Last week we had a meeting between TechHub Riga, Infogram and the Minister of Economics Vjaceslavs Dombrovskis. This meeting outlined a further collaboration between the Ministry and TechHub Riga and discussed options how a more active involvement by the government could make Latvia a better place for investments in startups.
"Even though we are a country with traditions in computing and we can ensure a competitive education in the region, a demand for programmers in the world is still high and will continue to grow," the Minister notes. "Therefore it is important to develop companies that can use this programming capacity to create applications that are demanded in a global market and TechHub Riga companies have proven this skill. It's not a secret that even one successful product in a perspective can bring a lot to the local economy. Those are resources that can be later invested to modernize our IT education, develop science and create more jobs and products with higher added value".
Latvia is already recognized as rapidly growing startups centre
Our chairman Andris K. Berzins states: "In recent years Latvian startup companies have rapidly grown, becoming a visible part of the entrepreneurship". Such startups as Froont, Cobook, Infogram have already gained global recognition. Their success has helped startups to attract significant investments, create more jobs and popularize the name of Latvia abroad. Latvia has a great potential to become the intelligent centre of technology in the Northern region.
Uldis Leiterts, the CEO of Infogram, recognizes that during last years foreign investors have become significantly more interested in Latvian startups. "Latvia is a small market," he says. Hence tech startups aim at global markets from the very beginning. We have creative ideas, energy and the necessary knowledge, and foreign investment gives us a chance to play globally. To foster development of such startups, Leiterts suggests collaboration between business and legal institutions. The best way how the government can help the startups is to eliminate various bureaucratic obstacles and let them work.
The meeting highlighted most important issues that could facilitate an even faster growth of tech startup environment in Latvia:
Financial support to make an international contact base. To help new companies develop, the government can co-fund their participation in international business development events, such as accelerators or bring the "taste of the Sillicon Valley" by helping to bring experienced people to Latvia. If startups have good connections globally, they do not have to agree to disadvantageous investments when the VCs demand too many shares for their money. Despite of Investment and Development Agency of Latvia (LIAA) currently offering various financial instruments, these instruments cannot be used due to bureaucratic burden while submitting applications and reports.
Tax policy and less bureaucracy. Startups are ready to actively engage in legislation processes. There is a need to create a tax payer status for those companies with a foreign capital and VAT number, which is necessary to do business abroad. Additionally, there is a need to adjust the status for micro-enterprises that receive a foreign funding and do global business. At this moment these options are strictly limited.
Establishment of new accelerator funds. In order to develop new companies, accelerator funds are widely used around the world. That enables startups to scale fast in short period of time and increase competitiveness in a way which allows to attract foreign investors for further growth. It is important for Latvia to develop such programs in nearest future with help or EU structural funds. LGA is already actively working on development of such acceleration funds, and discussing the possibilities with startups in order to create best suited options.
Financial tools to increase foreign investment. Latvia needs to develop activities that popularize the country as a good place for foreign investment in tech companies. A good example is Finland where government�s venture capital fund Tekes invests in startups and doubles the investment if the startup receives an additional funding from abroad. With implementation of such co-funding models in Latvia, the country could be positioned as a high growth startup centre that makes it attractive to both new companies and investors. This model goes in hand with the planned accelerator funds that can help startups grow bigger and attract a further foreign capital.
"Government is already working to provide at least 10 support instruments that will help new tech companies with good ideas to pick up the speed," the minister describes. "Among them will be development venture funds, loan guarantees, export credit guarantees and others. That will serve as a good foundation to see similarly successful companies as Infogram, Froont and Cobook in the next 7 years."