How Governments in Baltics Are Fueling Startup Innovation

The Baltic region is known for its impressive output of startup unicorns per capita. While Estonia often takes the spotlight with the highest number of unicorns per capita, its Baltic neighbors, Latvia and Lithuania, by rapidly advancing by adopting best practices are also attracting significant investor attention. In 2024, while European startup funding decreased by 5%, Latvia experienced a 7% increase, and Lithuania saw a remarkable 56% surge. Although Estonia faced an 18% decline, the Baltic region collectively enjoyed a 10.5% boost in publicly announced funding, underscoring its robust startup ecosystem. Notably, over 80% of this funding originated from foreign investors, highlighting the region's global appeal. 

Government support plays a critical role in developing this vibrant ecosystem and attracting foreign businesses. Many programs receive funding through EU initiatives and operate under de minimis regulations, which ensure state aid remains within limits to prevent market distortions. While common themes such as defense tech, renewable energy, fintech, and deep tech are prevalent across the region, each country offers unique "vitamins" tailored to the specific needs of its startup landscape.

Latvia’s Startup Support Framework

Latvia has implemented various programs to support startups, often in collaboration with EU and Norwegian financial instruments. The Investment and Development Agency of Latvia (LIAA) and Altum are the two primary institutions leading these efforts. Latvia promotes business expansion through digitalization initiatives, talent attraction, and export facilitation. It provides financial aid for international trade missions, participation in global expos, and networking events in Riga aimed at connecting startups with investors.

In Latvia you can find such support mechanism types:

• Startup Development & Innovation Supports – Grants, tax relief, and mentoring for early-stage startups. Business incubators provide office space and networking, while innovation vouchers and prototyping support help develop and commercialize new technologies.
• Digital Transformation & Business Modernization – Supports businesses in adopting automation, AI, and IT upgrades. Process digitalization grants help implement smart technologies, while innovation procurement funds R&D for public and private sector needs. 
• International Expansion & Export Growth Programms– Helps businesses enter global markets through funded participation in trade fairs, missions, and state-led delegations. Companies receive financial aid for market research, promotional activities, and international networking to attract investors and partners.
• Large-Scale Investment & Financial Supports – Provides investment loans with capital discounts for expanding infrastructure and scaling operations. Supports industrial and technological projects with co-financing options and favorable loan conditions.
• Creative Industry, Tourism & Specialized Grants – Funds foreign film production in Latvia, tourism product development, and creative industry projects. Supports businesses in launching new attractions and international collaborations to boost Latvia’s cultural and tourism sectors.

Estonia’s Innovation-Driven Ecosystem

Estonia is a pioneer in digital governance and has cultivated an efficient, tech-driven startup ecosystem. The country has identified five strategic areas for development: Startup Environment, DeepTech, Global Talent, Regional Development, and the New Nordic DeepTech Valley initiative. With all administrative processes fully digitalized, Estonia allows entrepreneurs to establish and manage businesses online, making it one of the most accessible startup hubs globally.

Key Estonian government initiatives include:

• e-Residency Program: Introduced in 2014, this program allows non-Estonians to create and manage EU-based companies remotely. With over 70,000 e-residents and 13,000 registered businesses, it significantly contributes to the Estonian economy.
• Funding Programs: Estonia provides extensive financial support for digital transformation, applied research, and product development, with grants. Businesses can also access mentoring services, export assistance, and intellectual property consulting.
• International Market Access: Estonia prioritizes trade expansion by connecting startups to global markets, including Germany, the UAE, and the U.S., through participation in key trade fairs and business delegations.
• R&D Supports: Estonia actively engages in Horizon Europe EIC Accelerator and Eurostars programs, providing significant financial aid to research-driven startups.

Lithuania’s Adaptive and Forward-Thinking Approach

Lithuania has built a reputation for agility in regulatory frameworks, particularly in fintech and emerging technologies. The government continually updates its support programs, focusing on sustainability, industrial innovation, and international cooperation.

Notable Lithuanian government-backed initiatives include:

• Green Experiment + Ecoinnovations: A program encouraging sustainability-driven projects.
• EVE for Industry: Designed to advance industrial innovation and modernization.
• GameTech & EduTech Support: Funding programs targeting startups in gaming and educational technologies.
• Pre-commercial Procurement Initiatives: These help startups bring pioneering solutions to market.
• International R&D Collaborations: Lithuania partners with the European Union, Norway, Israel, Poland, and the U.S. to foster cross-border innovation and research.
• Trade Missions & Space Industry Involvement: Lithuanian businesses actively participate in European Space Agency projects and global trade delegations, further expanding international business opportunities.

The Lithuanian government also supports digitalization, defense technology, and commercialization of innovative solutions. Due to the dynamic nature of its funding programs, startups are encouraged to monitor government announcements for evolving opportunities.

The Baltic states have developed sophisticated startup support systems, each catering to their distinct economic strengths. Latvia excels in business incubation and export assistance, Estonia leads in digital governance and global expansion, while Lithuania is a frontrunner in adaptive regulations and sustainability-focused innovation. Collectively, these initiatives have solidified the region’s position as a thriving hub for startups, attracting significant foreign investment and driving economic growth.

‍

Author: Tomass Vilks, Analyst at SIA “Venture Faculty”