Estonia is the Silicon Valley of the Baltic Sea

There is a nice article about technology companies in Estonia in today's NY Times. It mentions the usual suspects: Skype, Jürvetson, Playtech, Webmedia, Martinson and others, so does not really give much new information per se. The key thing to understand is what comes out from the quotes: Estonian technology landscape has an ability to make big things with small resources and small teams. We can't build huge offshore software development factories, but we can mash up new solutions from bits and pieces, and do it in a way that end users find useful. The question, like Linnar Viik asks, is how to sustain that momentum?

Welcome to the Wild, Wild Est!

Want to visit Estonia? Want to know more about Estonia? Visit the campaign site Welcome to the Wild, Wild Est! where you can find some information and register to win 10 wicked weekend passes to Estonia. Dinners, hotels, limo rides and club VIP entrances included. Unfortunately the free plane and ferry tickets are only offered from Scandinavia. Then again, Estonia is worth visiting even if you have to pay for the whole trip yourself.

Battle for .eu domains will launch today

Today, December 7th at 11.00 CET will see the strat of issuance of .eu domain names by EURid. It will be quite fun to watch, as it will be a kill or be killed event between trademark and company name holders in different countries and trade mark groups. The first period where prior rights owners can apply is called "the Sunrise Period" and especially sexy is the open to everyone period from April 7th, called "the Landrush Period."

Everything is built on first come first served principle, meaning hundreds of registrants will start spamming the central register at 11.00. At least some time ago the EURid official documents said that this will definitely create a system overload, but at the same time create a positive "randomizing effect." That means basically it is a lottery. It will be interesting to follow EURid website to see who gets to grab what. I have bought some tickets as well ;-)

[edit] Like expected, the system grinded to a halt in first minutes, becoming either very slow or saying the system is unavailable. It was known in advance what kind of load there will be. It is neither rocket science nor prohibitively costly nowadays to build systems which can stand high peak loads.

Another Estonian-based b$ exit on the horizon?

According to eGaming review, another company similar to Skype in having its 200-strong IT development and support organisation based in Estonia, is rumoured to IPO on London Stock Exchange or change hands via a trade sale. It's Playtech, one of the leading casino and gambling software manufacturers in the world, running many of the top online casinos around the world. The valuation could reach hundreds of millions of dollars, if not more.

Congratulations to Skype and Estonia

While I join everyone in congratulating Skype (Jeff has posted some good comments and links to other blogs on this) and all the great people there, there are many reasons why the Skype deal is also of great importance to Estonia and Estonians. It should be a big push to start new successful tech startups and for enterpreneurs to look more actively at international markets, something that has been very limited until now.

Like the growth of the company and now the acquisition has shown, it is possible to grow world class technology companies out of Estonia. You must have the courage, hire the best people and think outside your region. But an important part is not to limit yourself to only Estonian employees, even if you are an Estonian startup, but look for best talent all over the world. And if needed, locate your management, sales and marketing where there are the best people for that, for example in US or UK.

True, you can say Skype is not Estonian per se, having its holding company in Luxembourg (tax reasons?) and big part of management and marketing in London. Still over 80% of the employees are located in Tallinn, and all of the product management and software development as well as other technical functions are done here in Estonia. Pretty good for a country with only 1,35 million employees and a total headcount of less than 5-8 thousand IT people in the country (my very rough estimate). Skype with its soon close to 200 people in Estonia has not yet been the one sucking in all the best people and currently the effect on the job market has been small. But there is definitely a risk for companies hiring tech people in Estonia of Skype getting your people, be it for higher salaries or just for being a cool place to work at.

Like my experience with CV-Online and CVO Group has shown, it is possible to expand internationally from Estonia. CVO now has offices in 9 countries and in addition to that single employees in places like Ljubljana, Slovenia and Nairobi, Kenya. In most of the countries it has managed to become one of the top online or offline recruitment companies in a market with very strong competition. Hiring the best people in each key market is important, then getting them to follow a joint vision, and then operating the business in their countries with a local touch.

Estonians and Eastern Europeans are very good at developing new innovative solutions, but we usually suck in things like sales and marketing, international business development. We can design and produce cool stuff, but rarely succeed in communicating and selling what we have abroad. Small, may be non-existant part of that is based on cultural differences (same applies to Scandinavians), us being somewhat slow, non-aggressive and quiet. Ross has written something regarding this as well. Mostly this is still based on just lacking the skillsets that you have developed in the Western world over tens and hundreds of years of free market economies and enterpreneurship.

The only solution for this that I see is hiring people from US or Western Europe into your management teams and for sales and marketing. Working next to them is the best education in this field you can have. Something you would learn by just doing it yourself in 5-10 years can that way accomplished in a year. One reason for CVO being successful in the CEE region has been hiring people from Western Europe and it really has helped us to get on the next level. Together with them we have also grown our local employees and they are now much more experienced compared to the competitors consisting of just local skills.

So Estonians, go out there and do what Skype did, thinking and hiring internationally. Develop products and services that people really need and like, and you might be the next Estonian multi-billion dollars startup.

Hot Or Not

A few days ago the Gartner Hype List 2005 came out. Reading through it, there is a mix of things yet to come, some which are common today and some that will continue to be only hype, but never materialise.

Podcasting probably is a thing that will remain a niche app, but it might be regional to US. Americans are much more accustomed to audiobooks, which are somewhat similar to podcasts (limited edition audiobooks). Europeans just listen to music CD's and radio.

On desktop search, everyone has been talking if Google or Microsoft will solve this first. I have installed Google Desktop 2 a few days ago and I still have no idea what the fuss is about. I have found no good ideas why I actually need it, as most people actually only quite rarely use a search on their documents, be it text, photos or some other format. But I have now software that shows some irrelevant links, US weather and already viewed photos thumbnails as a sidebar. Good enough, it might be good for seeding random number generators.

P2P and VoIP are already here to stay, and have been for a while, both as Kazaa and Skype.

Corporate blogs seem interesting. Let's see if I can get other members of my management team to start one up at MicroLink.

Wikis - again, pass for me, but I might not be the target group for one of those.

SOA has never lived up to the hype it generated a few years ago. As a concept it is good, but when you actually think of everyday IT, there is not so much it actually revolutionises.

I was hoping there might be some good ideas where to look next, unfortunately this time Gartner was more analyzing past and current, not the future.

Estonian Parliament approves Internet-based elections

The Estonian parliament passed a much-debated act providing for the opportunity of electronic voting in local elections. This means every citizen with an electronic ID-card (most people have these) and a smartcard reader on their PC can give their votes in next elections over the Internet, from their home. The first trial of the new system was in January 2005 in Tallinn. A PDF about the e-voting system can be found here.

Majority of Estonian parties say no to e-elections

Sad news broke off in Estonia yesterday, as the second reading of the e-elections legislation at the Parliament was halted, according to news from Baltic News Service:

Estonian parliament fails to reach agreement on e-election

TALLINN, May 03, BNS - Estonian lawmakers on Tuesday on the strength of ruling coalition deputies' votes broke off a second reading of a bill specifying the implementation of e-elections.

The People's Union's proposal to suspend the reading was supported by 52 MPs from the coalition parties Reform, Center and People's Union, and the group of Social Liberals. Thirty-one mostly opposition lawmakers voted against the motion.

People's Union and Social Liberal lawmakers said the bill sought to introduce online voting in an undemocratic and unconstitutional way as e-election secures neither secrecy nor uniformity of voting. They also found that allowing online voting would increase the risk of vote-buying.

Sven Mikser from the group of Social Liberals argued that although the technical system can be made fairly secure e-election does not guarantee what he called human security. In his words, parties can make the amendment serve their own interests.

Reformist Kristiina Ojuland, speaking on behalf of the standing Constitutional Committee, pointed out that IT specialists have unequivocally stated the system is secure and people's votes will in any case remain secret.

"Even if someone tried to influence a citizen, he still has the opportunity and the right to change his vote by voting again either online or on the election day in the electoral committee," she noted.

Furthermore, allowing online voting is not going to deprive a citizen of the possibility of turning up at a polling station and casting his vote in the conventional way, Ojuland added.

The chairman of the Constitutional Committee, Urmas Reinsalu from Res Publica, underscored that the possibility of vote-buying exists in both the present system and e-election.

He pointed out that e-election was enacted already during the previous parliament's tenure in 2002 and the bill would only introduce some technical corrections into the law.

The central electoral commission that devised the online voting system has earlier said it can be applied both in the Oct. 16 local polls as well as in following elections.

The first trial run of the e-election system was during a public opinion poll in Tallinn in January. The system worked without glitches during the trial and the auditors who analyzed it found no shortcomings.

Online voting would take place on the Web site of the central electoral commission and the possibility would be available to ID card holders.

One of the best comments (as noticed by Linnar Viik) was an explanation given by one parliament member, who said that "no, electronic elections are definately not secure, just because in physics the second law of thermodynamics and entropy exist and there are no such things as absolutely secure systems." If somebody can explain how thermodynamics and e-voting are related, feel free to do so.

It seems one of the key issues in denying Internet-based voting is actually the wish to keep young and more educated people from voting and participating in the society. As long as the voting is done only on paper, young people who have lived all of their adult life online behind the computers, the election turnout will keep decreasing and represent only older non computer literate citizens. Just what the politicians want.

This is just one step on Estonian spiral down the stairs of being an innovator in development of citizen-oriented IT services and technology. During the last years neither the recent governments nor the parliament have done much in this field, still being blinded by the glory of innovations from 5 years back. But as we all know, 5 years of standing still in IT means a lot.

Thirteen years on the Internet

Over the years I have archived most of my incoming and outgoing e-mail folders. They serve as a great resource to check out what you were doing 5 or 10 years ago in the exact same day, analyzing what developments there have been over that time. Unfortunately in my case they only start from 1995-1996, so the first years are not "documented".

My first e-mail address was created already at the end of 1992, which was an e-mail only account at a thick Ethernet connected Novell Netware network at Tallinn Technical University. We used DOS Pegasus Mail as the mail client. FTP access followed soon after, and for years that was our most used application besides e-mail.

As 18-year old students our main interests were downloading various free software, demos (as in demo scene) and MOD digital music files for MOD sequencers (mostly 4-track ScreamTracker files, played back on parallel port connected Covox D/A converters, not sound cards).

Google Groups archives show my first posts to the USENET from June 3rd, 1993. A bit before that I also subscribed to some mailing lists (mostly about raves, dance music and libertarianism).

I believe we got web access at the beginning of 1993, but we might have had it already in 1992, just that most machines were DOS-based PC's and had no web browsers. First web experiences I remember were NCSA Mosaic browser's own webpages, Adam Curry's mtv.com and O'Reilly's GNN. We also had O'Reilly's book "The Whole Internet User's Guide and Catalog", by Ed Krol to help us understand what is available on the Internet. Tim O'Reilly just blogged more about his experiences from that time, about GNN, the book and start of Internet advertising.

We started the first commercial website in Estonia, Via Baltica News, in August 1994. It was the website of a print magazine with the same name, which was an English-language guide to the Baltic countries. There were a total of 20 or so non-commercial websites in Estonia at that time, mostly at universities and various research institutes. The idea to start something commercial came from some American working for a short while at the company, who had had some exposure to the web back in US some months earlier. I was hired as the webmaster, as I had some very basic HTML and webserver administration experience from the university. My tasks ranged from technical to design and content management.

We had a 64 kbps leased line coming to the office, costing almost 600-800 USD per month, or it could have been even an asynchronous 19,2 kbps line at that time. The first idea was to run the webserver from one Windows for Workgroups desktop machine running NCSA httpd software, but I managed to quickly move that idea first to Slackware Linux on the same 486sx/25 PC and then to buy a Sun Sparc Classic for around 10,000 USD. The Classic did its job great for years to come at different Estonian websites.

The site www.viabalt.ee was basically a collection of articles as well as Baltic News Service daily news. We created a section for company profiles, each featuring one page company description with a company logo, and got 10-20 companies to sign up either for free or for a small ad fee. Anyway we did not do too well, as nobody understood what we were selling or what the Internet was. The main thing why Via Baltica News was closed down 1-2 years later luckily had nothing to do with the Internet, just that the print magazine went bankrupt. Even before that, in April 1995, I had left the company with a partner to start up Stallion, my own web design & development and Internet marketing company, again one of the first in Estonia. During 1995 we introduced many now known Estonian companies to the Internet and web, but being a bit too early on the market (or the market not being there), we were not too successful from the business side of it.

So what has changed over the 10-13 years on the Internet?

Promoting you website was not easy then and is not easy now. The relative number of people coming to average small company's site is still the same. The reasons have changed: then there were not so many users on the Internet, now there are too many sites that it is hard to stand out. Top sites or leading companies in any area might be an exception, it promotes itself via word of mouth and your brand. If you are not the owner of one of those sites, to get results you have to spend time, money and resources on creating and managing good content, offering value to the visitors and promoting what you do. Miss any of these, and you are wasting your money. Only a mix of efforts gives good results.

Blogging and social networks are quite similar, just more advanced, to what USENET, newsgroups and mailing lists were in 1992-1993. Many people still read and write to newsgroups, but it is a dying breed, which I feel a pity about. But as blogging develops, there will be many USENET-like features, like grouping together blogs or blog posts of similar interest, so that you will not miss any of them. Missing out on something important is one thing many blog-readers often mention.

It would be interesting to know from those using the Internet for over 10 years, how did you get started and what are the earliest memories?

Socialtext closes Series B

Ross Mayfield has announced they have now closed their series B financing round. Congratulations to the whole team !

As with the previous round, Ross has not issued a press release like most companies do, instead he has turned the news into a contest of dinding out the details yourself. I probably could not resist doing the press release in such an occasion, but I agree to Ross' reasoning on overrating the news about getting an investment.

It seems DFJ is one of the investors according to their pages. They are also investors in companies like Technorati and Feedburner, so it will be interesting to see if there will be any integration between them.

tag: socialtextb

On location-aware criteria-based e-mail advertising

It is sometimes hard to understand how little online direct marketing has developed over the last 10 years. I am talking here about location-aware advertising, where in e-mail marketing you get served information, ads and offers that are really relevant to you. Spammers will not do this in the nearest future, true, but well respected companies should.

The recent cases of information turned to spam at customers end that come to my mind have been various magazine offers and competitions from US. All of them in capital letters promote free trial issues, wonderful prizes or other similar bonuses, only to be found out later when you have clicked on their pages that the offers are valid in US only. What is strange is these offers mostly come from places which when registering have asked me to fill in long forms about my location, interests, hobbies, income, pets, professional experience, sexual habits etc. Based on this they should figure out much better what is of interest and what is not. Might be they just do not know where Estonia or Europe is.

Most of them do not take criticism on this well either. When I sent an e-mail about this to Techrepublic, the only answer I got was a template-based answer that their listserver has unsubscribed me from their mailing lists.

Sometimes the companies doing this try to answer that it is because of legal reasons why they can not accept participants from Europe. It would be so easy to filter their outgoing direct mails then the way that they do not get sent to irrelevant potential target groups. Why ask for the information in the first place, if you do not use that. I always wonder, how the information in the registration forms gets used, right now unfortunately most companies just keep collecting, but not actually using it.

edit: Just remembered two companies that have recently tricked or annoyed me as well. Napster got me to download and install their software, only to tell me then it is not available in Estonia. And then there is Paypal, which is available only in a small limited list of countries and is losing a lot of customers because of that.

Estonian government to invest into venture capital?

The new coalition agreement among Estonian parties once again mentions the need to set up a government-funded venture capital fund to support innovation and development of technology-oriented companies. The initial thoughts have been about a smallish (around 30 mEUR) seed and start-up capital fund, that would invest either on its own, together with private venture capital funds or into the capital of private funds.

Somehow I am not able to buy the idea.

The main reason that gets mentioned is that there is a lack of venture capital in Estonia (or Baltics, or Central and Eastern Europe). The people who mainly say this are small startups who have not been able to sell their ideas to anyone. Probably most of US or Western European VC's would turn them down as well, and for a reason.

Then there are private VC funds, who are looking for the government to cover part of their risks. This seems connected to the previous point, since it is very hard to find good ideas (or teams) to invest into. If the projects are of low quality, to invest into them together with state money seems like having 50% less risks. Why not do that, if there is a chance. If the projects or people would be any good, the VC of course would invest on their own and not give 50% or even 30% to the government.

As someone who has raised over 4 mEUR for CV-Online from LHV in Estonia, Esther Dyson in the USA and 3TS Venture Partners (a mix of 3i, Technologieholding and Finnish Sitra money) I believe there actually is an excess of local money and lack of people and ideas. I frequently hear both wealthy individuals who could be angels as well as private funds mentioning they do not find any objects to invest to.

It is easier to find quite OK ideas around here, but there are almost no people with international business management, sales or marketing experience. Unfortunately all of the government initatives are also channeled into product development, not bringing in experienced (foreign) management or supporting international sales or marketing.

The best thing the government could do is to invest the 30-40 mEUR into hiring people with previous successful experience in business management, technology sales and marketing and bringing them to Estonia to work at local startups. 30-40 mEUR should buy you at least 100 ex-enterpreneurs and managers from US for 2 years. When invested into technology, you only get around 20-30 struggling small companies, who have the beta version of the product ready, but no idea how to take that onto world markets.

How long is long, you jobhoppers?

As someone who has been in the recruitment field it always interests me how long people stay in one job nowadays. Or how short the period should be to be considered jobhopping?

Somewhere during this week there is a day when I have been employed by MicroLink for 3 years. Hard to say when exactly, as my job contract started April 29th, but I showed up at the office already around April 25th, 2002, so eager to get started.

Is three years longer than usual? For many people I guess it is, there are so many young people in mid-twenties with already 10 or more jobs they have had.

Before that I was at CV-Online full time for 2,5 years, which during that time grew from a small local startup to the leading recruitment company in Central and Eastern Europe (although I had been one of the founders already from 1996). From 1995 to 1999 it was a bit over 4 years at Stallion, another of my own companies, which although small became and has stayed the leading data security solution provider in Estonia.

I guess it all depends what you achieve during which time. It is easy to have a great impact on a company by just staying 1-2 years there. And you can spend 5 years somewhere and leave the office one day without many changes taking place during that time.

Still when hiring, I rarely choose someone who has been in one job less than 2 years. Shorter than that and you probably have not even got to know the company.