Growing Nova Scotia’s Tech Startups: Lessons from Estonia

By Ainslie Pierrynowski (AIMS On Campus Student Fellow) 

“I’ve got a lot of friends back in Toronto and Waterloo and every time I go back it’s like, what the heck is going on up there in Sydney?”

These words were spoken by Nova Scotia-based entrepreneur Brian Best, while discussing Cape Breton’s emergent technology sector. Indeed, on Cape Breton Island and elsewhere in the province, a growing number of fledging technology businesses are attracting buzz, customers, and investments. From a company working to preserve the history of the Sydney Steel Plant to a Halifax firm enabling Internet users to collaborate with each other in real time, Nova Scotia has become host to a diverse array of new technology startups.

 

To provide some context, a startup means a small, recently founded business. startups generally seek to meet a particular marketplace need through a product, service, platform, or process. To grow their business, startups often rely on venture capital (VC). This term refers to investments from established firms or funds to a startup which they deem to have high potential for growth. As AIMS On-Campus fellow Samuel Hammond noted, a series of financial reforms helped to expand VC in Nova Scotia–and lay the foundations for a growing startup sector. In 1993, the provincial government introduced a tax credit for those who invest in small and medium-sized enterprises. The years 1994-1995 saw the creation of Innovacorp, a crown corporation tasked with investing in promising Nova Scotia startups. Later years brought a privately-managed $30 million Atlantic Investment Fund (AIF), intended to fuel investment in Atlantic Canada’s startups.

 

In addition to this recent expansion of VC, technology-oriented business incubators, including Cove Ocean and Volta, have aided the province’s prospective entrepreneurs in sharing their knowledge, networking with investors, and refining their technological skills. The resultant rise of technology startups has been heralded as a much-needed path to economic growth and diversification. For all the technology sector’s successes, however, unemployment, seasonality, and outmigration remain pressing concerns in Nova Scotia. As well, the closure of Sydney’s Uhma Institute of Technology, a training program for technology entrepreneurs, suggests that Nova Scotia’s technology startups are not immune from setbacks. While local journalists and policymakers seem largely optimistic about the province’s technology startups, some commentators are grappling with how to sustain and expand the industry in the long term. If Nova Scotia is searching a model for how to grow the number of startups and render existing technology startups larger and more profitable, the province should turn to Estonia.

 

In terms of population size, GDP per capita, and government budget, Estonia seems comparable to Nova Scotia. Estonia’s technology start-up field, however, represents a vastly different landscape from that of Nova Scotia. The relatively small state on the Baltic coast ranks third in Europe for the number of startups per capita. Technopol, a business hub in the Estonian capital of Tallinn, hosts more than 150 startups. Estonia is home to numerous, internationally successful technology startups, including Skype, software firm Teleport, and Skeleton Technologies. In fact, the technology sector accounts for 15% of Estonia’s GDP.

 

Estonia is a leader in e-government. Voting, maintaining official health records, and paying for parking all take place online. Filing an online tax return online, like 95% of the Estonian population, takes only five minutes. The process of building this vast online infrastructure could offer insight to Nova Scotia, in terms of how the province could make accessing government services and filing reports faster and easier for technology startups.

 

After achieving independence from the USSR in 1991, less than half the population of Estonia had a telephone line. Therefore, Estonia embarked on nationwide project to equip classrooms across the nation with computers. By 1998, all schools were online. Starting in 2000, when Tallinn declared internet access a human right, Estonia’s government helped to spread free, quick wi-fi throughout the country.

 

Estonia’s online government services notably reject legacy thinking, or in other words the needless replication of the formats used in the old, paper-based system in the new, online format. For instance, rather than simply reproduce a paper-based tax filing process, Estonia’s tax forms take advantage of the online medium. They are pre-filled, so the tax paper only needs to verify the calculations rather than re-enter tedious information. As this piece from AIMS concludes, Estonia makes government services simple as possible.

 

This technological boom was facilitated by Estonia’s tech-savvy, goal-driven political leadership. With government officials and business organizations that appear to recognize the importance of technology education and competing in the global marketplace, Nova Scotia would do well to follow Estonia’s lead. As well, the country’s imitable simplified, competitive tax system has proved appealing to technology start-ups.

 

In the words of Estonian tech entrepreneur Taavet Hinrikus, “In the 80s every boy in high-school wanted to be a rock star…Now everybody in high-school wants to be an entrepreneur.” There is hope that Nova Scotia and its growing technology start-up sector can foster a similar culture of technological entrepreneurship.

 

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