Lithuanian startup ecosystem – pool of opportunities for foreign and local startups and VCs

There are several core facts making Lithuania’s entrepreneurial environment extremely attractive to local and foreign business leaders. According to ‘FTTH Council Europe report’, Lithuania is an absolute leader in fibre-optic internet penetration. Moreover, ‘Ookla Net Index 2014’ ranks Lithuania 7th in the world for the speed of internet. ‘Deutsche Welle’ has also recently announced Lithuania an EU leader in e-government services and internet coverage, whilst ‘CNN’ included Vilnius in the top 10 smart cities around the world. Country’s achievements on the European and global levels are quite extraordinary, bearing in mind the size of the nation.

Speaking of business environment, the ease of doing business in Lithuania is ranked 11th in the world by Doing Business 2015 report. Apparently it takes only 3 days to start a new business in Lithuania, which reflects a relatively marginal bureaucratic approach. Furthermore, Lithuania offers the lowest corporate profit tax compared to such countries as Latvia, Estonia, Poland, UK, Germany. Therefore it is not surprising that last year Lithuanian startup ecosystem was supplemented with numerous relocated startups, mainly from Russia. Thriving startup culture attracted a world-leader mobile game publisher Game Insight which moved their HQ from Moscow to Vilnius. Likewise, 15 other gaming companies from Russia and CIS have chosen Vilnius as their base. Planner 5D, Devtodev, Kula Tech, 4Talk were among those who relocated and consider Lithuania a great medium country between Eastern and Western markets and due to its convenient geographic location and overall business environment is a perfect spot to start and speed up new companies in order to scale to the global markets.

Lithuania produces prosperous and talented professionals, currently forming around 1,5m labour force. Among those, 26,000 employees are experienced IT professionals working in 2,380 IT enterprises across the whole country. There are 77,150 IT students studying at 7 universities and 14 colleges. According to European Commission report in 2013, half of the Lithuanians have a higher education and are fluent in at least 2 foreign languages. Nearly 100% of young professionals are proficient in English language and even 92% speak at least one foreign language, mostly English, Russian or Scandinavian. ‘Eurostat’ data of 2013 reports that Lithuanian labour force costs 4 times lower than the EU average.

All the numbers prove the relevancy of Lithuanian talent pool’s participation in the development and expansion of the local startup scene. 2014 was a record breaking year for Lithuanian startups with a stunning outcome of 46M EUR in investments, 405 employees working at startups and 130 newly established workplaces, and more than 2M EUR tax contribution to the state budget. Compared to 2013 startups attracted 34M EUR investments, employed 200 people and contributed 0,5M EUR of taxes to the state budget. Lithuanian startups cover various different sectors, including e-commerce, fintech, HR, life science, enterprise, analytics, transportation, education, marketing and advertising. In addition, there are 40 gaming studios operating in Lithuania.

Lithuania can boast with 3 promising startup stars so far – Vinted, YPlan and Trafi that have attracted significant amounts of foreign investments from such venture capital funds as Octopus Investments, Wellington Partners, General Catalyst Partners, Accel Partners and Insight Venture Partners. Other rising startups – MoboFree, WoraPay, CGTtrader, Planner 5D, TrackDuck, have as well received foreign investments from eVA Fund, Entrée Capital, Intel Capital, Kima Ventures and IMI.VC.

Despite the foreign funds that are constantly looking into Lithuanian market, there are several meaningful local funds and accelerators that provide funding and mentorship to startups. Lithuania was the first EU Member State benefiting from JEREMIE initiative. Practica Capital, BaltCap, LitCapital and Business Angels Fund I administrate the funding provided by JEREMIE initiative. Reportedly, €80m In total VC funding are available to Lithuanian SMEs since 2010 and €40.3M Disbursed to LT SMEs since 2010. There are 2 private venture capital funds – Nextury Ventures and Ltk Capital, as well as 2 startup accelerators – run by Practica Capital and StartupHighway – one of the biggest startup accelerators in the Eastern Europe. Also, Lithuanian entrepreneurial environment is actively supported and promoted by government institutions – business promoting agency Enterprise Lithuania together with one-stop shop information for startups StartupLithuania, consultant for foreign investors Invest Lithuania and The agency for Science, Innovation and Technology MITA.

Startup culture in Lithuania is being fostered every year in terms of events, hackathons and co-working places. Lithuania aims to enrich entrepreneurial mindset through more than 100 annual events, meet-ups, hackathons and workshops. Among those gathering the most participants yearly are LOGIN, StartupWeekend Lithuania, SV2B. The continuous development of creative initiatives and communities helps Lithuanian startup-scene thrive at a rapid speed. Lithuania is as well following global trends and can offer modern co-working spaces for likeminded entrepreneurs. Currently there are open spaces at Hub Vilnius, StartupHighway X, Namas Hub, Sunrise Valley, Talent Garden Kaunas. More importantly, The City of Vilnius in partnership with private capital companies has started realizing a majestic initiative to make Vilnius the main attraction point for tech-savvy talents across the whole region. The construction process of Vilnius Tech Park has already gained its pace. Vilnius Tech Park is considered to become the major technology hub for startups and other businesses within ICT sector in Lithuania. It is expected that the new technology park will bring both local and international talents from the most booming sectors, such as gaming, big data, cyber security and visual graphics.

According to TRINITI, an alliance of Baltic commercial law firms, there are several reasons why Lithuania is attractive for startup investment transactions. First of all, advanced regulation based on EU law, quickly improving business legal environment and protection of investors’ rights makes Lithuania investors and entrepreneurs friendly. Law taxation for small companies as well as deduction of R&D costs has a great impact on encouragement of transactions. Other reasons attracting investments are transparency of business environment and extremely fast commercial litigation process. Based on ‘The 2015 EU Justice Scoreboard’ Lithuania is No 2 in the EU by briefness of the legal proceedings needed to resolve a case.

In brief, Lithuania has delivered significant results in terms of business promotion and rapid startup ecosystem’s development. More elements of the startup scene’s overview have been highlighted by Lithuanian startup accelerator StartupHighway, business-promoting agency Enterprise Lithuania and TRINITI, Pan-Baltic, cross-border legal practise, in a versatile review of the whole Lithuanian startup ecosystem.

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