Running a startup from Estonia

It all started with e-residency

If you don't know what e-residency is, here's a quick summary: Estonians have these cool ID cards, which can be used for banking, filing taxes, e-signatures and even voting in elections...

To start a company in Estonia is simple. Just stick your ID card in the reader, go to rik.ee, pick a name and boom, you have an Estonian OÜ (read: private limited liability company) in 15 minutes, all without leaving home.

Really smart Estonians created a program where foreigners can get this digital ID card and create and run Estonian companies from around the world. The program has been a great success and brought Estonia €101 for every €1 invested. That's a crazy ROI!

Where you do business matters

The location of your business impacts your taxes, the legal framework you operate in, access to investments, service providers and marketplaces. That's why if you plan to sell globally, where you incorporate matters.

With the e-Residency, you don't need to live in Estonia to have an Estonian business.

Estonia's main advantages:

• 0% corporate income tax.

  • 20% income tax on distributed dividends.

  • 20% income tax + 33% social tax for salaries to Estonian personnel

• Digital society. No paperwork. Very low bureaucracy.

• Thriving startup community backed by the Estonian government.

• Access to EU banking system (SEPA), and global service providers (Stripe, PayPal, etc).

Starting an Estonian company from abroad

The first step is to apply for the e-residency. This term confuses most people, as "residence" perhaps sounds like you're getting an Estonian visa. Actually, e-residence is not a travel document at all. You cannot enter Estonia with your e-residence card.

This program is simply a way for the Estonian government to issue digital IDs to people who are not from Estonia. These digital IDs can be then used to access government services.

Your e-residence card has the ability to sign documents digitally. This is a legally recognized and binding way of executing documents in Estonia, so you can do serious things with it, such as forming a company...

The application process involves filling out the form, paying the state fee and then picking it up from the closest Estonian embassy or e-residence service point.

The Startup Visa

With e-Residence, I started my Estonian OÜ, and I was running it from Ankara, Turkey. To be honest, I had a comfortable life there as well. I had all my good friends, a spacious flat in a high-end neighbourhood, and a car... I did not have much to complain about, but I also knew that there was so much to explore outside of my own country.

The first problem was, most of my clients were based in Turkey. I was doing business in Lira, a currency which was losing its value consistently. I had to diversify and start making my income in $ and €.

Secondly, I knew that I had to surround myself with smart, ambitious people. If you want to achieve greater things, what better way to do it than to learn from the ones who did...

Estonia had both. It surely is a small country. But it's popular for its strong IT and startup community. Estonia would be my gateway into the European business network. I could both find new clients here, and network with people who are ahead of me in the startup game.

That's why when I discovered Startup Estonia, my mind was already set. I quickly applied for it, and was granted the startup status in 2018. With that, I got a temporary residence permit and moved here. And I'm loving it so far!

Was moving to Estonia actually the right choice for me?

Without a doubt, yes. I accomplished both of my goals for moving here.

1) I found new clients from not just Estonia, but from the USA and the UK. How? Here's my explanation: The idea of Estonia as an IT country is widely spread. People know this aspect of the country, and it attracts business and investors here.

2) I have met people in all stages of the startup journey. I've met interesting and smart people who are way ahead in the game than I am. I also had the pleasure of befriending some of these people.

The Real Experience

Goals aside, if we just focus on the real experience of living here, then of course it is quite a bit more nuanced than that.

First of all, this has been my first time living abroad. When you uproot your life and start fresh in a different country, you inevitably feel alone. But then, I was lucky enough to make some great friends at my co-working space (Spring Hub). That helped tremendously.

Still there are times when you miss your daily routine, your favourite restaurants and more obviously friends and family. As with everything else, you get used to it and learn how to deal with it as well.

Pros:

• Things are efficient. There's very low bureaucracy, everything is online & digital.

• Estonians love nature and the environment. They put a lot of care into this topic. It shows!

• Government support for learning the Estonian language: language courses, learning material, websites. And more recently, they even assign you a local language practice friend. All for free!

• Healthy business culture: Hierarchies are mostly flat. Ideas and criticism flow up and down, all within limits of respect of course. The outcome? If something is wrong, it will get talked about and it will get fixed. That's not unusual for start-ups, but here it seems to be the norm rather than the exception.

Cons:

• Family doctor: finding a family doctor can be challenging. Even after you find them, your next challenge is now being able to reach them and make an appointment.

• Making friends take time. Probably, you will make friends with other expats faster than with Estonians. With Estonians, relationships take longer to grow into true friendships. But once you're friends, you can count on them.

• It's recently become a bit expensive with the high inflation figures. But still, life quality vs. prices balance each other out.

Summary

Here is my takeaway from this experience: Where you live and do business matters. Change your surroundings, and your life will change with it.

Go find people who are working towards similar goals as you, learn from them, and perhaps even compete with them. It will put you in stress for sure, but it's healthy stress that grows you as a person and as an entrepreneur.