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Thursday, June 13, 2013

Summer Update

Checking In

Summer in Estonia. Sun is shining, weather is sweet. Many Estonian startups seem to be taking time off to enjoy the weather.

While they're out relaxing (and their competitors in other countries are hard at work), we thought we'd take this time to provide an update on a few companies we profiled in the past.

Fits.Me : Taxpayers Out Another 1.8 million

In our post last month about Fits.Me, we calculated that they received around 1.9 million euros of taxpayer money.

It turns out our calculations were wrong. They were too low.

After some further sleuthing, we found that the EU's now-defunct Eurostars program (yes, they gave it the same name as the train - brilliant!) also gave them money back in 2011. 1.87 million euros, to be exact:

So that brings the total amount of taxpayer money wasted on this company to 3,773,456 euros, for those keeping track.

Startup Wise Guys : Where's My Million Euros?

As we wrote earlier this year, we don't have high hopes for the Wise Guys. It looks like the wise guys (and girls) behind the Wise Guys have also wised up and mostly moved on to other opportunities. Looking at the list of their team members on their site, then checking the corresponding LinkedIn pages for those people, it looks like only two of the team members work exclusively for them, and one of those two is just an intern. All the founders have other jobs listed on their LinkedIn profiles as well. To us, it doesn't look good when all the organization's founders no longer focus on the organization.

In the meantime, they just announced they're accepting a new batch of applications for an intake this fall. Have a look at the description of the program, where they mention the up to 15,000 euros of funding available for each team.

Notice what's missing? How about the 1 million euros of funding available via SmartCap, which they announced last year? As far as we can tell, 250k went to VitalFields so there's 750k left.

Now, if you were running this program, and trying to get companies to apply, wouldn't you mention this huge amount of funding available? Why did they leave it out? Our guesses are that either the funding has been pulled due to limited success of the Wise Guys, or they are not confident they'll find qualified (good) companies for the money. Whatever it is, it makes us awfully suspicious when key information like this is left out.

Baltic Innovation Fund : Millions at Stake

As we've written about in the past, we're not happy about the Baltic Innovation Fund, which plans to use 100 million euros of taxpayer money to invest in companies in the Baltics.

How are things going so far? Let's have a look.

In February, it was announced that 30 million euros has been given to BPM Capital to invest in Baltic companies. As noted in that press release: "The investment period of the fund is expected to begin in Q2 2013" Well, we've got only about 2 weeks left in this quarter, and BPM Capital doesn't even have a website yet! Is this really the right group to trust with 30 million euros of taxpayer money?

Then, earlier this month, the Baltic Innovation Fund announced they're giving out another 20 million, this time to BaltCap. We've written about BaltCap in the past, because they already received 40 million euros of taxpayer money for investment, through other programs.  Then they got another 136,000 euros of taxpayer money as a grant from Enterprise Estonia.

Will BaltCap benefit Estonian companies? A look at their list of investments shows that since 2010, they've invested in only 2 companies in Estonia. One investment is in a wind park, and the other is in a company that does aircraft maintenance. Presumably these investments were made with the help of the previous wad of 40 million in taxpayer money. How will they spend their next 20 million of taxpayer money they just received?

As we've said in the past, we have no problem with private investors taking risky bets on new companies. This private equity process works amazingly well in other countries. Why does the taxpayer need to get involved in Estonia? Some will say the reason is that there is not a sufficient private equity market to fund good ideas in Estonia. We disagree. There is plenty of private equity available for good ideas, as can be seen by perusing the list of members of the Estonian Venture Capital Association (also note BPM Capital, mentioned above, is not a member, yet they still got 30 million euros).

We think there are insufficient good ideas, not insufficient funding. Handing out 50 million euros in taxpayer money to BPM Capital and BaltCap is a waste.


  1. Wow! Wonder what the teachers of Estonia would say to see this type of tax money go down the drain, and at the same time, they are encouraged to help with austerity measures.

  2. Investor Nossov:
    Yeah, but you don't get how much value we create. It's not about revenue or jobs we create, it's about VALUE.
    Not sure what the value is, but we create a lot of it.
    #bayarea #estonianmaffia #swag

  3. Wow! This is the level of understanding, how state aid works for start – up´s!!! No wonder! Dear blogger, it is fun, if you continue this blog. It just shows the level of thinking of software company, “who survived the dot-com crash”. Not very complex thinking, is it ... or is life just very black and white for you? Independent state is not a company of 20 people, mistakes are mad for sure, but who are you to judge it? But still … your blog is a fun to read! Please continue ...

  4. haha. I patented an invention two years ago, I prepared all technical stuff and papers and paid 500 EUR by myself for the patenting procedure.

    Then I thought, wait, maybe I can apply to EAS for patenting and get 50%, They told me I was wrong, I had to go to one of the laywers in their list, explain him the stuff (waste of time), pay him 2800 EUR and apply for the 1400 EUR back. This sounds as a scam to me. I refused and I will go on inventing and patenting by myself.
    Apparently, EAS is not interested in improving the number of Estonian patents, but to provide 'food' for their partners/consultants.

    1. It is quite well hidden, but there's actually a lot of corruption in Estonian bureaucracy and politics. Usually if you have a friend in high position or are his/her relative, you have a big advantage compared to other people without those "benefits".