In conversation with Jaak Raie - When will the next Skype emerge from Estonia? [Startup Hatch]

[ This article is part of a series called Startup Hatch, about incubators and accelerators in the startup ecosystem. ]

Jaak Raie is the Manager of Tallinn Science Park Tehnopol, responsible for strategy, real-estate development and business development services. The incubator in Estonia has now spawned close to a hundred startups. Jaak has an inter-disciplinary background, and worked in the field of management and team-building over ten years. Former positions as the head of Tallinn City Sports and Youth Department and as the Member of Executive board in Estonian Public Broadcasting have led to the growing interest towards managing of processes and human resources in combination with constantly developing technological solutions and growing amount of information.

I caught up with Jaak during a recent trip to Estonia, which included visits to Tehnopol (see my earlier article, Startup Estonia: Skype and Beyond ). Jaak joins us in this exclusive interview on the four kinds of startups in his incubator (clean-tech, health-tech, ICT, mechatronics), the importance of coaching and mentorship, and challenges and opportunities for European startups.

YS: What was the founding vision of your incubator, and how is it supported?

A: The founding vision of Startup Incubator was to support the early stage startup companies to help them with business model validation, prototyping and reaching export markets. That’s why Tallinn Science Park Tehnopol has developed the real-estate services, office and R&D facilities, supporting business services and inner network to inspire and create the synergy between startups and high-growth companies.

YS: What is the profile of the managers of your incubator?

A: All managers have an entrepreneurial background with at least B.A. degree in business or technology. We strongly believe that in order to give the company a competitive edge you have to work with business professionals. In addition to the core team of Incubator we have more than 25 business coaches (business experts from different companies) working with the startups.

YS: What would you say are the top three opportunities and challenges for Estonian startups?

A: The main opportunities are connected with the engineering talent we have in Estonia and raw innovative ideas. Entrepreneurs in Estonia do not get grants in the scale they do for example in Finland, which makes them eager to either scale fast or fail. The challenges are to overcome just the product-minded approach and focus more on business development. We can also consider the challenge of bringing more early stage or angel investments to the region.

YS: What are the selection criteria for startups in your incubator?

A: Startups applying have to have a technology-based idea (clean-tech, health-tech, ICT or mechatronics) that has potential to scale, a strong team, and first working prototype.

YS: What support and services do startups receive in your incubator?

A: Startups get a personal key-coach who will be with them during incubation. The key-coach involves other mentors or experts when necessary; also, our partners provide services for free or with good reduction. The average coaching per month is 4 hours. In addition to that we organise events and business trips abroad, get startups connected with VCs, angels and other startups to share their experience (see Fig. 1).

Fig. 1: Phases of startups at Tehnopol

YS: What kinds of intellectual property are being created by your startups?

A: Patents, mainly from the ICT sector and within European Union. The IP protection is not the number one issue that a company faces – we tend to believe in quick execution instead.

YS: How would you differentiate your incubator from the other incubators in the field?

A: Startup Incubator is clearly specialised on four selected technology sectors - ICT, clean-tech, health-tech, mechatronics. We can provide the support of Tallinn University of Technology and offer complex services for making prototypes. That kind of field-specific incubator is unique in the Baltic region.

We do not offer free office space, we do not take equity oor give funding. Companies selected to incubation pay a monthly fee of 75 Euros + VAT. Startup Incubator constantly has 20 companies in the portfolio.

YS: What would you define as success for your incubator?

A: We consider successful those startups who exit Incubator after having at least one revenue generating client, clear proof of concept and market validation, and capital raised (at least seed round).

YS: How do you compare and contrast your incubators with that of other countries?

A: Startup Incubator clearly is lacking capital to invest to startups, it of course dependent on our public nature coming from the founders – Estonian state, Tallinn city and Tallinn University of Technology.

Other incubators are able to provide those who are being accepted free office space. Also other incubators are closer to capital (VC funds, angels). In Estonia, the main problem is shortage of local free capital, but that situation is slowly improving .

YS: How many companies did you start off with, and which ones do you have now?

A: Since 2006, we have incubated about 95 startup companies. You can see companies who are in the portfolio from our website: http://www.tehnopol.ee/en/startup/portfolio

YS: When will Estonia produce the next big Skype-like startup?

A: Work in progress! Many companies have the potential (like Transferwise) but it will take time. We see the next big innovations happen in the field of mechatronics and health technologies. As these business areas need extensive research and market validation, we expect the innovation to take more time.

YS: What are your plans for the coming 3-5 years with respect to new startups?

A: We plan to do our best to find or initiate funds that can support the activities of startups. At the same time and within close cooperation with university, we will offer a full set of business development services from idea stage through incubation to acceleration.

YS: What are your recommendations to the startups and entrepreneurs in our audience?

A: Do not start building your product before you have talked to potential clients. Market and customer validation saves a lot of time and money!