Saturday, December 27, 2008

New legislation - new possibilities for startups

I recently did a small research on the implications of the Sarbanes-Oxley 2002 Act on businesses. The general opinion seems to be rather sceptical on the implications of the law. Most of the critics are of the opinion that the costs of additional finance reporting, procedures and IT systems are too big and useless. Many companies have even decided to go from public to private to avoid all the work and costs of becoming SOX compliant.
The proponents of the act claim that by investing into IT systems, better auditing and effective processes the companies become more transparent, easier to manage and besides becoming SOX-compliant they also will be more effective after the upfront work and investment is done.

New legislation is a possibility.
As with SOX much of new legislation opens up possibilities for new business. With SOX the obvious winners were auditing, accounting and IT companies. As studies show it took up to $2 million for every public company to become SOX compliant. Much of the money was spent on consultants, IT systems and additional audit fees. Somebody made that money. :-) So startup-s! Check regularly the legislation put together in Parliaments, Senates etc. Maybe some of it creates new business opportunities.

Build good team spirit.
It is possible to make a transparent company with the help of IT systems and good procedures. There is a big obstacle though. If a company does not have an open and trustworthy working atmosphere then every bit of information becomes an asset. Meaning that the specialists and mid-managers are not exactly motivated to do additional work (reporting) which results in giving away some of their decision power (information). The primary reason is that even though they are honest and work a lot they are afraid. Afraid of the possibility that they lose decision power to upper management who then might just overrule them and make decisions relying on financial numbers only for example. And even with the best information quality there are always some matters that are not accounted for in the IT systems and the decisions made without consulting the people involved are usually not the best ones.
So the first step of making every change in the business, be it becoming SOX compliant or having ISO standards, is to have a good team spirit, give full information to every employee about what is being done and why. And then yes, you can get SOX-compliant and transparent and run a much more effective business.

Tuesday, December 23, 2008

Two ideas on how to support startups

I recently won a "new economic engine" competition held by Eesti Ekspress. The idea of the competition was to find new ideas on how to shape up the Estonian economy. My idea was to introduce an "enterpreneur salary". The idea in a nutshell is that when you start a business, have a valid business plan and agree on some financial results, the state would pay you a "salary" during the first 6 months of starting the business. This would lower significantly the barrier of starting your own business. Of course the whole mechanism should be thoroughly planned to avoid possible maluse. But as "SeedCamp" type of competition price could be one of the possible solutions.

Another thing that the startup blogosphere has not covered very thoroughly is all kinds of business problems - customers not paying, weak contracts, co-founders cheating on each other. It is clear that all these bad things happen and enthusiastic startups are even a better target for cheating than professional businessmen with years of experience.

If you find time then please comment if you know any country or organizations that support their startups with "enterpreneur salary" type of support? How to minimize the risk of fraud for new businesses? Is there any legal advice offered by business incubators? How to minimize the risks for international businesses?

Thursday, December 18, 2008


Estonian Development Fund published recently a survey on what could be the role of IT in Estonian economics. This document most certainly deserves attention. Hopefully the Development Fund will translate it into english also, but here are some points about possible developments.

IT, communication and electronics technology industry itself will probably have a mediocre role in Estonian overall economy and exports. This is mostly due to the fact that at the moment serious ICT technological development demands huge resources and hundreds of specialists that we just don't have. But on the other hand our small size, flexibility and openness is a benefit as we can implement IT technology in other industries fast and they will be more efficient thanks to that. So the primary role of ICT in Estonian econoby will be using it in the most current and effective way.

Most of Estonian IT skills are in the field of finances and IT security. That is due to the fact that banks are our biggest IT buyers. Now we also have the NATO IT security center that most certainly helps to develop good IT security specialists.

In the near future the biggest social changes in Estonia, the Western Europe will be driven by the aging population, Peak Oil and environment (Global Warming). This in turn means that our societies need to rethink healthcare, education, industry, energy production and effectiveness, governing.
The only effective tool that we currently have for coping with these changes is ICT. So the challenge is bringing heavy ICT use into all these sectors.
So according to the study in Estonia we must change the ICT sectors priorities and build up strong skills besides finance and security also in eHealth, e-education, e-industry, e-energy and e-governing.

The next steps.
Development fund will finish the survey and publish it. The next concrete step will be that the our Ministry of Economics will have a 100 MEEK fund for giving the IT sector additional boost and they will use this survey as an input for the way of using this investment. The best option for spending this money is hiring some 6 world-class IT professors for a five year period for Tartu University and Tallinn Technical University. This will make the IT faculties more popular and also give a better and more openminded education to the students. I hope this will happen.

Wednesday, December 10, 2008

Who helps you get your startup started in Estonia.

So you have an idea and want to start your own business - an internet or a tech startup. If you want to do it in Estonia or nearby you can use the following help and contacts.

1. If you just have an idea you can participate in the "Ajujaht" competition. This is a yearly competition with serious prise money (1 MEEK fund in 2008) and really experienced judges and mentors. You can get the first advise on your idea and if you get to the finalists this proves that your idea is worth something.

2. The post-competition training programs and contact events of Ajujaht help you develop your business and idea further.

3. After that you can go to the Tallinn business incubator or Tehnopol. There you get also startup mentoring, contacts and affordable office space. They also have useful training programs. With their help you can also get the Tallinn municipalitis starting business support (100 000 EEK) or (50 000 outside Tallinn).

4. At any stage you can contact MicroLink incubator. We support startups with the technical solution (the web application, server hosting etc.) We charge for it, as our employees want their salary, but for startups we have a really special pricing! Starting from 10 euros/month for the first 6 months. Read more on our website:

5. Contact "Connect Estonia". They can help you with a springboard event. They have a network of specialists and investors. Good ideas do get advise and investment with their help!

6. Take a day or two and go through all the support programs of EAS. Visit their office and with the help of their consultants find a support program for your technical development or export support.

7. You also need internet marketing! Contact Altex, Dreamgrow or Peep Laja for that.

8. Cheap hardware and freeware system software you can get from Sun Startup Essentials program with our help.

Come to Open Coffee! The startups, their supporters and just interesting people gather on every first Thursday of the month at Mercado. Just show up, no fee, no registration. Sit to our table and tell us what your idea is about. Follow information on Facebook.

Communication. List your startup on ArcticIndex. Contact me or Arctic or to write about your startup. Create a blog and a Twitter account.