08.05.2023 - Startups

Startup sector sees unprecedented growth over span of 10 years

Last week’s highlight for Latvian startups was TechChill: the industry’s biggest event. The conference has been taking place for about as long as the Latvian startup industry has existed. On the occasion, Labs of Latvia reached out to some of the longest standing members of the startup scene to get their thoughts on how the industry is evolving.

While people are talking about startups more and more, there is still a lack of public understanding about how this type of business differs from any other. So, back to the basics: what exactly is a startup? Artis Kehris, co-founder of print-on-demand startup Printify and one of the early-stage angel investors at BADideas.fund (he was also one of Ask.fm’s first employees), explains that a startup is an early-stage company that offers a unique product or service for a particular problem. It focuses on innovation, growth and rapid scalability in the market, for which it raises venture capital.

“A startup is a technology company that has the potential for rapid scalability. It has found a real and painful problem in the market that has the potential to serve markets worth billions,” explains Marija Ručevska, board member of TechChill and co-founder of innovation management company Helve.

Growing number of startups

Māris Daģis, founder of Sellfy, one of Latvia’s oldest startups, says that the startup industry has developed over the last 10 years: there are now many more founders and people who have alreay acquired lot of experience in startups.

“It’s also much easier to attract investment than it was 10 years ago, because there are both local and foreign investors, for whom Latvia is no longer as exotic a country as it used to be,” he says.

Kehris also says that the number of quality startups, accelerators and support organisations has increased significantly (the Latvian Startup Association’s Startin.LV database currently contains information on 402 startups).

“Besides TechChill, BuildIt and Startup Wise Guys, the Latvian Startup Association has been established, which is successfully building the international visibility of the Latvian startup ecosystem. For a year now, there has also been a syndicate of angel investors for startup founders, BADideas.fund, which invests in the next generation of startups,” emphasises Kehris.

BADideas.fund brings together more than 150 experienced startup founders and employees, including Kehris. In its first year, it invested 1.2 million euros in 11 startups. Four of these investments were made into Latvian startups: Supliful, Lande, Squad Robotics and Finfra.

Ručevska is also excited about the next generation of investors who are investing the money they earn in startups in other early-stage projects in the sector. She is convinced that the recent years have seen significant growth.

“10 years ago, we had just a few startups with the ambition to build companies with a global market for their products. We have the right mindset now, good networks in Europe and elsewhere. Today, the ecosystem is in an acceleration phase with next-level challenges,” says Ručevska.

Daģis is most happy about the success stories, such as Printful, Printify, Lokalise and Whimsical. Kehris and Ručevska also add Nordigen, Giraffe360 and Aerones to the list. “Finally, several successful global startups have emerged in the Latvian startup landscape. These companies have proven that it’s possible to build a successful business out of Latvia and have managed to attract significant investment and powerful talent. This, in turn, helps to effectively transfer knowledge, inspires others, and results in a new generation of startups,” emphasises Kehris.

Development driven by several factors

Ručevska believes that several factors have had a significant impact on the growth trajectory of the startup sector. Firstly, the rapid development of the TechChill platform, which has put the Baltics and Latvia on the European map.

“We have been able to attract smart money, talent, media, which gives credibility to the market, an opportunity for people to network and establish global partnerships,” says Ručevska.

Secondly, Latvia already has a number of success stories, which, in Ručevska’s view, will lead to the emergence of more and more new companies in the startup environment, founded by people who have gained such good experience that they are able to attract large pre-seed investments without the intermediation of accelerators. For example, Mikus Krams and Jānis Vāvere, co-founders of Trace.Space, previously worked at Lokalise, a localisation process automation and translation management startup. The startup recently raised a $1.5 million pre-seed investment to build software for the development of complex engineering products. This is the largest pre-seed funding ever raised by Baltic startup founders.

Ručevska also highlights the Latvian Startup Association Startin.LV, which lobbies for the interests of the sector and is able to achieve significant changes in laws, such as the regulation of stock options and the Law on Aid for the Activities of Start-up Companies. Kehris adds that in addition to the success of individual startups, the development and support of the startup environment is getting more and more attention.

No shortage of challenges

“Startups still have to overcome classic challenges, such as access to finance and talent. But what is most lacking is the government’s understanding of the value of startups to the Latvian economy and adequate support for the sector. It’s good to see that local governments are starting to engage more with startups,” says Kehris. Daģis adds that there is still no clear support from the government as a priority sector, which has resulted in a struggle for simple things such as a Startup House: a co-working space designed for startups.

“So there is a lack of a focal point for everyone to meet and network. It’s good that TechChill exists,” says Daģis.

According to Ručevska, the venture capital and startup environment has grown rapidly, but not all innovation stakeholders are doing their job in the best possible way. She would therefore like to see more activity in the direction of corporate venture capital funds and private and public sector investors investing in venture capital funds. Ručevska sees this having a major economic impact. She would also welcome cross-border investments at the level of the Baltic region, which would unite the ecosystem. Ručevska highlights the importance of early-stage accelerators, which help to create high-potential startups. When startups first join an accelerator, they understand ‘what’s what’: the idea is unlikely to be a great success, but the next project will be much more successful.

Ručevska also encourages those involved in the sector to use a common message. “Of course, everyone has their own perspective, but it would be powerful if we all had a common narrative about how great the Latvian market is, not about the things we lack. We can whine among ourselves, but when it comes to presenting ourselves to a foreign investor, we shouldn’t mention everything that isn’t working well,” she adds.

Author: Anda Asere (www.labsoflatvia.com).
TechChill publicity photo.

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