This year, Estonian deep technology companies experienced a powerful growth spurt, increasing their revenues by over 160 million euros in the first half of the year, almost a third more than at the same time last year. The volume of investments raised grew fivefold.

Vaido Mikheim, the project manager for the deep technology sector at Startup Estonia, commented that the numbers for the first half of the year show the growing importance of science-intensive entrepreneurship in Estonia’s startup sector and the country’s economy.

“Against the backdrop of a general economic downturn, we see particularly clearly that the solutions based on our deep technology companies’ continuous research and development work are competitive in the markets. A strong deep technology ecosystem and founders’ community is emerging in Estonia, and the state has also understood the importance of creating a favourable business environment and legislative framework, which creates the conditions for further innovation development. The continued trust and readiness of investors to invest in local innovative technologies is also crucial,” said Mikheim.

Deep technology companies have raised a record amount in investments 

Today, 161 deep technology companies operate in the Estonian startup sector. As of the end of June, they employed 2,212 people or 16% of all employees in the Estonian startup sector. The turnover of companies in the sector grew by 28% in the first half of the year compared to the same period last year, reaching 160.4 million euros. The largest turnovers were made by Defsecintel (25.7 million euros), Threod Systems (22.8 million euros), Cleveron (14.6 million euros), Comodule (11.6 million euros), and Starship Technologies (11.2 million euros).

Deep technology companies raised a record 171.8 million euros in investments this half-year, which is as much as 72% of the startup sector’s total investment volume. There were 14 transactions, 7 transactions were larger than a million euros, but the size of one investment is unknown to the public. For comparison, 34.3 million euros were raised in the first half of last year.

“The growth in investment volume is quite logical, as more mature phase companies need more capital to expand their operations. It is nice to see the distribution of transactions between known players and new entrants. The volumes of the three largest investments are also significant, illustrating investors’ confidence in Estonia in today’s geopolitical situation, which is necessary for us,” explained Mikheim.

The largest investments in the first half of 2024 were raised by Starship Technologies (90 million euros), Stargate Hydrogen (42 million euros), Elcogen (30 million euros), GScan (3 million euros), and 10lines (1.5 million euros).

Deep technology companies paid the state 27.1 million euros in labour taxes, 10% more than last year. At the end of the half-year, Milrem was the largest employer in the sector, employing 231 people. The top three also included Starship Technologies, with 165 employees, and Cleveron, with 140 employees.

The artificial intelligence companies also showed robust growth in the first half of the year, with 162 companies operating in the sector. Their turnover grew by 29% compared to last year, amounting to 197.1 million euros.

The complex security situation has increased the demand for Estonian companies’ devices

Jaanus Tamm, the CEO of the AI and defence technology startup DefSecIntel, said that the demand for AI technology has grown. “The increasingly complex security situation in Europe has increased the demand for up-to-date and battle-proven devices and solutions that can ensure the security of national borders and detect malicious drones. Our AI-equipped devices and software allow clients to achieve this in a novel and efficient way,” said Tamm.

The AI companies with the highest turnover in the first half of this year were Veriff, with a turnover of 59.1 million euros, and Defsecintel, with a turnover of 25.7 million euros. The top three also included Adcash, with a turnover of 21.1 million euros.

For the Estonian startup sector, companies in the traditional financial technology field made a turnover of 141.6 million euros in the first six months of the year, which is 20% more than at the same time last year. The 233 companies operating in the sector paid 38.5 million euros in labour taxes to the state. The largest turnovers in the first half of this year were made by Fininity (19.9 million euros), Dream Finance (11.7 million euros), and 3Commas Technologies (9.7 million euros).

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