OUTSTANDING TRIO: Comparison of Three most Promising Estonian Internet Start-ups

30 Nov 2009

When someone asks about the most successful Estonian Internet business, the answer would probably be Skype, with over 400 million subscribers.

But how about start-ups? Fortumo, Edicy and UDC stand out as most promising ones.

Let’s take a look at these companies and compare them in a subjective way.

	Fortumo Answers by the Marketing Manager Martin Koppel (pictured below)	Edicy Answers by the Executive Director Tõnu Runnel (pictured below)	United Dogs & Cats Answers by the Executive Director Ragnar Sass (pictured below)
Date of establishment	June 5^th 2007	November 8^th 2007	December 15^th 2006
Seed capital	EUR 3 000!	A small sum	EUR 12 780
The founding members	Rain Rannu, Veljo Otsason, company Mobi Solutions	Tõnu Runnel, Priit Haamer, Toivo Annus, Märt Kelder	Ragnar Sass, Martin Tajur, Lauri Laineste, Jarko Pedaste
How was the company created?	Fortumo grew out of the Mobi Solutions Estonia service “Everyone’s M-business”. It seemed that this could succeed outside of Estonia. With the support from Enterprise Estonia a new service platform was developed and the brand renewed	Tõnu and Priit had worked in the online business for 10 years and had determined a way of making web building and management clear to people. Toivo and Märt got excited about the idea and joined them	Ragnar had had the idea for years.When he described it to some people he knew well, they liked it. In March 2007 the first demo was released.
The business model	A service, enabling small and medium-sized internet businesses and private individuals to create new SMS services (SMS voting, SMS campaigns and SMS chat) with ease and make a profit from itService creation and management is free of charge to the client	A tool that anyone can use to create a webpage easily – without outside assistance, straight off the internet, and within minutes. The service includes everything that is needed: design, content management, hosting, software updates and user support, and is available in about twenty different languages.	United Dogs and United Cats are environments connecting dog and cat lovers all over the world, and which allow them to create profiles for their pets. The “Cat and Dog Facebook” aims to interweave social networking, niche journalism and private info management systems.
Major competitors	International M-payment providers like Zong, Boku, etc.	Weebly, Yola, Jimdo, Webnode, Squarespace, Webs, Google Sites.	Dogster.com (USA), Petside.com (USA), Deine-Tierwelt.de (Saksamaa).
What beats the competition?	Openness, more different types of service for the client, and an opportunity to earn money.A focus on opening up Eastern European and Asian markets (Fortumo is already available in 17 different languages).	Unprecedented simplicity, a wide range of supported languages, high-quality design, and the option to use random designs.	A scaled platform that now exists in 14 languages. The competition works in only one language. Work is underway to enable the software solution to stand out even more from the competition.
Where are the clients located?	Western Europe (including Great Britain, Germany, Spain and France), Northern Europe (Scandinavia and the Baltic region), Central and Eastern Europe (including Poland, the Czech Republic and the Balkan States). Asia and Oceania (China, Malaysia, Taiwan, Hong Kong and Australia)	Most paying clients are in Estonia, USA, France, Spain and Canada.Free users are mostly in China	Italy, France, Spain, Estonia, Lithuania, Chile and Argentina
Number of clients	28,000	100,000 users, of whom less than 10% are active	320,000
Annual growth in the number of clients	180%	approx. 500%	100%
Growth goal for the next 5 years	The goal is not to have the most clients, but the best quality clients	10 million users, with 20% of them active	3.9 million users by 2013
Paying clients	200-300	Less than 10% of the users	Less than 10,000
What is generating profit?	Revenue by dividing the profits from the services consumed and paid for by the end users. 90% of Fortumo profits will come from outside Estonia	Design work for major Edicy websites	Ad sales and pay services for users
Turnover and profit/loss (EUR) 2008	turnover: 223 000 loss: 64 000	turnover: 100 000 loss: 10 000	turnover: 38 400 loss: 236 600
Forecasted turnover (EUR) 2009-2010	2009: 300-400% growth in turnover. Beyond that, healthy profits for the firm –annual growth of 200-300%.	2009: 290 000 2010: 640 000(profit: 192 000)	undisclosed
Number of employees	10 full-time employees. Besides Estonians also Polish, Romanian, Bulgarian, Serbian and Taiwanese	8 enthusiastic employees	15 + 1 dog (an Estonian Hound). Plus over 100 volunteer moderators. Besides Estonians,the team also includes people from Italy, Venezuela and France
Average age of employees	25	25	25
Family: how many children do the employees have?	3	1, soon to be 2	5 children + 4 dogs + 5 cats
Employees work in Estonia	75%	100%	90% of the moderators are located outside Estonia
Ambitious plans for the next 5-10 years	To set up a successful and profitable international company that could be sold in 3-6 years for a good price to a bigger company	To become a key industry player globally by keeping many steps ahead of the constant changes in the technology sector	To become the largest pet portal by 2013 with 3.9 million pet profiles and an annual turnover of EUR 10 million
Capital raised	About EUR 200 000 from Mobi Solutions	A bit of seed capital	EUR 800 000 from Ambient Sound Investments and Raivo Hein’s investment firm 220 Volti.
Funny things happened along the way	In the spring, our Taiwanese employee Po Han went for a walk in Narva. While walking alone along the river he was stopped by the Estonian border patrol who suspected him of entering the country illegally. Unfortunately he had left his ID card at home, so he was taken to the Migration Agency for a “brief conversation”. Luckily it didn’t take very long, however. Po Han took the whole adventure as good humour because it’s not every day that you get to ride in the border patrol jeep	Fun is our trade secret.Any amusing events that could give rise to public criticism cannot be mentioned	The name of our website makes people assume that we breed and sell dogs. When the Estonian Development Fund’s infomation day was held at the Estonian Parliament (Riigikogu), our dog Riki the Estonian Hound was granted official permission by the Riigikogu board to visit the parliament.Riki is probably the only animal the board has ever allowed to do this
Most important lessons learned	In the first year we hoped to see a linear connection between the money invested and results. The reality turned out to be more complicated than that, and a considerable part of our marketing budget was paid out as “school fees”.When we made a loss at the beginning, and most needed money, no one wanted to invest in us. An entrepreneur who has been looking for funds for a long time can be tempted to accept offers of money, even if the terms are brutal. Searching for ages for a deal and then turning one down was the hardest but most correct decision we made during the year	Don’t employ someone who is more interested in the hype than the actual product	To succeed outside of Estonia you have to have people in the team who are familiar with local conditions – personnel is the deciding factor in everything
The company’s biggest miscalculation	We started expanding into Scandinavia, hoping that our rich northern neighbours would grab the opportunity we were offering. In reality, things only began to develop when we moved into the Eastern European countries	When we launched, in the summer of 2008, we were confident that we would get 100,000 accounts (sites created by clients) by January 2009. In fact we did not reach that goal until October 2009	We tried to market the company in English in Southern Europe
Why does this business work so well?	Mobile payments and services are a rapidly growing sector and we enjoy being part of this growth	We offer tens of thousands of people a convenient website creation service and friendly user support	Our solution can educate pet owners, which improves the pets’ lives. What is enormously motivating is the direct user feedback, which is usually highly positive.
Executive Director’s business slogan	- If you do things you enjoy, the hope is that someone else will enjoy them too, and this is the road to success. - A good product/service is of no use to anyone if it is not known (marketing and sales is not done)	None	“The sky’s the limit”
Sceptics say that you can expand your business all over the world through the internet but to make money from it is complicated, because no one wants to pay for anything online!How do you respond to this?	Lots of internet businesses are built on a model that presumes many visitors will be found first; only then do they think about how to profit from them. Fortumo is different. We earn revenue from every user transaction right away, from the division of the SMS profit	Let the numbers speak for themselves.Today’s Edicy subscription statistics: 5 payments from 3 countries – some of these are advance payments for 24 months.Edicy is only 14 months old. We have only just started up	Our biggest competitor – Dogster – became profitable several years ago
Pride: the company’s prizes and awards	- 2005: Fortumo predecessor Igaühe M-Äri took first place in the e-business category in the qualifying rounds of the World Summit Awards- 2008: Fortumo was named Best Nordic Mobile Start-Up Company at the Nordic Mobile Media conference- 2009: Fortumo was selected as one of the 20 most promising mobile start-up companies in the world at the Mobile Monday Peer Awards	- 2008: We were one of the finalists in the LeWeb start-up company competition - 2009: Gold at the Estonian Internet Awards competition	- 2007: Ambient Sounds Investments’ angel investment- 2009: Estonian Development Fund’s investment- 2009: The best project in the Pro Bono category at the Estonian Internet Awards competition.
Company’s community activities: campaigns, sponsorships, etc.	We support charitable activities by offering free services	We offer many free or below net value websites and do design work for Estonian NGOs	- We supported the Estonian Society for the Protection of Animals in 2007 in gathering over 50,000 signatures to amend the animal protection policy.- We launched a campaign entitled “Stop Killing Dogs” in the summer of 2009 to direct attention to animal torture in South Korea