Step into the sauna and find out 19 naked truths about business in Estonia:
But that doesn’t matter to us.
It’s basically an unwritten law in Estonia that we have to remind the world at every opportunity that Skype is Estonian.
However, the company was actually founded by a Swede and a Dane — Niklas Zennström and Janus Friis — and most of their business is now outside Estonia.
That’s not something we’re trying to hide though. In fact, it makes us even more proud. Estonia successfully attracted these foreign investors and gave them the springboard they needed to build a global company.
They could have gone anywhere, but it was smart minds here in Estonia – like Ahti Heinla, Priit Kasesalu, Jaan Tallinn, and Toivo Annus – who turned their vision into reality.
It worked out so well for them that the founders and early employees of Skype used their success to create and invest in many more Estonian companies afterwards. Many of them have their own saunas for employees, by the way, which perhaps played some part in their success.
So we’ll always celebrate people who choose to startup in Estonia, regardless of where they come from or where they want to go next (and even e-residents who have never stepped foot in Estonia!) To see an example of that pride, go check out the co-working space Lift99 in Tallinn. Every room is dedicated to people from outside Estonia who made a valuable contribution to our country. There’s a Zennström room, for example, and even rooms dedicated to the Pet Shop Boys and the entire nation of Iceland!
It was just the best option.
Estonia had few resources at the dawn of re-independence when we faced the daunting task of rebuilding our infrastructure almost from scratch.
It’s often repeated though that we became a digital society for this very reason. We just couldn’t afford to invest in the kind of legacy infrastructure used by other countries at the time of its re-independence.
This interpretation misses the point.
Estonia definitely saved a lot of money by investing in digital, but the primary reason that we became a digital society is because it also offers us greater benefits. It’s not just cheaper. It’s better.
We’re the Estonia of Europe – and that’s fine by us.
Some people have compared Estonia to Silicon Valley – including BBC News and Deutsche Welle.
Sure, we have a vibrant startup ecosystem and we value our close connections to Silicon Valley — but we really couldn’t be more different.
Estonia’s strengths are Silicon Valley’s weaknesses — and vice versa.
Silicon Valley has a huge economy of scale to provide startups with access to local talent and finance. But it’s also a very expensive fixed location for a business. And location is less important in the digital age.
Estonia is the opposite. Our location is very affordable and you can manage your Estonian company online from literally anywhere. You won’t find a huge talent pool locally (so you’ll probably need to go remote as you expand) but you will find a closely connected and very supportive community of entrepreneurs locally. Being an independent country also means we can adapt fast with legislation to support emerging industries and new technologies – like we did to legalise delivery robots, ride sharing, AI, and other new startup ideas.
So Estonia isn’t the Silicon Valley of Europe. Estonia is… the Estonia of Europe — and that’s how we like it.
We have fair and simple taxation.
Estonia has been ranked number one for tax competitiveness for six years running by the Tax Foundation. This isn’t a measure of low taxation though.
The index mostly measures how well designed the taxation system is, both for achieving policy objectives and for being simple to pay. Estonia ranks top because we have fair, simple, and smart taxation.
For example, Estonia doesn’t tax companies when they make profits but taxes them instead when they distribute dividends. This encourages companies to re-invest in themselves. You definitely shouldn’t confuse that with 0% corporate tax though. Estonia wants you to grow so you can (happily) pay even more taxes in future!
No one actually knows who first invented the first sauna.
There’s one last myth to bust. Some of you might be thinking while reading this article: “Isn’t the sauna a Finnish thing though?”
The sauna, as most people know it today, is rooted in the culture of Finno-Ugric peoples living around the Baltic Sea – like both the Estonians and the Finns. The tradition is mentioned in some of Estonia’s earliest written records so it stretches further back into our pre-history.
However, many different cultures around the world have similar sauna-style sweat bathing traditions once you go back far enough. Some believe it was humanity’s second innovation after figuring out how to make fire.
So the sauna belongs to our common human heritage. What makes the sauna special in our part of the world is not who invented it, but how we are preserving it and making it even more relevant in our modern age.
Our dear neighbours in Finland have certainly done more than anyone else to preserve sauna culture and help the world rediscover it. For that, they do deserve credit. Estonia’s sauna expertise, design and traditions are gaining increased notoriety around the world so we invite you to discover it. By the way, as there’s no word for ‘sauna steam’ in English, you might as well start using our word: leil.
So the sauna belongs to everyone – regardless of where you come from or where you are going, whether you choose to go naked or not, and whether you want to sweat it out in the leilruum with us or just listen to stories from the eesruum. That’s the naked truth.
No one is more critical of our digital development than us – and that’s a good thing.
You’ve probably seen at least one article about how ‘This Tiny Ex-Soviet Country is Now the World’s Most Advanced Digital Nation’. It’s flattering, but a bit formulaic.
Even those of us whose job it is to promote Estonia, would rather invite journalists to look more deeply into both the opportunities and challenges of living and working in our digital society. No one is more critical of our digital services than us as Estonians because we expect them to be continuously developed to a high standard – and the best way to achieve that is with free, open and critical discussion.
Even if you can’t visit during the pandemic, Invest Estonia arranges virtual business visits here in which we’ll give you a deeper overview of e-society. And Estonia has the second most free internet in the world so we’d also happily show you how to reach out to entrepreneurs doing business here, such as through Facebook groups, so you can listen to their own experiences.
(Oh, and Estonia wasn’t a Soviet state because we were illegally occupied then nullified our membership — and we’re not even that small, just very spread out!)
But our connectivity is very good anyway.
There’s a claim endlessly copy and pasted in international media reports about Estonia that we have a nationwide free WiFi network. It doesn’t exist – and no one is quite sure where that claim came from!
For one thing, it would be a bit tricky to implement. Our country is surprisingly big for a small population and more than half of it is wilderness — not to mention those 2,222 islands.
Don’t worry though. Internet access is considered a human right here. WiFi is still widespread, although less important these days, and there is no spot in our country that doesn’t have good connectivity. You can pick up 4G at even the most remote sauna cabins.
Stones are the most fundamental feature of a sauna. We heat them then periodically throw water on them to generate steam known as leil. Without those two things – stones and leil – it’s not a sauna.
That includes ‘sauna blankets’, ‘sauna belts’, and even ‘infrared saunas’! Oh, and those ‘24 hour saunas’ in Tallinn are also not real saunas, but that’s a whole ‘nother issue.
Our oldest and most special type of saunas are known as smoke saunas. They are also the traditional place of birth for Estonians until relatively recently. These smoke saunas pre-date chimneys so a fire is lit beneath a large pile of stones and the smoke fills up the room instead. After half a day of heating, the fire dies out, the smoke is released then we go inside to bathe with just the radiant heat of the stones, which will keep hot for another half a day.
You might be surprised to know that the room we heat the stones inside is not actually the sauna. It’s the leil room (or ‘leiliruum’ in Estonian). The sauna is so much more than that. It’s the whole building and experience around it.
In fact, our smoke sauna tradition in Võrumaa, South East Estonia, is even listed by UNESCO as part of the ‘Intangible Cultural Heritage of Humanity’. It’s important to note though that it’s not just the hot room or even the building that is listed. It’s the entire tradition and expertise passed down through the centuries. That even includes aspects such as gathering branches to make a ‘viht’, which is the bundle of branches we beat ourselves with in the sauna. (It’s not as scary as it sounds).
Estonians particularly love a good eesruum (pre-room) in their sauna because that’s where we spend most time at the sauna relaxing with friends and often enjoying good food and drink too.
A good sauna is also just as much about cooling down as warming up!
There’s no medals for enduring high temperatures as long as possible.
Estonia is home to the annual European Sauna Marathon, one of the world’s most bizarre sporting events, which attracts competitors and media coverage from around the world.
In truth, it’s not actually a marathon because you have to use cars to get between all the saunas. In fact, it’s not even a proper race because the ‘winners’ are chosen randomly at the end. If you think that’s unfair, then you are taking it way too seriously!
Our (not so big) secret is that this event is really just a very fun way to show off our winter capital of Otepää and let people see as many different weird and wonderful saunas as possible.
And saunas should never be thought of as a competition.
Too many people around the world think of the sauna as something unbearable to be endured. In most cases, an unbearable sauna simply has poor ventilation.
Our traditional smoke saunas are not just nice and airy, but also quite mild in temperature by modern standards.
No matter how hot it is though, should go cool down as soon as you feel uncomfortable and always drink plenty of water. No one is going to give you a medal for staying in the longest or enduring the highest temperature.
We’re proud of our other identities too.
Estonia’s own marketing material often introduces our country to entrepreneurs as a “Nordic nation”.
This can lead to heated debates (even when we’re not in the sauna).
The truth is that we have multiple overlapping identities — just like everyone else in the world. We’re Nordic and Baltic. We’re Northern and Eastern. We’re a forest nation and we’re a digital nation. We’re Finno-Ugric. We’re European. We’re global. And we’re Estonian.
Being one doesn’t mean we are any less proud of our other identities.
Estonia undoubtedly has similarities with the rest of the Nordic region in history, language, culture, style, and cuisine. And it’s particularly relevant to highlight some of our Nordic characteristics to entrepreneurs. For example, our country is very stable and has a very high proficiency in English as a second language, and our design tends to be simple, functional and inspired by nature.
Even the cross used on most Nordic flags originated in Estonia. According to the Danes, it fell from heaven in the 13th century when they arrived in Tallinn (which literally means ‘Danish town’, by the way). Ok, that whole ‘flag falling from the sky’ story might have been a bit embellished over the years, but our Nordic identity is a real part of who we are.
There are also plenty of ways we’re not like other Nordic countries due to our differing history — and that’s just as significant. Estonia is particularly affordable, resourceful, flexible, and retains strong links across Eastern Europe and beyond.
There are better souvenirs from Estonia.
You can find plenty of Baltic amber in the souvenir shops of Tallinn (usually alongside Russian Matryoshka dolls). We’re part of the Baltics so a lot of tourists expect to find Baltic amber here. The thing is, Baltic amber is actually mostly from Latvia, Lithuania, Russia and Poland.
If you are attending Latitude59 in person and want to pick up a local souvenir then there are plenty of great examples of contemporary Estonian design you can find instead. The simplest is a reflector. We have to wear these by law in winter so there’s a burgeoning local industry producing them in beautiful designs. This souvenir might even save someone’s life one day.
We think being straight-talking is polite.
Outside the sauna, it’s not uncommon for visitors to think we’re a bit rude — at least at first. This is a simple misunderstanding though.
Estonians are efficient with words. We say what we mean and we mean what we say. For example, if you say ‘how are you?’ to an Estonian then they won’t say ‘fine, thanks’. They’ll actually tell you how they are!
To Estonians, not keeping a promise or not meaning something literally can also be misinterpreted as rudeness by others. Why didn’t we get called, we wonder, by that person who said they’d call?
Neither is right or wrong though. This is just a cultural difference. And, once that’s understood, most international entrepreneurs dealing with Estonians quickly discover these straight-talking Estonian mannerisms are very useful in business!
But the real benefits of using a sauna are even more interesting.
This often-repeated claim by modern ‘wellness gurus’ has no basis in science. Also, infrared saunas don’t enable you to ‘deep sweat’. There’s no such thing. And, in case you are wondering, saunas definitely won’t prevent you from getting coronavirus.
Our ancestors were definitely right though in believing the sauna did give them special powers. There are plenty of real health benefits to using a sauna regularly as part of a healthy balanced lifestyle, but we still need more credible research to understand them better (and a bit less pseudoscientific bullshit).
Interestingly, the most significant health benefit of the sauna backed by credible science is also the one least talked about.
The sauna is particularly good at strengthening social bonds. Loneliness is one of the biggest health problems we face right now (especially among those starting companies) and connecting with people more deeply, whether through regular saunas or any other group activity is what matters most for our long term health and happiness.
One study even found that men who sweat together are better at co-operating afterwards. Of course, women are already good at co-operating.
The benefits of technology should be for everyone, including those who don’t like technology.
98% of people here have a digital ID card and more than two-thirds use it regularly. That’s all true.
But the part that gets misunderstood is that we don’t love using technology just for the sake of it. Most of us just like technology because of what it enables us to do instead – like… spending less time glued to our technology. Estonians love nature more than anything else, as well as time spent with friends and family (preferably with a sauna nearby).
There’s nothing wrong with being a tech enthusiast too, but we mustn’t lose sight of the end goal. We are not just building tech solutions for tech enthusiasts. Everyone deserves the benefits of digitisation, whether they are tech-savvy or not.
Our digital society is most notable for the things it helps eliminate: bureaucracy, costs, paperwork, fixed locations and queuing up in government offices.
So don’t step off the plane at Tallinn airport and expect to see advanced technology everywhere around you. The point of a digital society is that it’s invisible. You can learn more about this by checking out Tallinn’s Smart City plans.
Estonia’s e-Residency programme gets a lot of praise as one of the world’s most interesting technological innovations. But it’s not a technological innovation.
The key technology behind it is our digital ID cards, but those have already been in use for almost TWO DECADES by our citizens and residents. Most Estonians actually now use their smart devices for digitally-signing instead.
The most significant innovations though are often legal or process-based, not technological. For e-Residency, Estonia rethought how the state operates in a digital world then changed laws to make it possible. If citizens and residents can log into our business environment online anywhere then it’s just the logical next step to open up our digital infrastructure to non-residents too. The e-Residency programme is still working hard – not to develop new technology, but to make the experience more user-friendly and develop a supportive ecosystem for e-resident entrepreneurs
A company established through e-Residency is not some special ‘virtual company’. It’s an EU company like any other and the benefits are what we as Estonians already consider to be normal — doing everything online with minimal cost and hassle.
And to prove how easy it is for anyone, yes, we did genuinely once start a company in a sauna.
But we are the best place for many people.
Estonia currently ranks 16th in the world for ease of doing business, according to the World Bank. It’s also near the top of a lot of other important international rankings for entrepreneurs — including low corruption and high economic freedom.
That’s pretty good. But not the best. At least not for everyone.
But all companies and their founders are different. So too are their needs and preferences.
Estonia is unlikely to ever rank as the best place overall to start a company but it’s more important that Estonia is the best place to start a company for as many people as possible. Like any good startup, Estonia focuses on its key customers — the type of entrepreneurs who most benefit from our low hassle, low cost, transparent and digitised EU business environment. That especially includes startups, online businesses, and freelancers.
Estonia has also made a lot of progress improving access to banking, such as by changing the law to allow Estonian companies to use any bank or payment institution across the EU. Even the vast majority of e-residents outside Estonia can now access some form of banking solution. However, those that have the most difficulty tend to be the people who are not suited to opening a company in Estonia anyway because if the bank can’t understand how your business benefits over registering a company elsewhere then they are far less likely to open an account for your company.
Our companies are naked too.
Estonia has one of the world’s most transparent business environments. Anyone can look up any company and see who owns it, where they operate, and how to contact them, as well as key financial data.
We can be sure that data is real too because it’s all verified using our digital IDs and the police do punish things like using proxies as owners or directors.
Starting a transparent company like this for the first time can be as daunting as going into the sauna naked for the first time, but most people quickly realise that it’s not an issue (in both cases).
n fact, it’s this transparency that helps ensure our business environment functions smoothly and Estonian companies can operate with greater trust globally, including to access more e-services globally.
Jurisdictions that offer greater privacy in business tend not to be such great places to do genuine business day-to-day with customers around the world.
Lack of transparency can be costly in business. Going back to the subject of banking, that’s actually the second most common reason why bank applications might be rejected – because the bank simply doesn’t have enough oversight of how the company operates.
By the way, you also have to go through police and background checks in order to become an e-resident so if you do have something to hide that would make you untrustworthy then don’t even bother applying.
And we’re not a crypto paradise.
Estonia is popular among blockchain enthusiasts. One theory floating around the web even attempts to prove that Bitcoin founder, Satoshi Nakamoto, was really an Estonian.
Estonians were indeed experimenting with blockchain-like public ledger technology early – and at around the time that the Bitcoin whitepaper was released. But those involved here in Estonia are pretty clear it wasn’t them who created Bitcoin. We have no reason to doubt them.
Estonia has found real benefits from that early integration of public ledger technology, such as by enabling citizens to see which officials access their data so they can challenge any improper use of it. But our country’s relationship with crypto is a bit more complicated.
Estonia is always open to new ideas and has listened to crypto entrepreneurs about the kind of policy frameworks that could help them. We also have to balance that with our values of trust and transparency in business though, which is especially important in financial services regardless of what type of currency is used.
Crypto may or may not change the world. Either way, we both welcome and regulate entrepreneurs involved in it.
You have to turn up to your own wedding.
We can digitally sign almost any agreement online except for marriage, divorce, and buying or selling property. There used to be a few other things until recently, but the pandemic meant we had to bring more things online.
By the way, this isn’t because we haven’t figured out the technology to do those last three things online. We just think it’s probably a bad idea if you can do any of those at the click of the button any time of the day or night. We don’t want you giving away the house in a late night poker game.
And, yes, we can even now switch on our saunas online from anywhere.
Want to invest in Estonia? You are welcome to step into our virtual investment sauna’s waiting room here . It’s the place where the most important decisions are made and the best advice is given. See you at Latitude59 and our virtual investment sauna here.