Indrek Uudeküll, Partner at Prudentia Tallinn

In 2021, with 7 companies valued over billion dollars, Estonia became the country with the largest number of unicorns in Europe. Although we love to be collectively proud of Skype, Wise, Bolt and other similar companies, only few are able to grasp the importance of growth companies to the local economy. To this end, Prudentia Advisory, in cooperation with the Siena Secondary Foundation and the Founders' Association, published a separate ranking for growth companies in order to more clearly measure their potential and contribution.

In the first wave of the coronavirus pandemic, the support to Tallink and Bolt from the state budget was sharply opposed. The heated social debate vividly illustrated how difficult it is to assess the role of growth companies in the local economy. The minister of finance called Bolt a "low-cost sharing economy app" that underestimates both the contribution of start-ups today and their future potential.

The role of tech companies in the Estonian economy is growing and the growth of their share is many times faster than in other sectors. Speaking of tangible numbers, today about 1% of Estonian employees work in technology companies, paying the state about 130 million EUR in labor taxes. At the current growth rate, growth companies mayalready account for 30% of Estonia's gross domestic product by 2030.

It is no exaggeration to say that the engine of economic growth is emerging from the start-ups. In addition, there are benefits to our international reputation that can be considered invaluable.

Growth companies need a separate ranking

It is true that companies like Tallink and Bolt cannot be given the same weight. Prudentia Advisory in cooperation with Nasdaq Tallinn compiles the TOP101.ee ranking of the most valuable companies in Latvia and Estonia. However, growth companies usually do not make it to the list because they do not have historical profit figures.

In order to take into account the dynamic developments of technology companies and to better describe their role in the local economic landscape, a separate ranking of growth companies was compiled for them. Similar rankings are compiled around the world by, for example, the Financial Times and Deloitte, although the methodology of each ranking is somewhat different.

TOPTech keeps an eye on the growth of the values of the technology companies established by the Estonian founders, also taking into account the potential growth in the future. The aim is to provide a comparable assessment of the value of companies at a specific point in time and based on a similar methodology.

• Only technology companies that are defined similarly to the approach of the Founders' Association's start-ups can enter the table, ie fast-growing technology companies that have at least one Estonian founder or are registered in Estonia AND the company's head office or at least 20% of employees are in Estonia.
• The value of companies' equity is assessed, which, in tech sector, is similar to the enterprise value.
• The TOP is compiled using information available from public sources and provided by the company.

TOPTech ranking in 2021

The first TOPTech ranking includes 25 growth companies, including well-known technology coats of arms such as Wise and Bolt, as well as less well-known companies such as the meditation and relaxation application Synctuition or the world leading cryptocurrency P2P sales platform Paxful.

The TOP is dominated by various financial services companies such as Monese and Admiral Markets, including a wide range of cryptocurrency services (Paxful, Coinmetro and Change Invest). The tone is also set by business software providers (Pipedrive, Glia,  Toggl) and various transport, courier and parcel service providers (Bolt, Starship).

The custom software development companies Nortal and Helmes can also be found in the top, which clearly shows that it is possible to make it to the technology top as a so-called traditional profit company. Both groups are expanding rapidly around the world, increasing both turnover and profits.

In addition, the ranking includes well-known Veriff, Testlio and the local investor community favorite Ampler Bikes.

A similar division can be seen in growth companies all over the world - from Europe to Israel, which is the only country in the world that is ahead of Estonia in terms of unicorn per capita. Among the 10 most valuable startups in Europe in 2020 were as many as 6 fintech companies such as Checkout.com, Klarna and Revolut (including our own Wise).

In Israel, the picture is a bit more mixed, but there are also a number of financial services companies at the top of their unicorn value charts, such as eToro, Rapyd and Pagaya. Various business software providers are also doing well from information security (Tanium) to a machine-based sales solution (Gong).

Illar Kaasik, Managing Partner at Prudentia Advisory, is pleased that the top of technology companies has become a reality: “This has not been an easy task, as the methodology must take into account the specifics of the operation of growth companies. We believe that the new ranking will help to understand the value of growth companies both in the context of the industry and in society in general.”