Skype even be possible without the carefully cultivated know-how of the BMI team? I doubt it.

      Knowing this history and knowing the people behind it closer than just from the pages of a newspaper it seems kind-of stupid to deny their achievements in actually *creating* (even if is not the same as "founding") Skype.

    4. @Anonymous:

      It seems you did not read what I wrote. It does not make sense to "draw the line" anywhere. No matter where the employees of the company are now, if it was born from the particular Estonian ecosystem, the company will always be regarded as "founded in Estonia" and can be called "Estonian" in the appropriate context.

      It is later only natural for any Estonian company to expand beyond the tiny country of origin up to the point where it may have its proportion of Estonians matching the overall proportion of Estonians in the world, i.e. close to zero.

      And no, it is not true that "every company where an Estonian was even slightly involved gets trumped up". None of the examples above fit this category and I doubt you'll find any.

    5. "Funding is important, but in general a replaceable aspect of a tech company."

      "Prior to forming Atomico, he co-founded Skype, Kazaa, Joltid and Joost among other high-profile technology companies. Niklas held the position of CEO from Skype’s inception until September 2007 when he became the company’s chairman, a post that he held until March 2008."

      So you're saying the guy who co-founded Skype and served as its Chief Executive Officer, is somehow less important than the Estonian techies who wrote the code?

      History is littered with great technology that went nowhere because of bad business leadership.

      It seems kind of stupid to deny the bottom line, that a Dane and a Swede brought this to market, led the company to what it became, sold it for billions, and rightfully, are acknowledged as its founders and former CEO, by the world (except the world according to Estonians).

    6. I think I made myself quite clear. The Swede and the Dane *founded Skype-the-company*. Estonian team *created Skype-the-product*. All of them deserve credit.

      If this does not explain to you why Skype is often praised as being of Estonian origin (the core development and the servers, if I'm not mistaken, are still here, by the way), I do not know what else to say. Go troll somewhere else. This is certainly not the place to discuss how much exceptional skill is needed to exceptionally sell an exceptional product.

    7. Estonians don't say Estonians wrote the Skype code. Estonians say Skype is Estonian, was founded by Estonians, was started by Estonians. That is false.

      The REAL founders (founders = people who build the COMPANY) were Danish and Swedish.

      Get over it.

    8. No one here (except you) has expressed the idea that the credit of founding the company does not belong to the two guys from Denmark and Sweden. Your presumptions are wrong and the butthurt has no grounds. Get over it, indeed. Skype's Microsoft's property now, anyway.

      Also try to get over the fact that Estonia is the place where the technology was invented and the software and the server park is still being developed and maintained from. Is there something wrong about that?

  9. ZeroTurnaround was founded in Estonia, developed in Estonia and most of its core team/founders still live in Estonia.

    How does one office in Boston make them a US startup?

  10. It is interesting to look at the whole picture and to see the reasons behind why would anyone be interested at all by saying that one or another company was founded in one or another country. Usually the ones who care and promote this aspect of some company and specially start-ups are government (or non-profit) employees, politicians and other similar people who gain something by showing how good and successful everything around them and specially the project they have some “responsibility” in, have been. It is same with every other country too. Usually companies only promote their “background” when they have something to gain from it (like “Nordic design”, or “Swiss made” and so on). It would be interesting to see the analysis about the biggest loudmouths about Estonian start-up scene.
    For example - Garage48 has their own agenda to push, EAS has their agenda, Andrus Ansip has his and journalists have theirs. Garage48 needs to find new participants and get their funding going, EAS needs to show how well tax-payers money has been spent, politicians just want overall “I’m great leader” image to be re-elected and the journalists – well, they need to write something to get paid and why not some nonsense about some “miracle” country. As long as it “turns profit” for everyone involved there seems to be no stop to it.

    1. As I mentioned above, I think the reason is way simpler.
      For all of the startups listed above I can say that they were founded either by a friend or a friend-of-a-friend or, in a rare case, a friend-of-a-friend-of-a-friend of mine. Due to the size of Estonia, this holds for pretty much all the people here.

      Thus, politics aside, most Estonians know the local companies simply because they are closely related to the people that work on them, and it is only natural for them to appreciate the efforts, especially if you see that those efforts gain some worldwide resonance.

      It is easy to see that this aspect is not present in most large countries at all.

    2. My 5 cents. I think the article is somewhat to a point. Of course, labelling a company with a certain 'country' is typically done by those, who are not directly associated with it - the comment of Anonymous has its point.

      But a more interesting question is if the public money - read taxpayers money - should be spent as it is - on supporting risky businesses which are very likely to move away from the Estonian tax domain if they succeed.

      In my opinion one solution could be to limit the size of a public money pot given to a single company by ~50k EUR. If the company cannot get to a product/service interesting for the private investors with this kind of money - as a tax payer I don't want to support it frankly and would rather see money being invested into creating kickass physical and chemical labs in schools and higher bonuses/events for the education.

  11. I think the desire to promote an American style start-up / free enterpise scene with public money / the social democratic political approach that comes from the EU is at the heart of many of the problems in Estonia.

    I am not saying that either of these approaches is wrong. It is just that they do not work together in this order. Perhaps it would work the other way around when we would promote socially conscious start-ups with private funding American style. Where the companies goals are related to benefiting the public (socially concious and all that) and their funding is private. Not like it is right now when the funding is social / public and the goals private.

    Young and in terms of Estonia, affluent, men failing with large sums of public money is never nice for the morale of the country and even if you succeed the DNA of your business is built upon the Anglo-Saxon model so you will end up in London, Boston or Califronia sooner or later because your business was built for that environment and all of your role-models are there.

    That leads to there not being any big social benefits for Estonia or the EU to fund start-ups with public money. Hopefully, the founders succeed and I wish them well.. but the gain of an handful of founders does not replace the benefits that we expect to come and that will not come. Thus, Boston or San Francisco benefits from public money that Estonian and European pay in tax.


  12. Bottom line -- It's not about Estonian, vs American, or The Chicago Bulls vs The San Antonio Spurs.

    It's about having a kick ass team and being able to build great value in society.

    Getting caught up with politics, and burning your mind working with small minds -- is a waste of time.

    Small minds talk about people, Mediocre minds talk about events, And Great minds talk about Ideas.

    Estonian has the potential to become a hub of great minds, if they delete this idea of having pure Estonian teams.

    To build the next generation DNA, its important to have the best the world has to offer, and build an environment where the best minds can come and comfortably work.

    1. Ideas are cheap, execution is everything.

  13. This constant talk about value, outside the box, bay area etc reminds me of:


    Actually goes with Estonian start-up scene as well.

  14. If a woman gets married and takes new family name, is she now the daughter of her husband's mother instead? Or is she still daughter of the woman that gave birth and raised her? :)

    Sorry to see all these lost daughters...

  15. Company should be treated as Estonian only if it pays most of its taxes in Estonia and has majority of employees in Estonia. How can you call company Estonian if founder just run away when earned enough money and uses its own country as a place where he could hire cheap work force. It will not last forever - more smart people are migrating away, less taxes are paid, education and infrastructure becomes worse, level of corruption increases. Source of good ideas is just running out. Companies and startups are already unable to find smart and talented people inside the country. You cannot consume from local society all the time without investing into it.

  16. The Economist magazine has recently published several blog posts (not to be confused with articles in the print magazine, which are higher value journalism) that sex up the start-up scene in Estonia. The blog posts are all rubblish and biased journalism.

    For years the main zealous advocate for the Estonian cause has been Edward Lucas. Lucas was remorved from the Eastern European correspondent job three years ago in 2010. This happened overnight and the magazine did not replace him over a year. Why would a senior journalist, who had been covering Eastern Europe since 1986, be removed from his post? And if this was a planned move, why did The Economist replace him with someone else immediately?

    Reportedly Lucas nearly got the sack and saved his skin by offering to edit the International section. The International section is considered second-rate by The Economist journalists. No senior journalist wants the job. The stories are mostly about women's issues, religion, hunger in Africa, etc. Lucas has been the editor since 2010.

    The British media reported at the time that Lucas was too close to Estonia's officials. The president Toomas Hendrik Ilves, the corrupt former prime minister Mart Laar and several advisers in the governement are Lucas's close friends (his Twitter feed is illuminating). Lucas travelled to Estonia once and twice a month, which is once or twice too many. His articles were filled with praise for Estonia even when the topic was Polish prostitutes or Hungarian wine.

    Eventually the editor of The Economist John Micklethwait caught up with Lucas's game. Lucas stopped writing about Eastern Europe and his travel budget was taken away. (There is a monthly section in the European Voice, a newspaper no one reads, where he promotes Estonia as often as he can.)

    Recent blog posts in The Economist about the start-up scene in Estonia have all been by second-rate journalists: Kenneth Cuckier, Ludwig Siegele, etc. Lucas is feeding them ideas and information. He made an unofficial deal with president Ilves and co several years ago to promote Estonia any way he can.

    The blog posts are littered with very bad mistakes: Hotmail was created in Estonia, Transferwise and Realeyes are Estonian, Skype is Estonian, 5-year-olds are taught programming at school. But then again the quality of The Economist has been in serious decline more than a decade. This is a magazine that claimed Ronald Regan broke up the Soviet Union, that Iraq war is justified, that Iran has nuclear weapons and that Snowden is a criminal who should serve at least 15 years.

    Doteebubble - keep up the good work!