Investment climate, Tech, Foreign media

How the Soviets have helped Lithuania’s startup scene

October 05, 2015

Lithuania’s brave new business world, embodied by a powerful beachhead of IT expertise and startups, is woven out of threads from the past.

These various threads include a sense of creativity or inventiveness born out of necessity, as well as a collaborative instinct carried over from previous generations and an older social order.

Russia’s Soviet control of Lithuania came to an end in the late 1980s/1990. But much more recently Russia has been directly influencing the country because of western sanctions over Ukraine, and Putin’s response which further impacted trade in Lithuania.

But this disruption also has had an unexpected silver lining: a number of young Russian companies and skilled workers (mainly IT and particularly gaming) relocated to Lithuania as a result of that crisis.

Simonas Satunas, director of the external economic relations at Lithuania’s Ministry of Foreign Affairs, said: “Russia sanctions definitely impacted the trade between the EU and Russia, and because we are the gateway between the EU and Russia we were impacted quite a bit. The food industry and transport were the most heavily affected areas.

“We have probably the biggest transport and logistics fleet in the region,” noted Satunas, adding that transport was more of a challenge to accommodate than the actual export of commodities.

“We did not panic. We did not see drop in investment to here, on the contrary we see Russian and Ukrainian companies, especially IT companies, that are looking to relocate to this part of the world.

This unexpected boost to the IT sector has been particularly concentrated in areas like the gaming industry, with Russian re-locators like Charlie Oscar helping to ramp up growth.

The startup scene in Lithuania is happening. For example Vinted, based in Vilnius, is a peer-to-peer marketplace to sell, buy and swap clothes. It has reached 10 million users globally, and has set a precedent which P2P starts of every stripe are now following.

Lithuanians will tell you startup companies naturally grow out of the genetic code of the country, vitiated by people’s creativity and inventiveness.

One point of contention is Skype, which most people don’t realise is an Estonian company. Rivalry with Estonia is also fuelled by the likes of Transferwise, another well-known startup from that country.

One of the “Invest Lithuania” team stated: “We are happy for them. And their success in this region is good for us too.” Then after a moment he added: “Mind you, to be clear, the team that invented Skype were Swedes, not Estonians.”

A good example of Lithuanian startup success is cheap remittance service TransferGo, one of the fintech companies with a presence in Canary Wharf’s famous Level 39.

Andrius Biceika, head of TransferGo, explained how he found success on his third attempt at building an online company, and that failure is an essential part of the startup process.

[quote text=”We have a really great substance, a really great material – we just need the outside world to mould us into the Silicone Valley of Eastern Europe, or something like that. Because the potential is great: everybody speaks English; in terms of education 95% or more finish their Bachelors, Masters; we are receptive, we are learning, and we are ready. Barclays is here, Western Union has its biggest office outside the US in Vilnius.” name_surname=”Andrius Biceika” description=”head of TransferGo” left=””]

Biceika made it clear this discussion of startups in Lithuania were his personal views and did not reflect any companies he was part of. He went on to say investors in Lithuania fail to grasp that it sometimes takes mistakes to realise success, hence the need to look farther afield for funding from places like London and the US.

He said: “Homegrown investment is great for seeding a business but to grow, further investment from outside the country is required.

“There is money on the table. But I would often advise against taking it. Because the guys who give the money, they don’t really understand. All they think is – ‘we just need to get our money back’.

Biceika pointed out that the Silicone Valley approach is to break things and start again: “With an Eastern European investor the mentality and attitude is completely different. Eastern Europeans are afraid to fail, to learn something.But it’s changing. Slowly.”

“I’m exaggerating a little bit, but that is one of the differences for you to notice. When you want to grow out of seed investment range, you are probably looking outside Lithuania for a further investment, for a series A investment to series B investment.

“In the current environment, it’s very good to start here, to test here, but then the majority of startups starts looking beyond when they want to speed up their growth in international markets.”

Rimante Ribaciauskaite, project manager, Enterprise Lithuania, said: “Some Lithuanian startups have managed to attain foreign investment, but investment in startups from places like London is still a work in progress.

“Investors are not sure about the country, the legal situation and so on. We have been inviting investors in, and taking Lithuanian startups out to the offices of venture capitalists and angel investors.”

Biceika added: “We have a really great substance, a really great material – we just need the outside world to mould us into the Silicone Valley of Eastern Europe, or something like that.

“Because the potential is great: everybody speaks English; in terms of education 95% or more finish their Bachelors, Masters; we are receptive, we are learning, and we are ready.

“Barclays is here, Western Union has its biggest office outside the US in Vilnius.”

Indeed a whistle-stop tour of UK companies that have located divisions in Lithuania, took in Barclays’ imposing data centre. It’s head of HR Mariano Andrade Gonzalez proudly showed off break-out rooms where IT staff play X-Box and everyone seemed curiously happy to be at work.

Same thing at Callcredit, a UK company which does credit checking rather like Experian. Its manager Dainius Aksinavicius smilingly showed off video games rooms, scooters, table football – the company is located within a sports arena set around a world class basketball court (Lithuanians are nuts about basketball).

We were also taken to see the Lithuanian arm of Camira, a fabric spinning factory where they weave the patterned covers for tube trains that Londoners spend years of their lives sitting on. The women running the operation proudly showed off enormous looms loaded with lots of spools of coloured thread.

Afterwards at lunch, the Invest Lithuania communications girls Monika and Eva tried to explain certain nuances about Socialism, passed on to them from their parents and grand-parents.

“Old people are nostalgic for the Soviet times, for Socialism, because they see how society today lacks a sense of community. They talk about how you could leave your door open. People were in and out each other’s houses. Everybody had the same furniture; nobody was envious about material things,” said Eva.

She argued that some of that community spirit has survived and been retained by Lithuanian millennials, evidenced by young people working together night and day in startups.

Perhaps prompted by the visit to Camira’s fabric mill, Monika reminisced about how her parents would receive parcels of goods from relatives who lived in America. Her mother once received some pairs of woollen socks and picked them apart to knit a child’s jumper.

She said: “We are creative people. We had to be. I think that has been passed on.”

Source: International Business Times

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Aistė Žebrauskienė
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    Aistė Žebrauskienė Press Officer
    Thank you!

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