Microemergents

I grew up on television sitcoms. One of my favorites was on Thursday nights on a lineup advertised as “Must See TV”. It was about a bar in Boston and the  theme song featured an iconic chorus that went, “Sometimes you wanna go where everybody knows your name.”

That show was Cheers. It was the exception to the generic family sitcom. Instead, it was a bunch of oddballs that had nothing in common other than this random bar. It was a family of sorts, one where they bonded over nothing more than beers, one-liners, and gathering in the same drinking establishment.

Place can be a powerful driver for building human bonds. When I arrived at college as a freshman, the first thing I noticed walking through the halls of my dorm was how different everyone was. I was not sure if I could make friends from that chaotic mix of personalities and backgrounds. Eventually though, I found my tribe that included an evangelical Christan from Northwest Washington, a guy with a massive collection of music that I thoroughly disliked, and a dude that mumbled so much that I never understood half of what he said.

The same can be said for startup ecosystems. Some of the most dynamic and fast growing hubs started by builders gathering together and making connections. When I launched my startup in NYC, the startup scene was still quite small. Eventually, pockets of founders and developers found each other at places like New Work City, General Assembly, WeWork, Alley, Projective Space, Spark Labs, and many others.

The last two weeks, I have been traveling through Northeast Europe with the 42Geeks to explore the various startup ecosystems and communities in the region. My journey started in Warsaw, Poland to speak at a couple of event before making my way over to Helsinki, Finland and Tallinn, Estonia. While I only spent a few days in each city, it gave me a good lens to understand the economy, innovation environment, people, and culture.

I found all three countries to be impressive. Poland and Estonia in particular emerged from communism and the post-Soviet collapse to become vibrant nations. The transition to democracy and a market-based economy have enabled both countries to experience rapid economic growth and wealth creation over the past 30 years. Poland's GDP has increased seven-fold since 1990 while Estonia has seen a six-fold increase.

Finland has also seen significant growth in the past three decades. Since joining the European Union in 1995, per capita GDP tripled to $54,00. The economy also became more export-driven with the rise of Nokia and strength of the forestry industry. The 2008 financial crisis and the 2020 global pandemic caused a dip in the economy. Unlike other Nordic countries though, the shock of Nokia losing its dominance (once contributed 4% to Finland’s GDP) and loss of Russia as a key trading partner due to the war with Ukraine led to a deeper slowdown.

To counter slow growth, Finland has leaned heavily into the tech industry and fostering more startup creation. The results have been dramatic, with Finland creating ten unicorns like games developer Supercell (creator of Clash of Clans), consumer delivery service  Wolt, open source data provider Aiven, and smart ring maker ŌURA. Overall, Finland has over 4,000 startups, of which 67% are funded, one of the highest per capita globally.

Estonia has also become a powerhouse startup hub. With 1,530 startups, they have nearly one startup per 1,000 people, most per capita in Europe. Built upon the success of Skype, Estonia has produced ten unicorns, the most per capita in Europe. These are globally recognized companies like ride hailing and delivery app Bolt, sales management and CRM tool Pipedrive, money transfer app Wise, and identity verification solution Veriff.

What is the secret ingredient that has enabled Finland and Estonia to punch above their weight as startup ecosystems?

Much of the foundation for successful startup creation is built into the fabric of these two nations. It was one thing in particular that stood out when speaking with startups and investors about why they thought they were successful. They did not mention government support, funding, or talent. The one consistent theme they shared was community.

Community is a hard to objectively measure. There is no number that can easily express the level of contribution community has on startup creation, unlike VC funding or size of exits or number of startup programs. When people here talk about community though, what they mean is accessibility and connectedness of people within the ecosystem.

These are countries where everyone knows your name. Unlike the famous bar from the sitcom though, the high level of community engagement has unlocked enormous human potential. By building a society based on trust, equality, and transparency, they fostered a strong sense of security and belonging among its people. This has enabled people to take the raw ingredients that already existed in each country and amplify it to create a flywheel for curiosity, idea generation, collaboration, and business creation.

Anyone that steps into Estonia or Finland to launch a startup can easily tap into the network. Whether you attend an event, join a program, or visit a co-working space, you will find familiar faces. More importantly, people are willing to help. Even if you are a complete startup noob, you can still get on a call or meet with an exited unicorn founder.

Across all of the places I have visited, the most impressive startup ecosystems have been in smaller nations. It would be reasonable to assume the opposite since small countries have fewer resources. Large, developed nations like the US, United Kingdom, and China have dominated the list of most startups and unicorns produced. They have a large talent base, leading universities, strong economies, and massive pools of capital to invest.

Talent, education, economy, and capital would be barrier to most small nations. However, there is a subset of countries that have managed to use their small size to their advantage to create vibrant economies that enable startup ecosystems to thrive. These are called microemergents.

There are a few criteria to designate a country as a microemergent:

• Under 10 million in population

• Capable of creating multiple unicorns

• Supportive startup ecosystem

• Stable economy and government

• Highly skilled and educated talent base

There are 13 countries that identify as microemergents. These include Austria, Denmark, Estonia, Finland, Ireland, Israel, Latvia, Lithuania, Norway, Singapore, Switzerland, United Arab Emirates, and Uruguay. All of these nations have produced more than one unicorn other than Latvia and Uruguay, though these two nations have the potential to create significantly regionally and globally important companies and massive exits.

Each of these nations has managed to create outsized outcomes by leaning into their natural strengths. Finland and Singapore are well-known for their educational systems. Switzerland has top universities and research centers. UAE, and in particular Dubai, provides favorable tax benefits. Israel has strong ties to US markets. Uruguay has the most stable economy and government in South America, attracting founders and investors.

The other thing that ties microemergents together is that startups are building for global market on day one. This is a necessity since the size of market does not allow for building a venture scale business locally. During one of the 42Geeks talks in Finland, a speaker mentioned that they pilot the startup ideas locally, then they just kick them out. That has been the key for Israel to their success as the “Startup Nation”, which has produced 90 unicorns by catering to US and European markets.

This is an important distinction between microemergents and larger countries. Countries like Brazil or Indonesia or Poland do not have startups that necessarily have the same global ambition. They can build a sizable company by serving the local needs because they have a large enough market. Microemergents do not have the same luxury; to survive they need to shoot for the moon.

The last point to note is that with size comes complexity. Larger nations may have more people and money and resources, but they also have bigger problems. This can lead to greater bureaucracy, unstable governments, uneven policy directives, and rocky economic outcomes. Building a startup in these conditions is not impossible as countries like Argentina and Nigeria have shown, but it is just adds more friction to the challenges faced by startup founders. It is hard to foster entrepreneurship in an unpredictable country.

What are your thoughts on microemergents? If you are building a startup in one of these countries, what do you think is their key ingredient for startup success?

Mark Birch

As mentioned, I have been on the road the past two weeks, so I skipped last week’s edition of the newsletter. Therefore, instead of the normal community update, I will share the LinkedIn posts that documented my travels and what I learned about the startup ecosystems along the way.

Poland and Taiwan Similarities: A comparative analysis discovering striking parallels between Poland and Taiwan's startup ecosystems, from similar economic structures and developer talent pools to shared histories of democratic transformation and growth as regional technology hubs.

42Geeks Landing in Finland: The opening day in Helsinki featuring presentations from local VCs, government officials, and panels on Finland's investment landscape, plus a keynote from former Prime Minister Esko Aho on Finland's success through prioritizing free education.

Finland Startup Ecosystem Overview: An analysis of Finland as a startup ecosystem where 4,000 startups thrive through strong R&D culture (4% of GDP), government support, dense Helsinki hub concentration, and Finnish values of community, trust, and work-life balance.

Finland Deep Tech Overview: Site visits to cutting-edge Finnish startups including quantum computing company IQM and satellite imaging unicorn ICEYE, showcasing Finland's competitive advantage in deep tech across quantum, space, gaming, and cleantech sectors.

Estonia Economy Overview: A meeting with Estonia's Economic Adviser to the Prime Minister revealing the country's remarkable economic transformation from Soviet dependence to EU integration, with current GDP of $40 billion and projected growth despite recent inflation challenges.

Estonia Startup Ecosystem Overview: An exploration of how Estonia's tiny population of 1.3 million has produced 10 unicorns through tight-knit community support, post-Soviet grit, and a nation that operates like a startup, generating impressive economic impact with €326.6M invested across 57 deals in 2024.

42Geeks Unconference: A recap of the final day where 42Geeks hosted an unconference in Estonia to share diverse expertise ranging from financial bubbles to cybersecurity to building communities (my talk) in an intimate, supportive community setting that exemplifies what makes this community special.