tag:blogger.com,1999:blog-8081340196831249352.post2079155539535960725..comments2024-01-11T07:07:31.635-05:00Comments on .ee Bubble: The Truth About Estonian Startups and TaxesDot EE Bubblehttp://www.blogger.com/profile/01855670670568018877noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-8081340196831249352.post-25828154251900754432014-12-05T06:25:15.779-05:002014-12-05T06:25:15.779-05:00Also, thank you for a different point of view. I t...Also, thank you for a different point of view. I think its only great to see such a lively and intelligent debate :)<br /><br />Personally I support the startup movement. I haven't been living in Estonia for the past 8 years, but if so, I'd rather give my tax to some young entrepreneurial guys naive enough to believe they can change the world, rather than improving general livelyhood or even healthcare. Even if it means myself suffering at some point because of it when moving back. Why? <br />Because I believe this is a form of education that is otherwise almost impossible to get and will give us significant returns otherwise. Having studied in a very practice oriented university and not in Estonia, I still firmly believe running a business is your best business school. If you've been an entrepreneur once then you know what Im talking about. <br /><br />The thing government should do however is:<br /><br />1. To make sure this money is utilised with some focus in mind. I would argue for example how useful is another Taxi app startup or price comparison website or even Cherry Media etc. Things that we know are a big gamble in the tech world and have a ton of competiton outside the borders. Also, our developers are far from cheap, so there should especially be consideration about what markets the startups seek to enter and how they are planning to scale. And yes, "technology" as a focus area is way too broad these days<br /><br />2. To make sure there is proper accountability for funds used. If you're a young entreneur who's just blown off 300k EUR of taxpayer money, you should really be ready give answers for it before the public. Having some element of fear is useful in the game of entrepreneurship, so you won't have everyone applying who thinks they have a new fantastic penny auction siteAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-68056912984069871432014-11-03T12:49:33.686-05:002014-11-03T12:49:33.686-05:00I'm an expat(not from UK/USA as you can notice...I'm an expat(not from UK/USA as you can notice from my writing :) ) that recently moved to Estonia and I'd like to congratulate you for giving an different viewpoint towards the startup culture here, different than the propaganda that's booming from the loudspeakers everywhere here in Eesti(and most of the world TBH).<br />I honestly think that the Estonian government instead of drinking the startup Cool-aid should've turned Estonia into an outsourcing paradise in the mold of Bulgaria and Romania...A recent article in the baltic business review is saying that the Kuehne+Nagle centre here is the biggest reason why the salaries in the IT are rising...not some fancy pants startup....Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-49988082020092538182014-10-16T03:55:34.045-04:002014-10-16T03:55:34.045-04:00My argument is that this money is not lost but it ...My argument is that this money is not lost but it recreates growth. And in proportion to the money already spent on health and social, it is minuscule. So yes, i think money spent on (promising) startups is good idea. We can always improve selection process and finetune other related mechanisms, but in general, in this time and place, i think some state support is good.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-55999287388543658702014-10-15T18:27:27.428-04:002014-10-15T18:27:27.428-04:00Great idea! Half of all Estonian startups received...Great idea! Half of all Estonian startups received taxpayer money. You seem to think this is a great idea, so how about they expand it so ALL startups get it? They can register their startup online, then they'll get a deposit in their bank account of half a million euros, which is the average all Estonian startups have received from the taxpayer.<br /><br />There are NO better ways for the government to spend 13 million euros than on startups, right? Despite Estonia ranking quite poorly compared to other EU countries on numerous social and quality of life measures, there's nothing that can be done. More money for startups! They'll save the day!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-71238885601098538152014-10-15T14:30:43.475-04:002014-10-15T14:30:43.475-04:00Easy - You eat well today or plant some for tomorr...Easy - You eat well today or plant some for tomorrow too. So these evil startups got 13 MEUR grants and investments. Healt Insurance Fund's budget is over 0,9 BILLION EUR. This 13 MEUR would have not made any difference there. And were they there - they never would have been seen again. But these 13 MEUR will bring returns. If You believe authors of this article, then in 4 year, if we take into account some successful exits or profit makers or fast growers already demonstrated (Fortumo, Smartpost/Cleveron, Modesat, Grabcad etc) , then probably much earlier. Actually, perhaps they have already paid back more if we take into account other kinds of taxes and other ways money is flowing back into economy...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-90727474863140097082014-10-15T13:30:57.132-04:002014-10-15T13:30:57.132-04:00Yes. It is a government's job to promote publi...Yes. It is a government's job to promote public health and protect natural resources. These are even listed in the Estonian Constitution (Section II.28 and Section I.5). Every government should do that. In addition, that's the type of duty that the private sector cannot really do on their own.<br /><br />What's not in the Constitution, and also something that many governments do not do, is invest into private startup companies. That's something the private sector can and does do. <br /><br />Now, if Estonia was doing well at responsibilities the government is expected to take care of, like public health, maybe there is less to debate. But the data shows Estonia ranks quite poorly in the EU in many social areas. Why not spend more to improve living conditions of the people, and less on handing money to startups?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-30423506435550635132014-10-15T13:19:25.797-04:002014-10-15T13:19:25.797-04:00And these are the only options? Either one or the ...And these are the only options? Either one or the other? Let me put it differently: Estonia is among the few member countries in EU with lot of relatively wild woodlands left but these need our attention and care to undo what damage has already been done, what would You prefer - spend money on planets green lungs or to spend it on some people stupid enaugh or not caring about themselves enaugh that they become drug addicts and HIV carriers? This the choice! (Or is it?)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-77794067541877660922014-10-15T13:10:48.684-04:002014-10-15T13:10:48.684-04:00Enterprise Estonia isn't and shouldn't be ...Enterprise Estonia isn't and shouldn't be a venture capital fund. I'm sure VC's don't include companies _they never invested in_ in their calculations, so why should a company be listed that never took taxpayer money?<br /><br />Using that logic, they should look at all startups in Estonia. How about Urmas's Kohvik that opened up last year? It's a startup, and he pays taxes, so let's include cafes also!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-16725493123870657782014-10-15T12:21:03.501-04:002014-10-15T12:21:03.501-04:00Estonia has one of the lowest average life expecta...Estonia has one of the lowest average life expectancies in the EU, and one of the highest rates of HIV infection.<br /><br />If you ask the average Estonian person on the street if it's better to spend their money improving everyone's health so they can live longer lives, or to put money into a social network for dogs and robotic mannequins, which do you think they would choose?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-92208143570987302442014-10-15T12:08:09.161-04:002014-10-15T12:08:09.161-04:00Yet somehow, amazingly, American companies are abl...Yet somehow, amazingly, American companies are able to compete and outperform many European companies in the high-tech sector, without any government handouts.<br /><br />How is that possible? Americans certainly aren't any smarter than Europeans, and some would even say they're dumber!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-29616386624629309812014-10-15T11:41:48.471-04:002014-10-15T11:41:48.471-04:00It's not only about startups, there are millio...It's not only about startups, there are millions and millions of taxpayers money wasted on entire industries here in Estonia who would otherwise just go bankrupt for not being competitive which is creating an unfair competitive advantage. They basically work with a damage waiver. If the company is loosing money, the government will come to help, whether the business is sustainable or not. Wrong!<br /><br />They should rather invest all that money into education here in Estonia.<br />Everybody is talking about turning Estonia into a hub for R&D in Europe but besides talking about it, nothing has happened within the last 5 years.<br />Academic quality of the Universities in Estonia? Way below EU average.<br />Research done by Universities in Estonia? Almost none.<br /><br />If you look at the salary levels for teachers and professors, it's no surprise there is not much quality left. A caretaker in the US makes more money than a University Professor in Estonia.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-38113495274292412702014-10-15T11:35:47.681-04:002014-10-15T11:35:47.681-04:00You're right about Click & Grow not being ...You're right about Click & Grow not being part of SmartCap. It was correct in our table (note only "EAS" not "SC,EAS" listed next to it), but we just looked at the wrong row when writing that sentence. It was meant to be Now! Innovations. Article corrected. Thanks for pointing out the error.Dot EE Bubblehttps://www.blogger.com/profile/01855670670568018877noreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-49264810148247802432014-10-15T11:18:53.605-04:002014-10-15T11:18:53.605-04:001. "Two of the five, Click & Grow and Spo...1. "Two of the five, Click & Grow and Sportlyzer, have direct investments from taxpayer-funded SmartCap." - Get your facts straight - Click&Grow does not have anything to do with Smartcap.<br />2. Learn the difference between grants and investments. You list here Enterprise Estonia Grants and somehow twist it to pile blame on Smartcap. I understand that You dont like them, but this kind of "logic" does not increase Your credibility.<br />3. While not in all EU countries have governments so directly involved in investing, all of them have their grant schemes. You are welcome to check Tekes.fi for example. Actually, while our own Enterprise Estonia has closed mosed grants schemes accessible to startups, Tekes is more than happy to give them to Estonian startups relocating there. So while we grumble about grants ruining free market here, actually not giving enaugh grants comparing to our neighbours, already is ruining our companies opportunities in international scale. <br />4. Your payback calculations assume that none of the startups will grow - which again is strange logic. While many of them ultimately fail, there is no reason to think that their current size (and level of taxes) is what they aimed at.<br />5. When You go to ANY investor, everybody of them confirms that they would be happier to invest if company has product, client, market traction etc. Small investors cant afford to wait that long (it doesnt mean they wouldnt like) because they dont have enaugh money for bigger rounds, so they invest in perhaps prototype phase. But everybody knows thtat it is harder to find money if you have little to show. And thats why government grants exit - to amplify founders money so that they can go further before running out. While some market distortion undoubtedly exists, it is not so big - as You yourself demonstrate: pretty much everybody who has good enaugh idea, can get this grant. Actually could... as i said before, these programs are mostly closed now, so there is little reason to continue this.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-81677506387563670242014-10-15T01:18:06.677-04:002014-10-15T01:18:06.677-04:00It is really surprising how hating something so pa...It is really surprising how hating something so passionately makes you live in a different world. In a world where:<br /><br />- the return on your portfolio is based only on a subset of examples. In real world, a16z does not leave out Twitter nor Facebook from the calculations<br />- there is only one type of tax present, applied to the salary. No additional forms of taxes present in real world, such as the capital gain taxes are anywhere in sight<br />- the rate of return of your capital is calculated using the current data, not extrapolating any kind of change over time. The fact that in real world some of the companies had 10x less employees and 10x smaller tax base is of no concern in this magic world<br />- the exits do not count. For whatever reasons, in this world, Grabcad $100m exit will not contribute a single penny towards the rate of return.<br /><br />And to topit off, in this fantasy world, achieving close to 25% rate of return of your capital is considered a lousy outcome. In this world, Warren Buffet is a bozo and cannot invest his way out of a paper bag.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-72977986788231175772014-10-14T21:04:41.806-04:002014-10-14T21:04:41.806-04:00That looks like similar data to what Sass posted, ...That looks like similar data to what Sass posted, but why are you including startups that didn't get taxpayer funding? They have nothing to do with it.<br /><br />Why should successful companies like AdCash and Creative Mobile, that pay lots of taxes but took no taxpayer funding, be used as a justification to give so much taxpayer funding to other companies? It doesn't make sense.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8081340196831249352.post-34978275773021817962014-10-14T16:05:05.157-04:002014-10-14T16:05:05.157-04:00I took another table of startups and their taxes p...I took another table of startups and their taxes paid, total for of 47 startups was 1 771 459 EUR/2months, which makes payback of about 1 year. So even if none of the smartcap investments come back (which is not very probable - one of the first ones CrabCAD was great success), then state will get the money back in one year, and the startups work much longer than 1 year. Taxpayer money well spent. My table: http://pastebin.com/bhJjwGThAnonymousnoreply@blogger.com