Estonia launched its e-Residency programme three years ago tomorrow so that anyone on Earth could apply for a secure government-backed digital identity and gain access to our e-services. Understandably, no one was entirely sure back then who would actually sign up and why. Many of the first e-residents were simply excited to join our borderless digital nation and had no plans to use their digital ID cards. Three years later however, its now very clear who benefits most from e-Residency and as a result the programme is growing at its fastest ever rate.
Three years later however, its now very clear who benefits most from e-Residency and as a result, the programme is growing at its fastest ever rate.
The latest statistics show that there are almost 30,000 e-residents from 139 countries and the biggest motivation for signing up (at present) is the desire to establish a company. Why? Because companies established through e-Residency are trusted location-independent EU companies, which can be run remotely from anywhere on Earth with low costs, minimal hassle and access to all the tools needed to grow globally, such as international payment providers.
There are even more advantages to being an e-resident under development, but more than 4,000 companies are now run by e-residents and these companies make a significant contribution to the Estonian economy. On the third anniversary of the e-Residency programme tomorrow, Deloitte will publish an independent economic assessment of the full impact of these companies.
So who are these e-residents and what value do they see in the programme?
Below is an overview of the key groups of entrepreneurs now benefiting from e-Residency. Many e-residents will fit into several of these categories, but theres one common theme across them all: E-residents are people who faced barriers to entrepreneurship because of borders and managed to find new opportunities online in our borderless digital nation.
Due to rapid advances in digital technology and more flexible working cultures, a rapidly increasing number of people are choosing to live as digital nomads because they can work anywhere theres an internet connection.
Rachel King is originally from Canada, but now uses Berlin as her base camp while travelling and working for her location-independent advisory company established through e-Residency. She is a consultant for governments and startups on the development of technology ecosystems. She also runs spiegel.de, a website about business, travel and money.
Entrepreneurs who want EU access
The largest growth for e-Residency is currently coming from outside the EU where entrepreneurs want to gain access to the EU market and benefit from its legal frameworks, access to financial services, and higher level of trust when conducting business globally.
Erdogan Harun is a professional tour guide from Istanbul who first founded his company as Walks in Istanbul. By 2015, he had built up a successful business after selling more than 600 walking tours, providing work for 12 local tour guides and earning a huge number of positive reviews online.
Then disaster struck. Political problems within the region led to a sharp decline in tourism as governments issued travel warnings for people stay away. Then PayPal stopped operating in Turkey so even those who did want to travel were unable to pay for his services.
Fortunately, Erdogan discovered e-Residency and then established Walks in Europe as an EU company so that she could access international payment providers, but also expand his business across the continent.
Entrepreneurs within the EU
Many people assume that e-Residency is primarily aimed at entrepreneurs who need access to the EU market, but entrepreneurs within the EU are currently the largest demographic.
An increasing number of entrepreneurs across the continent are realising that they need an EU company, but theres often no reason to establish it within their jurisdiction, especially if the costs and hassle of running it there are higher.
Sergej Putin, originally from Russia, now runs Telexchange Systemonline from Sweden. His company is now the top performing Telecom company registered in Estonia. E-Residency enabled Sergej to lower his business costs and provide more value to his customers.
Entrepreneurs facing Brexit
Theres been a sharp rise in applications from the UK since the country voted to leave the European Union. Many British entrepreneurs discover e-Residency while searching for a way to stay in the EU, but soon discover that the benefits of e-Residency are bigger than Brexit as it can often enable them to more easily conduct business globally.
Ellenor McIntosh and Alborz Bozorgi are the Mayor of Londons entrepreneurs of the year 2017 for developing an ecofriendly toilet paper called Twipes. They believe that the EU is their most valuable market to grow their product so chose to establish their company through e-Residency while remaining in the UK.
The UK is not generating the highest number of companies established through e-Residency (as that honour goes to Ukraine), but the media focus on the complexities of Brexit for entrepreneurs does help spread greater awareness of e-Residency globally.
Location is one of the most important decisions facing startup entrepreneurs as it affects their access to customers, as well as the talent and funding required to reach them.
However, a startup established through e-Residency is location-independent because it can be run within the EU business environment from anywhere on earth. This flexibility allows startup entrepreneurs to start very lean, contract talent globally, and keep their options open.
E-resident Deepak Solanki from India is developing LiFi technology, an innovative alternative to WiFi, through his company, Velmenni. He started the company in India, but had difficulty raising finance until he reestablished his company in the EU, thanks to Estonia. The company is now run remotely through e-Residency with investors from the UK and Zimbabwe, all of whom are also now e-residents.
Freelancers from emerging markets
Trust is one of the most valuable assets in business. Unfortunately, large numbers of people around the world currently have difficulty using financial services just because of their location. However, e-residents undergo background checks with the Estonian Police and Border Guard Board and then gain access to an open and transparent EU business environment where they can access all the tools needed to conduct business globally, such as PayPal.
Olya Kostova is a conversion optimization specialist from Odessa, Ukraine. Last year, Olga took on a big European client but had to open an EU company to start working with them. E-residency enabled her to close the deal fast and has opened many other opportunities since then.
Olga and her business partner Mirko Kiefer now run Blackbelt Labs, a location independent agency helping businesses transform through Analytics, Apps and APIs.
The rise of blockchain technology is disrupting an increasing number of industries, as well as providing new opportunities to raise finance through Initial Coin Offerings or ICOs.
This is a broad category of companies, but one thing that many of them have in common is the need to authenticate the online identities of users through a process known as KYC or Know Your Customer. Fortunately, the secure government-backed digital identities offered to e-residents means that they can be onboarded faster and at lower cost.
Peter Ferry cofounded Microsoft business in Scotland and is now the Commercial Director of a new global software business based on blockchain technology called Wallet.Services. All of the board members are now e-residents and so too are many of their customers.
The estcoin proposal generated considerable new interest in e-Residency among blockchain entrepreneurs and the crypto community. There will be an update on estcoin in the near future, but the proposal is already helping lead to even more ideas about how Estonia can be more supportive to blockchain entrepreneurs, particularly those interested in Initial Coin Offerings (ICOs). Watch this space.