A Start-up Programme to get off to a good start
Thanks to the European Regional Development Fund (ERDF), Enterprise Estonia, the business support and foreign investment national agency has set up a popular, effective “Start-up Programme”.
Established in 2000 by the Ministry of Economic Affairs, Enterprise Estonia (Ettevõtluse Arendamise Sihtasutus / EAS) aims to promote the competitiveness of businesses and improve the economic environment, an essential task in a country which has just emerged from 51 years of soviet regime. As one of the main institutions responsible for implementing Structural Funds and the leading provider of support for businesses, EAS operates three programmes which are jointly funded by the ERDF: a “Research and Development Financing Programme”, an “Export Planning Programme” and a “Start-up Programme”.
In a country which greatly needs to develop its network of SMEs, the Start-up Programme offers new entrepreneurs access to start-up capital. It is aimed at two major objectives: 1) encouraging the momentum to set up one’s own business; 2) increasing the number of businesses with potential for growth, particularly those oriented towards exporting and/or which use innovative technologies. To qualify for assistance, applications should be submitted by private, independent companies, employing less than 50 people, which must have been created less than 12 months ago and be situated outside Tallinn, the capital.
In 2005, the Start-up Programme was split into two sections, according to the two types of funding which depend on the applicant company’s orientation. On the one hand, a Growth Grant is provided for new, profitable, export companies which are planning rapid expansion. The entrepreneur can receive a maximum of EUR 10 225, on condition that they estimate that they will be able to generate an average, annual turnover of at least EUR 32 000 over the next three years. On the one hand, a Start-up Grant is offered to all new small businesses which do not necessarily have extensive growth potential but which can depend on an established market and stable turnover, and are therefore able to contribute to job creation in the county. The maximum aid granted under this section is EUR 3 200.
Examples of 3 projects
In 2004, the University of Tartu closed its archive restoration department. The employees had no alternative but to create their own business. They set up Mandragora, a company which has extended its activities to the renovation of funerary monuments and stucco. A Start-up grant of EUR 7 527 in 2005 enabled it to renew its highly specialised tools and to acquire ultramodern laser equipment.
Established in a farm on the island of Saaremaa, the family firm GoodKaarma (www.goodkaarma.com/) is the largest Baltic company to produce soap from entirely natural ingredients. All of its soaps are hand-made using a specific, cold process. The Start-up grant of EUR 7 594 in 2005 enabled it to market its production beyond the local market. Boosted by their success, the husband and wife team are now converting their farm into an eco-tourism destination.
Established in Tartu by three students, the company Grenius (www.grenius.com) has found an innovative and ecological way of producing trendy accessories from waste (coffee packaging, milk or fruit juice cartons, old advertising posters, etc.). In this way, Grenius produces 400 bags, wallets and pencil cases every month. Its products are sold in 12 stores in 5 countries: Estonia, Portugal, the Netherlands, Belgium and Finland. After receiving a Start-up grant of EUR 2 396 in 2006, the company is now launching into the Scandinavian market.
The Start-up Programme is the most highly solicited of the forty or so support mechanisms managed by the EAS. In 2004, the year in which the programme began operating, EAS received 667 applications and ultimately funded 188 projects. This success encouraged the agency to raise its requirements and divide the programme into two sections, in order to improve the quality of applications, “good ideas” and innovative projects rather than simply manufacturing products. Hence the reduction of applications in 2005 (286 applications resulting in 153 projects funded, accounting for a total of EUR 1.1 million), and 58% of projects with high potential. The number of applications increased once again in 2006, with 406 applications submitted. Out of the 188 firms which were established using Start-up grants in 2004, 170 (90%) are still operating. In 2005, financial assistance was accompanied by 10 training courses covering the everyday activities of running a small business. This dimension was extended in 2006, with “Enterprise Days” organised throughout the country.