In the early 2000s, Estonia was modernizing rapidly, tottering residues of Soviet influence. it Was ambitiously turning into one digital society with innovations such as E-Governance and online voting.
And, of course, Skype was born, the company that would start the small Baltic country’s journey to becoming a start-up powerhouse and a “unicorn country.
Since then, Estonia has established itself as a leader in breeding high-profile software companies such as Bolt and Wise. Now, it is aiming to become a center of deep technology, accelerating the development of research and science-based enterprise.
Deeptech in Estonia is still relatively new. About 70% of the companies have appeared during the last five years.
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However, the sector is growing rapidly. In 2023, deep-tech startups achieved a record turnover of 227.2 million euros – a 14% increase from the previous year. They also raised €394 million, up from €254 million a year earlier.
Towards a center of deep technology
The Estonian government’s vision is for deep-tech companies to account for around 30% of the country’s total startup volume by 2030. This translates to 500 deep-tech startups — up from 132 in 2023.
A key component of Estonia’s action plan is to facilitate further access to finance, mainly in the form of grants and angel investments, especially for early-stage businesses.
Another is to encourage entrepreneurship within the academy with dedicated courses for students. Equally important is ensuring a smooth spinout process.
According to Sten Tamkivi, early executive at Skype and partner at VC firm Plural, Tallinn University of Technology (TalTech) and University of Tartu have taken active steps in recent years.
“They’ve created their own entrepreneurial arms and made sure the IP and capital spinout process is easier,” Tamkivi tells TNW.
A third component is their startups themselves – and their ability to turn scientific breakthroughs into commercial products.
Cosmic rays for 3D scanning
Tallinn-based GSCAN is using muon tomography for 3D scanning and chemical composition analysis.
Muons are subatomic particles that make up half of the cosmic radiation that reaches Earth’s atmosphere.
GSCAN collects muons with its proprietary detector technology, which combines the use of AI to measure the flux of muons as they penetrate an object, create 3D visualizations and analyze materials.
“This is a platform technology that you can use anywhere, just like X-ray tomography,” Andi Hektor, co-founder and chief strategy officer at the startup and former CERN researcher, tells TNW.
According to Hector, muon tomography offers significant advantages over X-rays. First, it has the ability to penetrate very large objects and provide information about the chemical composition of materials. It is also safer for people and the environment, since muons are the result of natural radiation.
One of GSCAN’s focus areas is non-destructive testing (NDT) for the built environment. NDT helps evaluate the properties of a material or structure for potential defects without causing damage.
Hector gives an example.
“The world is full of old bridges, buildings and tunnels made of reinforced concrete. Reinforced concrete has a limited lifespan and within these structures there are metals that are subject to corrosion.
“Understanding what’s going on inside these structures is vital for both security and economic reasons,” he says.
GSCAN counts numerous projects so far, including scanning two old nuclear reactors for their safe decommissioning process.
In addition to the built environment, the startup is also using its technology for customs and security applications.
In March, GSCAN raised a €3 million round from investors including Bolt founder Markus Vilig. This brought the total amount raised since its inception in 2019 to €5.1 million.
Green carbon and graphite nanomaterials
A spinout from the University of Tartu, Up Catalyst transforms CO2 emissions into green carbon nanomaterials and graphite.
The startup’s technology extracts CO2 from waste biomass and flue gases from heavy industry emitters. It then converts it into green carbon in a process called molten salt electrolysis.
“We are essentially electro-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 is to reduce dependence on carbon-based fossil fuels, minimizing the environmental impact of raw material production.
According to Segko, Up Catalyst’s mission aligns with the EU’s energy transition objectives and the need to ensure a reliable (and ideally domestic) supply chain of critical raw materials.
“Graphite, among other key carbon products, is considered a critical material by the EU, especially since we import about 99% of it, which mostly comes from China.”
Graphite is a key component of EV batteries, which typically contain between 50 kg and 100 kg of the material.
In turn, carbon nanomaterials are valuable additives in energy production and storage devices, including batteries, fuel cells, and solar cells.
In July, Up Catalyst received €2.36 million in funding to accelerate the development of an industrial pilot reactor.
According to the startup, the reactor will be able to produce 100 tons of CO2 per year, which can yield 27 tons of green carbon materials.
Up Catalyst came out of the University of Tartu in 2019.
“We had a good case for success because we were able to fully transfer the IP from the university to the company,” Teele Niidas, the startup’s CMO, tells TNW.
Despite some “difficult parts” of the negotiations, the spinout process was “pretty easy,” says Niidas.
“I think everyone [in the Estonian ecosystem] realizes that science-based startups have a great future if they are really supported by academia.”
Use of nanotechnology for wound dressing
Another nanotechnology startup is Nanordica Medical, which has developed an antibacterial wound dressing.
A resource from Estonia’s National Institute of Chemical Physics and Biophysics (NICPB), the startup sought to create a more effective solution for bacterial wound infections. These affect around 100 million people worldwide, including those suffering from diabetes.
“Common wound dressings use silver,” Olesja Bondarenko, CEO of Nanordica, tells TNW.
“Silver has good antibacterial properties. But the problem is that it also has side effects and can lead to impaired wound healing.”
After research, the team discovered that the key lay in the combination of silver with copper nanoparticles.
“We found that they reinforce each other, reducing the negative effects,” says Bondarenko.
The Nanordica dressing works by attracting bacteria and inactivating their effect, which enables 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 trial in Estonia with 30 diabetic patients suffering from food ulcers. The results were promising, with the wound dressing showing twice as fast healing compared to a commonly used silver alternative.
Nanordica plans to confirm these findings with a larger future trial and expects to receive approval from the EU health regulator this year.
After the intended commercialization of the wound dressing by 2025, the company will aim to expand its range of antibacterial products.
Nanordica recently raised €1.75 million from VC investors. In the first years after its establishment in 2019, it relied on funding from the founders and grants from EIC, Enterprise Estonia and NICPB – from which it bought the IP.
According to Bondarenko, software has historically dominated investor interest.
“But now, I think there’s a real transformation,” says Bondarenko.
“There is a growing realization that science-based deep technology is very important. And the same investors who were focusing on software are now looking at different opportunities.”
“The chances are very high that we will soon see unicorns in health technology and in deep technology in general.”