Lithuanian startups in figures: what is the forecast for 2024?
Over 870 startups employing 17 800 talents are currently operating in Lithuania. According to the data of the Unicorns Lithuania association, these startups alone added EUR 275 million to the national budget in the first three quarters of this year, which is a quarter more than at the same time last year, even though they had raised 5 per cent less investment until December.
In the European market context, venture capital investments raised by startups are expected to almost halve to reach EUR 41 billion this year compared to 2022, whereas last year startups raised EUR 75.4 billion, according to venture capital firm Atomico. Researchers confirm that only Lithuania, Romania and Luxembourg are ahead of the curve and have recorded an increase in the number of investments raised by startups, with the 2 major investments in Lithuania being the main contributors.
“Moreover, the Lithuanian startup ecosystem stands out in the context of other countries because the main source of its growth is its own capital and its own strengths, thus making it possible to be more flexible in adapting to the new reality we live in today. 2023 was neither an easy nor a quiet year for startups, although there were quite a few notable achievements. However, this does not mean that we have bypassed all the challenges,” says Inga Langaitė, CEO of the association, evaluating the year that is coming to an end.
Talking about the upcoming 2024, she identifies talent shortage as the biggest challenge for the growth of the Lithuanian startup sector. According to a survey of more than 120 employers in the information and communication technologies (ICT) sector, companies operating in ICT alone are ready to recruit at least 7 600 specialists by 2025, which is double the current number of specialists employed.
What was 2023 like for Lithuanian startups?
This year, total investment in Lithuanian startups has already exceeded USD 297 million, or EUR 273 million. This is 5 per cent lower than last year, when the amount reached EUR 286 million in the first 11 months of the year (EUR 293 million over the year). This year, the largest investments (USD 100 million each) in Lithuania were raised by Vilnius-based Nord Security and Surfshark, the second unicorn in cybersecurity products, and PvCase, a leader in design software for solar power plants. US startup CastAI, which has an engineering centre in Vilnius and is developing a cloud platform based on artificial intelligence, also raised a total of USD 55 million this year.
According to Ms Langaitė, these figures should be considered taking into account that not all transactions are public and the year is not yet over. Nevertheless, raised investment is just one important component of the success of the startup ecosystem, and there are more optimistic signs in Lithuania.
“If we take a long-term perspective, over the last 5 years the number of talent working in Lithuanian startups has more than tripled (5 500 in Q3 2018, 17 800 in Q3 2023), and the amount of taxes paid has grown more than 5 times (EUR 17.3 million in Q3 2018, EUR 92.6 million in Q3 2023). The startup sector in Lithuania is growing and getting stronger, as is the added value the sector brings to the Lithuanian economic growth,” she underlines.
When talking about some of the most significant achievements of the Lithuanian startup ecosystem in 2023, Ms Langaitė also pointed out Baltic Classifieds Group, the officially recognised third unicorn of the country, the Cyber City technology space opened in Vilnius, where 3 000 people can work, the national IT exam, jointly organised for the first time by as many as 12 startups, and the materialising Tech Zity Vilnius project, which has attracted a lot of attention from foreign media.
The data of Unicorns Lithuania shows that today 7 out of 10 startups in Lithuania are working on business-to-business (B2B) services. The largest share (25 percent) of startups are operating in the field of business software, followed by products and services related to financial technology and wellness. The largest expansion of teams in Lithuania is expected in cybersecurity, software development and telecommunications. In line with the observed trends, the salaries paid to Lithuanian startup employees have also been rising steadily. According to the data for Q3 2023, the average salary in the startup sector amounts to EUR 3 800 before tax, growing by 12 per cent (EUR 400) per year.
What is the outlook for 2024?
Speaking about the upcoming 2024, Ms Langaitė identifies the shortage of highly qualified talent as the main challenge. Employers surveyed during the “Demand for ICT Professionals and the Labour Market Forecast in Lithuania” survey indicated that by 2025 they plan to hire about 1 400 back-end developers, about 1 000 front-end developers and up to 1 000 DevOps engineers. There is also a shortage of analysts, digital marketing and UI/UX specialists.
“What do we need to do to bring about the very real changes needed for the growth of society as a whole? Not only to talk about it loudly and systematically, but also to pay attention to the current figures and finally take perhaps uncomfortable and difficult yet strategically important decisions. Unicorns disrupt the established norms by introducing new products, services or business models that fundamentally change one sector after another, which does not take long to translate into tangible economic results. The success of many countries whose startup ecosystems have flourished lies in the fact that they have become a hub for talent – IT professionals, startup founders, investors. Although we have a lot of concentrated talent in Lithuania, this will not be enough. The world is on the brink of change, and we need to hurry to accumulate as much of the most essential available asset, i.e. intelligence. The startup industry in Lithuania is growing and strengthening, thus we need to ensure that we live up to the expected potential,” Ms Langaitė points out.
The surveyed employers have indicated that by 2025 the ability of professionals to apply and develop solutions based on artificial intelligence (AI) and machine learning will become critical. The data of Crunchbase analysts show that 1 in 5 new unicorns this year are working in AI. Lithuanians are also actively developing products in this field.
“Market adjustments take time, but I can assure you that we are definitely in the startup era. The importance of technology in our daily lives and the capital in the hands of investors are only increasing, and we do not lack ambitious people who are motivated to achieve more. In addition, the opportunities needed to build a business today have never been more accessible. Businesses that have managed to survive even in times of crisis tend to perform outstandingly with the economic upturn, so I would like to wish startup founders to be patient. Lithuanian startups are cautious about taking risks and revise their business development plans, because it is not easy to predict how the situation will evolve further. However, the results of the last quarter of this year, which will be available at the beginning of 2024, are unlikely to be shocking,” Ms Langaitė shares her predictions
Keep in mind – Vilnius is already preparing for one of the most important events of the year – the annual Vilnius TechFusion Startup Awards. At the event organized for the fifth year in a row, awards await both growing high-tech companies and heroes of businesses, talents and ecosystems that have already gained recognition in Lithuania and the world.
Vilnius TechFusion startup awards will be held on January 11, 2024, this year they are organized by Vilnius city tourism and business development agency “Go Vilnius”, Lithuanian startup association “Unicorns Lithuania” and “Sunrise Tech Park”.