Vilnius Tech Offers a Key to Resilience In Uncertain Times
Silicon Valley-based tech giants such as Twitter, Meta and Snapchat have announced massive layoffs triggered by attempts at cost reduction and concerns about looming crisis. Meanwhile in Vilnius, the TechFusion ecosystem is growing with no plans to slow down while leading companies are increasingly seeking professionals for hire. There are a couple of factors why Vilnius tech companies react so differently compared to the world’s big players, among which different growth philosophy and independence from investment fluctuations may be key elements.
December 8, 2022. Recently Meta Platforms Inc. has layed off 11,000 workers – the first reduction of such scale in company’s history, and Meta is only one of many tech giants to do so. But while a significant number of tech companies across the Atlantic deal with slowing growth, high inflation and rising interest rates by downsizing, some tech companies based in the capital of Lithuania witness completely opposite trends.
The official development agency of the capital Go Vilnius even launched an initiative to attract digital nomads by promoting opportunities to get moving cost reimbursement. Vilnius doesn't stop there and after a LinkedIn post has done some guerrilla marketing in London near the Meta office and central London.
A quick glance at statistics reveals that Vilnius decision isn’t based on optimism but rather on hard data. The so-called Vilnius TechFusion ecosystem encompassing ICT, fintech, biotech and laser industries shows no signs of slowing down. Quite the opposite, according to Inga Langaitė, Head of Lithuanian Startups Association.
“Lithuania’s startup sector is growing rapidly and strengthening its value. In the third quarter of this year, the 700 startups active in Lithuania paid EUR 74.4 million in taxes, 45% more than in the same period last year. The sector's average salary grew by a fifth to €3,200, and the total number of employees in the ecosystem has already reached 16,400,” she said.
Investors choose Vilnius mainly for its talented professionals, and the capital of Lithuania boasts lots. Nevertheless, Vilnius still experiences a high demand in tech specialists due to growth: the Lithuanian unicorns Vinted and Nord Security alone are currently looking for more than 350 employees, while the total number of vacancies in the country's most successful startups exceeds several hundred. Today, the most sought employees in the market are not only those with technical skills, but programmers, testers, data analysts, and even sales, marketing or human resources specialists.
Vilnius TechFusion ecosystem — a lion in winter
Currently the situation in the financial markets is tense, and this has a high and direct impact on startups that depend on investment as they try to attract investors with cost-cutting and layoffs. However, while cautious mood in Lithuania is palpable, the reaction is different. Firstly, many large startups in Lithuania expand due to profits and not due to direct investments, so their revenues depend on customer satisfaction. Secondly, Lithuanian startups have never been spoiled by easy access to capital and investment.
"Growth without external investment is an important part of the Lithuanian startup ecosystem", says Karina Dirvonskienė, human resources executive at the leading Lithuanian digital security and privacy startup Nord Security. "We do believe that we could have even more official unicorns in Lithuania, although they prefer growing in a more sustainable way and focus on profit in the early stages. It’s the more sustainable business approach that allows to withstand unfavorable economic circumstances." Vilnius tech ecosystem proves that businesses are able to adapt and accumulate actual value even during a period of slowdown.
“Yes, we are facing more cautious investment planning, slower growth and hiring. But when you live with “winter” in mind, you follow a radically different business model. You are not thinking about beastly growth at any cost, but rather about payback, sustainability, independence and residual value. Having followed the American business model and been dependent on investment, some of the world's startups will have to learn to turn back to European or even Lithuanian conservatism,” Inga Langaitė added.
Gerda Sakalauskaitė, managing director of Lithuanian venture capital association, agrees that there will be good opportunities for growth in the times to come: “In many regions, startups were overvalued. It hasn’t been the case in Lithuania yet, so we have room for manoeuvre. In addition, our local VC market has successfully fundraised new funds for the upcoming period, so we have resources to support local startups, especially in the early stage”.
Principles of conservatism and sustainability have ensured that the growth of Vilnius TechFusion hasn’t slowed down even in 2022, while the bigger players started losing profits. According to Ilona Bernotaitė, human resources executive at digital health product company Kilo Health, “The growth of the business itself has not slowed down this year, because we have put the right processes in place and done our homework before taking the next step in the growth of the team.”
Kilo Health is second in the Financial Times ranking of the fastest-growing companies in Europe, and now feels ready to face 2023 with confidence and expects to use the layoff wave around the world as a possibility to attract new talents. It isn't surprising that the company's growth-facilitating know-how found its way into other companies, as Vilnius has united various players in its ecosystem under “Vilnius TechFusion” to pursue growth, exchange knowledge and foster closer ties between various tech companies.
The project aims to further the exchange of know-how, the collaboration of companies, and the discovery of visionary technological solutions. It plans to achieve this by uniting IT, gaming, financial, laser and biotechnology developers, companies, and investors to work cross-sectorally and reiterate to the world that Vilnius is the home of technology and progress. The current situation just proves that the fusion pays off — especially in uncertain times.
Vilnius TechFusion — open to opinions and initiatives
Vinted and Nord Security, the unicorns that have attracted millions of dollars in investment, have already demonstrated that the professionals working in the Lithuanian capital meet the needs of the international market. Now the Vilnius unicorns face up to a new challenge — a possibility to prove that Vilnius meets the demands of an increasing number of talents coming from all over the world.
“There is no doubt that Vilnius has a lot of advantages compared to the big megacities — it is a very clean and green city with convenient transport links, and the conditions for doing business are improving. Another important difference is the work culture,” Ilona Bernotaitė maintained. “A lot of team members leave companies because of the highly toxic atmosphere. The culture of Lithuanian startups is friendly, open to opinions and talent initiatives. We see this as one of the biggest advantages.”
Vilnius also promotes a government initiative to compensate €3,000 to arriving talents in order to cover relocation costs and €5,000 to companies that employ talents from around the world, which makes it even easier to take a chance on Vilnius. But even without such incentives, most Vilnius tech companies have already started designing their recruitment strategies based on international talent themselves.
According to Toma Dile, executive director of a solar photovoltaic system design tool startup PVcase, “Our company currently has 130 employees internationally. In just one year we have doubled in size. And we do not plan to stop in 2023 — we have a goal of expanding our team to 250 employees. We will be hiring mainly in Lithuania, Spain, Germany and the USA, and this is a very important part of our recruitment strategy — we already have and will be actively recruiting abroad.” Meanwhile, Nord Security plans to increase its headcount by 40%.
Startups and unicorns that emerge from these difficult times are disrupting traditional markets, changing habits, and at the same time are creating global trends and radically new value propositions. The lessons learnt and the experience gained can help to absorb the challenges ahead. “The winners are those that can respond to change flexibly, plan responsibly, manage costs wisely and stick together,” said Inga Romanovskienė, Director at Go Vilnius. “Such startups can turn a crisis into an opportunity rather than a verdict. Professionals are invited to discover those opportunities in Vilnius.”