TopTech 2025: Estonia's technology success story needs the next chapter

Madis Lehtmets

EstVCA CEO

Prudentia’s and the Siena Secondary Fund's recent TopTech ranking of Estonia's most valuable technology companies is always a fascinating to look at, but the real picture of the sector's situation and development is in the dynamics over the years.

Looking at the changes from 2021 onwards, we can clearly see a recovery and growth in valuations this year. The booming numbers at the beginning of the decade were an anomaly - money was plentiful, fundraising was easy and company prices soared. Then came the correction. Estonian entrepreneurs are stubborn, so many survived and were able to continue without new capital in the more difficult years. This year, compared to the past couple of years, the top of the table has seen very good growth and valuations are back to their peak.

In addition to the absolute top performers, it is interesting to follow the newcomers and faster growers. Pactum and Lightyear have stood out in recent years, and this year also Blackwall. Defence companies stand out as well. DefSecIntel Solutions, Threod Systems and, as a new entrant, Frankenburg Technologies, show that a sector that had problems with convincing investors a few years ago has found both growth and capital. The need here is clear, this industry is in focus.

More broadly, a bit of a new breath of life can be sensed in the Estonian start-up sector. The last few years have brought a fair amount of shake-ups and reality-checks, correcting inflated expectations and stress-testing entrepreneurs. Yes, the influx of new startups is still rather scarce and, for example, in the field of AI, Estonia's position in global competition could be much stronger. At the same time, in addition to the defence industry, we are seeing activity and new initiatives to support science-based companies as well as to nurture new founders. There is movement and new energy, but there is still a lot of work to be done. In fact, now is a very good time to start new businesses.

The problem of liquidity cannot be ignored. We don't have enough exits and this is holding back the whole ecosystem. Exits would bring new capital to the market, free up talent and create liquidity in fund portfolios, which in turn would make it easier to raise new funds. Without these natural 'capital cycle' moments and success stories, our growth will inevitably be limited.

This brings us to the bigger question. With its technology sector, Estonia is in an exceptional position - here lies the potential for huge wealth creation for the whole country. Technology is the engine of our economy. But to do this, we must be able to make ourselves even more visible in the world. I fear that we tend to overestimate how much the success story of our digital nation and Skype is really known. We have our fans, who cheer and clap in front of the stage, but when you look up, the hall is half empty. We couldn't pull off a stadium concert today. The story of Estonia's tech sector need its next chapter and wider reach. It is needed geopolitically, to attract foreign capital and to make it easier for our entrepreneurs to open doors in global markets. To achieve this, we need more cooperation, both nationally and within the sector, a conscious re-imagining of our start-up and digital story, and telling that story. And most of all, we need new faces, new success stories and the courage to do seriously big things.

And we should start teaching entrepreneurship much earlier. Entrepreneurship should be taught at school to younger children, and at secondary school it should not be limited to wallets or craft candles. There, young people should be made to think and experiment with globally scalable business models. If we want the next decade to be as impressive, we need to nurture today those who dare to think big.

In addition, more experienced talent from the teams of successful start-ups could take bolder steps and eventually start their own companies. Many of them have certainly thought about it.

So the question remains - have you thought about setting up your own startup? Now is a great time to do so.