ESTONIAA CASE

STORY

1This report investigates another remarkable Estonian achievement: the establishment of a strong and fruitful relationshipwith the Japanese innovation ecosystem, and Japanese
investors in particular.
Based on research and interviews conducted with the most
relevant and important stakeholders, this report tracks thestory behind Estonia’s success with the Japanese, beginning with initial contacts being made in 2009 until today.
How did a small Baltic country make its mark in Japan?
What have they achieved? And what can Danish ecosys-

PREFACEtem players learn from this story, in relation to accessing
both Japan and Asia in a broader context?
The publication has been developed by Asia House and
TechBBQ as part of a series of guides to innovation ecosystems
in China and Taiwan, India, Japan, Korea, and Singapore.

In 2003, a pan-Nordic founding team launched Skypein Tallinn, the capital of Estonia. Since then, threeother Estonian startups have attained unicorn status,
making Estonia the country in the world with thehighest number of unicorns per capita.

The series is published as part of the non-profit initiative
Innovation Lab Asia to improve and enhance cooperation
between Danish and Asian innovation ecosystems. This projectis supported by the Danish Industry Foundation.

ASIA HOUSEPeter Johansen, Project Manager

TECHBBQ
Lisa Mallner, Lead Consultant

MAIL
hello@innovationlabasia.dk
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BARUTOTHE

SUMO

WRESTLER

Baruto Kaito is one of the few foreign sumo
wrestlers to reach the highest division in the
sport. He’s Estonian, speaks fluent Japanese,and is famous all over Japan. Baruto has been
key to promoting Estonia in Japan, working
as an ice breaker at official delegations andpromoting Estonian companies in the Japanesemarket. Baruto is the secret sauce of Estonia.

CONNECTING
WITH JAPANTheJapaneseinnovation
ecosystem
iscurrently
experiencing an increase in startup investments,
especially from corporate VCs. Many Japanese investors
are looking abroad for opportunities to add to theirportfolios. The Japanese startup ecosystem is still
relatively underdeveloped, and by investing in foreigntechnologies with a proven product-market fit, theJapanese VCs reduce their risk.

Japanese venture capital is also more open to speculative
industries like Robotics, AI, and Quantum computing - areas
where the Nordics lack heavy upfront investment. Unlike local
VCs who prefer quicker turnarounds and proven businessmodels, Japanese investors provide more patient capital,
looking to long-term outcomes.
Nordic markets are also relatively small, which limits startups’ability to develop their technology enough to be feasible todeploy at a global scale. Markets like Japan give companies theopportunity to, for example, stress-test, iterate, and deploy ata sophisticated level.
45SMART

Estonia has proven extremely adept in connecting with the

The collaboration between Japan and Estonia goes beyond

Japanese ecosystem. In 2015, the Japanese E-commerce

investments. Many Japanese startups view Estonia as an ideal

giant Rakuten acquired Estonian startup Fits.me, a virtual

gateway to the EU and Estonia’s largest startup conference,fitting room. Japanese investments in other startups followed,

Latitude59, sees a solid Japanese participation. With 131

including Lingvist, LeapIn, Lift99, Jobbatical, Transferwise,

delegates registered

Funderbeam, Realeyes, and most recently Bolt, in July 2019.

country represented at the conference, after Estonia and•Estonia is roughly the size of Denmark, but
their population is only 1.3 million people.

•

Estonia has produced four unicorns:
Skype, Playtech, Taxify, and TransferWise.
This means that Estonia has produced thehighest number of unicorns per capita
in the world.

•

Estonia is a world leader in digital
governance and was the first nation to
hold legally binding general elections
over the Internet in 2005.

•

The Estonian drive towards digitization
started with the launch of the Tiger Leap
program (Tiigrihüpe) in 1997, where thegovernment invested heavily in computerand network infrastructure, especially foreducation. In 2000, Estonia became thefirst nation to make internet access ahuman right.

in 2019, Japan was the third largest

Finland.
Furthermore, Estonian VCs such as Maki.vc and Tera Ventures,
have Japanese investors as Limited Partners in their funds.

Though Tokyo remains the main entry point to Japan for

Having this international presence from the beginning helps

Estonian startups – most often facilitated by the national

startups and investors internationalize earlier and createsbusinessmore diversified opportunities to scale and find partners.

southern Japanese city of Fukuoka is a growing launchpad

promotion agency Enterprise Estonia – thefor Estonian entrepreneurs. Fukuoka is already home to two
In 2018, the Japanese connection was taken to a new level

Japanese-Estonian startups, Planetway, and Blockhive, andwhen the NordicNinja VC fund was launched as a joint venture

the government program “Startup Fukuoka” has engaged in

between the Japan Bank for International Cooperation (JBIC)

several Estonian partnerships.

ESTONIAand the Baltic VC BaltCap. Headquartered in Helsinki, partly
due to the availability of direct flights to Tokyo, NordicNinja is

The past few years, Startup Fukuoka has hosted a pitch

the first Nordic/Baltic fund with a focus on Japan. The USD 110

competition at Latitude59, where winners receive a trip tomillion fund is backed by three large Japanese tech corporates:

Fukuoka to help scale their companies into Japan. Coffee

Honda, Panasonic, and Omron.

Pixels, the Latvian startup who won the pitch in 2017, has now
seen a successful expansion into the Japanese market via

NordicNinja’s stated focus is to match new Nordic ideas with

Fukuoka.

Japanese industrial powerhouses. Since 2019, the VC fund has
invested in two Finnish and one Estonian startup: MaaS Global(May 19), Flexound (June 19) and Bolt (July 19).

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INVESTMENT TIMELINE

Funderbeam is a funding and“virtual fitting room” for online

trading platform that incorpo-

shoppers. The startup wasStartup: Xolo
Investor: Mistletoe
Xolo (formerly known asStartup: Lift99
Investor: Taizo Son
Lift99 is an internation-

July 2019

Investor: Mistletoe

June 2018

Fits.me developed aStartup: Funderbeam

October 2017

Investor: Rakuten

March 2017

July 2015

Startup: Fits.me

Startup: Bolt
Investor: NordicNinja
Bolt (formerly known as

LeapIn) raised an initial USD

al community of startup

Taxify) is a transportation

rates Blockchain technology.

1.5 million in Equity Crowd-

founders that provides

network company that

acquired by Rakuten, Japan’s

The startup received an earlyfunding from Mistletoe andskill-sharing software for

operates a ridesharing

largest e-commerce site and

USD 2 million investment fromThorgate. They have since

entrepreneurs worldwide.

platform in 50 cities acrossinternet bank, and number

Japanese investor and incubatorgrown rapidly, raising a USD

Lift99 raised USD 2.3

more than 30 countries.

one credit card company byMistletoe. In June 2019, they

7.5 million series A roundmillion in an international

It’s also NordicNinja’s latest

transaction value.

raised a USD 4.5 million seriesin 2019.

investment round led by

portfolio company. Accord-

A round that included Mistletoe

Taizo Son, the founder ofing to Techcrunch, the total

and other Asian investors.

Mistletoe.

sum invested amounts to
USD 67 million.

that develops innovative
language-learning tech-

Investor: Mistletoe
Jobbatical connects people
looking for international jobs
in the tech and creative sector

Startup: Transferwise
Investor: Mitsui & Co,
World Innovation Lab

June 2019

Lingvist is an Edtech startup

Startup: Jobbatical

November 2017

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Investor: Rakuten

September 2017

November 2015

2015

Startup: Lingvist

Startup: Realeyes
Investor: NTT Docomo
Realeyes is an Estonian-Transferwise is anfounded, UK-based startup

Estonian Fintech unicornthat enables any mobile

nology by utilizing artificial

with companies that hirethat specializes in inter-or desktop webcams tointelligence. Lingvist re-remotely working employees.

national money transfers.

measure the emotions andceived around USD 8 million

Jobbatical received USD 4

Transferwise raised aattention levels of consum-in funding in a Series A

million in a series A round of

whopping USD 280 Series

ers as they watch content.

investment led by Rakuten.

funding led by Mistletoe.

E round in May 2019 that

Realeyes raised USD 12.4

included Japanese inves-

million in a round led bytors Mitsui & Co. and World

Japanese mobile operator

Innovation Lab.

NTT Docomo.

2019
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PAVING THE WAY
In 2009, Estonia’s Chief Information Officer Taavi Kotka
travelled to Tokyo to figure out why Estonian companies
were having difficulty accessing the Japanese market.
Enterprise Estonia had been present in Tokyo for years
but hadn’t achieved any real breakthroughs.

While in Japan, Taavi realized that even though Japan wasa highly advanced society, its public sector was lagging indigitization. Taavi had the savvy insight to put e-governancefront and center in dialogue with Japanese stakeholders. While
Estonia never actually managed to sell any e-government
solutions to Japan, the ensuing dialogue paved the way for
regular, high-level meetings between the two countries over asustained period of time. As Taavi Kotka later concluded: “Youcannot sell from a distance - that is the basics of any business”.

1011While Taavi Kotka was promoting Estonian e-governance inJapan, Anne Sulling - then special advisor to the Estonian PM- launched a plan for selling CO2 quotas to foreign countries
and companies. Anne Sulling learned that the Japanese had ahigh demand for these quotas, and that the actual trading washandled by the large Japanese corporations like Mitsubishi,
Sumitomo, Marubeni, the very same companies that Taavi
Kotka was in dialogue with regarding e-governance. Together,
they established the foundations of a strong relationshipbetween Estonia and key decision-makers in Japan.
In 2014, Anne Sullling became Estonia’s Minister for Foreign
Trade and Entrepreneurship. Her first major challenge was
the Russian trade sanctions imposed on the EU in August
2014, which had a strong negative impact on Estonia’s
agricultural sector. The Japanese connection saved the day
when Japanese companies bought up massive quantities ofEstonian dairy products.
As Anne Sulling tells Innovation Lab Asia: “It takes a long timeto establish a deep level of trust with the Japanese and secure
the first deal, but once this happens, you find yourself with an
all-weather friend, and other deals follow”.

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Photo credits: Ahto Sooaru

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ENTER E-ESTONIAIn December 2014, Estonia launched its e-Residency
scheme, providing online access to Estonia’s public
services for both Estonians and foreigners alike.
Estonian citizens could pay taxes, sign documents andaccess doctor’s prescriptions online, while foreign
entrepreneurs could establish a company and open a bankaccount in Estonia with a minimum of red tape.

The e-Residency further strengthened Estonia’s image
as a cutting-edge digital nation and frontrunner within
e-Governance. A few months later, in 2015, Japanese Prime
Minister Shinzō Abe became the first high ranking foreign official
to acquire an Estonian e-Residency. The e-Residency card waspresented to Abe in a well-publicized on-stage event by Taavi
Kotka, who initially launched the e-government drive towards
Japan in 2009. Now, obtaining an Estonian e-Residency has
become a cool thing to do for Japanese startups.

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Furthermore, the e-Residency program and the Estonian

Japanese companies have been particularly keen to collaborate

Startup Visa-program, have made it relatively easy for foreign

with local digital entrepreneurs and are inspired by Estonia’s

entrepreneurs to physically locate to Estonia, turning the

success given its small size and relative geographic isolation.

country into a launchpad for startups looking to scale to the EU.

For a new generation of Japanese entrepreneurs, Estonia has

Presently, more than 50,000 people from over 150 countries

become a point of pilgrimage to learn about the “world’s mosthave established 7,000 new companies in Estonia.

digital society”.

The e-Residency program has played an important role in the

Hikaru Kusaka, a Japanese serial entrepreneur and co-foundersuccess of the Estonian startup ecosystem, both by actingof Blockhive, an Estonian startup with Japanese founders, says

as a driver for innovation and by creating a strong narrative

they chose Estonia as their base because they believed Estonia

internationally. Additionally, the Estonian government has

represented the future of society. “We have a clear reason why

made a concerted effort to grow their startup ecosystem for

we are here in Estonia. No other country but Estonia has done

the past decade by supporting community driven startup-

more to use Blockchain in their e-government system which

support initiatives and ensuring startup-friendly legislation.

dramatically changes citizens’ daily lives,” says Kusaka in an

These initiatives are now paying off. Today, Estonia has ainterview with Invest in Estonia.

vibrant innovation ecosystem with the highest number ofunicorns, and the third highest number of startups per capita.

This attitude is shared by many of his peers. Public sector

In 2018, investments reached a record high at USD 360 million,

agencies host hundreds of Japanese visitors in delegations

and startup employment is increasing by 30% annually.

each year, and private travel agencies in Japan have made abooming business in providing tailored trips that focus on new
innovations in Estonia. Last year, close to 150 delegations fromJapan visited the e-government showroom in Estonia, and
40% of all visitors to the Estonian e-showroom are Japanese.

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Photo credits: Karel Zova

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THE NEWNORDIC WAY
Estonia is a model example of how to establish commercial
relations in far away markets on a shoestring budget.
The drive towards Japan wasn’t backed up by a multitudeof large organizations, numerous employees and elaborate
export promotion programs. Estonia’s success wascreated by a strong narrative, a vibrant and closelyknit startup community, and few dedicated individuals
working together towards the same end. In addition,
Estonia successfully branded themselves as New Nordic,
leveraging on the generally strong Nordic image in Asia.

Perhaps the single most important factor behind Estonian
success was the ability to establish long-term, trust-based
relationships with Japanese decisionmakers. All Estonian
stakeholders interviewed for this report emphasized patience
as a key ingredient. Recalling the early years, Anne Sullingstates: “It was very time consuming to get the first deal done…but once trust was established everything went smoothly....
The first deal also served as a reference of our trustworthinessto others”.
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Photo credits: Adam Rang

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JAPANESE-ESTONIAN

STARTUPS

Planetway (July 2015)
Investor: Mistletoe, Tokusui, Sakura Internet
Planetway helps Japanese corporates to integrate Estonian digital society technologies. The
Both Anne Sulling and Taavi Kotka maintained continuous

the Japanese desire to learn English - introduced the startup

Startup events such as Latitude59 has also been useful inrelationships with Japanese stakeholders, gradually gaining

Lingvist to a Japanese delegation. In November 2015, Japanese

promoting Estonia as a world capital for digital innovation toaccess to higher-level decision-makers. Taavi Kotka remarks: “I

investor Rakuten invested USD 8 million in this startup.

influential Japanese stakeholders. When the editor of Wired

went to Japan about 8 times, and every time I met the manager

Japan visited the event, he was inspired by the myriad ofat the next level. That’s how I climbed, and that’s how I ended

These high-level developments were supplemented by

Blockchain use cases presented on stage by the startup

up having dinner with the Prime Minister, twice. But I started

continuous activities on the grassroots level. The Estonian

Funderbeam,from the ground. You must have this patience to work yourself

startupand

Blockchain companies in a special issue of the magazine.

up to the top”.

entrepreneurs introduce Japanese contacts to relevantJapanese investor Taizo Son from Mistletoe read this article,

stakeholders on a personal basis. This personalized approachand eventually invested in Funderbeam. Since then, Mistletoefits well with the Japanese business mindset.

has invested in several Estonian companies and makes frequent

Describing the Japanese perspective, one high ranking

ecosystem

isaclose-knit

community,

official stated that “once you establish a relationship with theJapanese, it does not change even if you change your position”.

andsubsequently

highlighted

Estoniantrips to the country. Recently, the Baltic VCA Summit had a“Often, these delegations are difficult to understand, because

subtheme on Japan, and invited Japanese investors to attend.

the delegates do not always speak English… Often they don’t
When delegations from Estonia and Japan visit each others’

know what they’re looking for, and nothing further comes from

Some stakeholders interviewed for this report mention acountries, Estonian startups were always selected to fit

the meetings. However, sometimes high-level people in thesecultural affinity between Japan and Estonia, a similarity inJapanese requirements and for their readiness to engage indelegations get inspired, and things start happening. Thus,

temperament and approach that makes it easy for the cultures

long-term collaborations. As one delegation organizer stated,welcoming Japanese delegations should be viewed as a longto connect. As one Estonian investor says: “It’s perfectly okay“...[Japanese delegations] may have an idea of what companies

term investment,” says Raul Allikivi from the startup Planetway,

to have long pauses or be silent during a meeting”.

they want to meet, but if in reality there is no potential match

an Estonian-Japanese startup that regularly helps Japanese

between them, I will try to match them with a company that hasdelegations visiting Estonia.

startup is backed by Japanese investments andits founding team includes Estonian IT specialists and a Japanese entrepreneur. The board isalso a joint collaboration, including Taavi Kotka
and a former senior manager of Softbank Mobile.
Blockhive (April 2017)
Investor: ILP, a borderless legallybinding token agreement
Blockhive help companies unlock new markets using Blockchain. Its four core businesses
includes a digital smart wallet. Blockhive is an
Estonia-based company founded by Japanese
entrepreneurs, including Hikaru Kusaka.

more potential”. For instance, the Estonians - understanding

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LEARNING•

FROM

ESTONIA

Create one strong narrative. Danish
stakeholders should approach Japan with acommon and cohesive story, and build on it
together.

The close relationship between Japan and Estonia has moved•of the ecosystem, both vertical and hori-

beyond corporate boardrooms and startup coworking spaces.
Japanese tourism to Estonia is skyrocketing, andzontal. Japan is huge and working with local

young

stakeholders is never a zero-sum game.

Japanese people seek financing on popular crowdfundingsites for trips to Tallinn to learn about the “world’s most digitalsociety”. In June 2019, an 84-year old Japanese woman named•

Be patient. Danish stakeholders needto consider long-term initiatives that

Masako Wakamiya, the world’s oldest living programmer went

go beyond short-term KPI’s.

on a well-publicized crowdfunded trip to Estonia because she
considered it a “tech giant”. Estonia has truly gone viral.

Collaborate. Work together across all levels•

Be personal. Build strong personal relations
over a sustained period, and connect withother stakeholders for the benefit of yourJapanese guest.

•

Be punctual. Try to answer all enquiries
within 24 hours.

•

Travel. You’ll need to make many trips toJapan before things start happening.

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This report has beendeveloped by

In a collaboration
betweenWith support from

Asia House
24|

Indiakaj 16, Copenhagen|www.innovationlabasia.dk|

hello@innovationlabasia.dk