In the early 2000s, Estonia modernized rapidly and shook off the Leftovers of Soviet influence. It was ambitious turns into a digital Society with innovations such as Electronic administration and online voting.
And of course it was the birth of Skype, the company that paved the way for the small Baltic state to become a startup powerhouse and a “Unicorn Land.”
Since then, Estonia has established itself as a leading country in creating high-profile software companies such as Bolt and Wise. Now the country is aiming to become a deeptech hub and drive the development of research and science-based companies.
Deeptech is still relatively young in Estonia. A full 70% of the companies were founded in the last five years.
Nevertheless, the sector is growing rapidly. In 2023, deeptech startups achieved record revenues of €227.2 million – a 14% increase from the previous year. They also raised €394 million, compared to €254 million the previous year.
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Towards a deeptech hub
The Estonian government's vision is that deeptech companies will account for about 30% of the country's total startup volume by 2030. This corresponds to 500 deeptech startups – in 2023 there will be 132.
A key component of Estonia's Action Plan is to further facilitate access to finance, mainly in the form of grants and angel investments, especially for young companies.
Another goal is to promote entrepreneurship within the academic world through special courses for students. Equally important is to ensure a smooth spin-off process.
According to Sten Tamkivi, a former Skype executive and partner at venture capital firm Plural, both Tallinn University of Technology (TalTech) and the University of Tartu have taken active steps in recent years.
“They have created their own venture capital arms and made the spin-off process for intellectual property and equity easier,” Tamkivi tells TNW.
A third component is the startups themselves – and their ability to translate scientific advances into commercial products.
Cosmic radiation for 3D scanning
Tallinn-based GSCAN uses muon tomography for 3D scanning and chemical composition analysis.
Muons are subatomic particles that make up half of the cosmic radiation that reaches the Earth's atmosphere.
GSCAN collects muons using its proprietary detector technology that combines the use of AI to measure the flow of muons as they pass through an object, create 3D visualizations, and analyze the materials.
The GSCAN system is modular and can scan any material up to 20 meters thick. Source: GSCAN
“This is a platform technology that can be used anywhere, similar to X-ray tomography,” Andi Hektor, co-founder and head of strategy at the startup and former researcher at CERN, tells TNW.
According to Hektor, muon tomography offers significant advantages over X-rays. Firstly, it can penetrate very large objects and provide information about the chemical composition of materials. Furthermore, it is safer for humans and the environment because muons are a result of natural radiation.
One of GSCAN's main focuses is non-destructive testing (NDT) for the built environment. NDT helps to examine the properties of a material or structure for possible defects without causing damage.
Hector provides an example.
“The world is full of old reinforced concrete bridges, buildings and tunnels. Reinforced concrete has a limited lifespan and inside these structures there are metals that are subject to corrosion.”
“Understanding what is going on inside these structures is critical for both safety and economic reasons,” he says.
GSCAN has so far completed several projects, including the investigation of two old nuclear reactors with a view to their safe decommissioning.
In addition to the built environment, the startup also uses its technology for customs and security applications.
In March, GSCAN raised €3 million in a seed round from investors including Bolt founder Markus Vilig. This brings the total amount raised since its founding in 2019 to €5.1 million.
Green carbon nanomaterials and graphite
Up Catalyst, a spin-off of the University of Tartu, converts CO2 emissions into green carbon nanomaterials and graphite.
The startup's technology extracts CO2 from biomass waste and flue gases from heavy industry emitters. It then converts it into green carbon in a process called molten salt electrolysis.
“We are essentially electrochemically transforming carbon dioxide gases into carbon nanomaterials,” Apostolos Segkos, head of development at Up Catalyst, tells TNW.
The startup's first goal is to achieve price parity with traditional carbon sources. The second goal is to reduce dependence on carbon from fossil fuels while minimizing the environmental impact of commodity production.
According to Segkos, Up Catalyst's mission is in line with the EU's energy transition goals and the need to ensure a reliable (and ideally domestic) supply chain for critical raw materials.
“Graphite is considered a critical material by the EU, along with other important carbon products, especially since we import about 99 percent of it, most of which comes from China.”
Graphite is a key component of EV batteries, which typically contain between 50 and 100 kg of this material.
Carbon nanomaterials, in turn, are valuable additives in energy generation and storage devices, such as batteries, fuel cells and solar cells.
In the Up Catalyst laboratory. Left: Apostolos Segkos. Source: Up Catalyst
In July, Up Catalyst received a financial injection of 2.36 million euros to accelerate the development of a pilot industrial reactor.
According to the startup, the reactor will be able to produce 100 tons of CO2 per year, yielding 27 tons of green carbon materials.
Up Catalyst was spun off from the University of Tartu in 2019.
“We had a great success because we managed to completely transfer the intellectual property from the university to the company,” Teele Niidas, the startup’s CMO, tells TNW.
Despite some “difficult phases” in the negotiations, the spin-off process was “fairly easy,” says Niidas.
“I think everyone [in the Estonian ecosystem] recognizes that science-based startups have a great future if they are actually supported by science.”
Use of nanotechnology for wound dressings
Another startup in the nanotech field is Nanordica Medical, which has developed an antibacterial wound dressing.
As a spin-off of the Estonian National Institute of Chemical Physics and Biophysics (NICPB), the startup wanted to develop a more effective solution for bacterial wound infections, which affect around 100 million people worldwide, including diabetics.
“Conventional wound dressings use silver,” Olesja Bondarenko, CEO of Nanordica, tells TNW.
“Silver has good antibacterial properties. The problem, however, is that it also has side effects and can lead to impaired wound healing.”
During their research, the team discovered that the key lies in the combination of silver with copper nanoparticles.
“We found that they reinforce each other while reducing the negative impacts,” says Bondarenko.
Nanordica's dressing works by attracting the bacteria and inactivating their action, allowing tissue regeneration and wound healing. The Tallinn-based startup says the solution offers 8 times better treatment compared to standard care products.
The company has already conducted a small clinical study in Estonia with 30 diabetics who suffered from stomach ulcers. The results were promising: the wound dressing showed healing twice as fast as a commonly used alternative containing silver.
Nanordica plans to confirm these findings in a larger study and expects approval from the EU health authority later this year.
Following the planned commercialization of its wound dressing by 2025, the company aims to expand its range of antibacterial products.
Wound dressings from Nanordica Medical in various sizes. Image provided by Olesja Bondarenko.
Nanordica recently raised €1.75 million from venture capitalists. In the first few years after its launch in 2019, it relied on funding from its founders and grants from EIC, Enterprise Estonia and the NICPB, from which it purchased the intellectual property.
According to Bondarenko, software has always been the dominant theme among investors.
“But I believe that a real transformation is taking place now,” says Bondarenko.
“There is a growing understanding that science-based deeptech is very important. And the same investors who focused on software are now considering other opportunities.”
“The chances are very high that we will soon see unicorns in the healthtech and deeptech space in general.”
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