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1. Access to information

2. Access to capital

Access to information

Since 2012 Lithuanian startup ecosystem had been expanding exponentially. Lithuania has many competitive advantages including: location between east and west, highly qualified IT talent pool, operating cost advantages, as well as expanding and supportive ecosystem. According to Startup Lithuania, the country has been acting as hotspot for local and regional startups. IT sector expansion facilitated creation of new businesses and workplaces but also increased awareness of Lithuanian IT potential since Lithuanian startups were seen scaling up globally. Startup Lithuania believe that Lithuania has a perfect setting for IT sector to continue exponential expansion. In 2012, Enterprise Lithuania (now - Inovation Agency Lithuania "Versli Lietuva)) organized 25 start-up events. The biggest event organized by Startup Lithuania was Silicon Valley comes to the Baltic’s with more than 1500 participants. Periodically, Startup Lithuania also had hackathons including - App Camps with 500 participants and 60 teams formed, Startup Weekend with 150 people and 20 teams formed which was held in the highest building in the region – Television tower, 150 meters above the ground level. The ecosystem also had numerous niche sector events such as GameJam (100 people, 25 games created). In 2012 there had been rising international interest in the region. Oxygen accelerator from London and Rockstart accelerator from Amsterdam, both held events on the same day and discussed potential expansion opportunities in Vilnius. Locally, there had been StartupHighway accelerator which had had a track record of 10 teams accelerated and added more in May 2013. From the investment side, with the European JEREMIE initiative help Lithuanian Startup ecosystem have had 4 funds operating in Lithuania. These include Practica Capital (21.7M), Business Angel Fund (27.6M), BaltCap (20M) and LitCapital (25M) with a total capitalization of EUR 100M to be invested by 2015. Practica Capital which had operated seed fund of 6M Eur, had made 5 investments locally and made a declaration to do 1 investment per month up to 200k Eur with further 12 investments in the pipeline through 2013. As a result, more funding had been pouring into Lithuanian Startup ecosystem when Baltic Investment Fund had been launched with 200M Eur total capitalization divided across three countries. In addition, other Mega venture capital funds including Acell Partners had made investments in Lithuanian based startups – like GetJar.

2013 can be considered as a breakthrough year for Lithuanian startups. According to Enterprise Lithuania data, 19 investments totaling EUR 16M reached Lithuanian startups in 2013, while investments in 2007-2012 amounted to EUR 34M, of which EUR 31.5M had been invested into GetJar. 42 startups created 224 jobs in Lithuania. Enterprise Lithuania has bounded bridges with Silicon Valley as well as other international key startup destinations to attract further investment and exchange of ideas. In 2013, April 18-19 during biggest tech conference in the region – LOGIN, the Startup Fair was organized for the first time. Best regional startups had an opportunity to pitch to Silicon Valley and European investors.  Also, later in 2013 Startup Lithuania did a 3 stop – Roadshow, where best 20 Lithuanian startups had been visiting Stockholm, London and Tel Aviv to present their companies to international investors, entrepreneurs, business angels and Venture capital funds.

The state investments in startups administered by Enterprise Lithuania amounted to EUR 0.35M in 2013, and said startups paid more than EUR 0.5M into the budget in taxes. Average age of startup founders is 29. The youngest startup founder participating in the survey was 17, and the oldest was 46. Lithuanian Startup Community is expanding and is more and more visible on the global map. LOGIN Startup Fair was large event with 30 VC funds and accelerators and 65 startups from the region and International Startup Day was celebrated.

In terms of investment, 2015 might be the record year for LTstartups.  Vinted, Trafi, Vittamed and TransferGo raised EUR 42M, not to mention several modest injections of up to EUR 0,5M into other companies. In 2015 the start-up ecosystem in Lithuania witnessed new players and initiatives e.g. project of Vilnius Tech Park has been confirmed; GreenGarage, a new maker’s space has been opened; 1st gaming conference GameOn was held with 7000+ participants; Startup Lithuania partnered with CrunchBase; HackerGames, a new series of hackathons were organised.

Enterprise Lithuania organises events to support start-ups to build connections or attract funding from Silicon Valley or European investors. This risk capital market is not well-developed in Lithuania, so the next best option is pursued – the “Road Show” takes youth entrepreneurs to other markets. This is an expensive and resource intense process when all of the promotion, selection, travel and follow-up are considered. However, a small number of entrepreneurs stand to benefit greatly from this opportunity and will likely lead to positive outcomes for Lithuania, such as job creation. Due to the nature of business angel and venture capital investment, high-tech businesses are often favoured excluding non-innovative and agricultural start-ups. This therefore excludes the bulk of youth entrepreneurs.

Access to capital

With regard to access to capital for youth entrepreneurship Lithuania can be regarded as an example of good practice. Access to finance is one of the strongest elements of the youth entrepreneurship support system in Lithuania (OECD, 2015).The Entrepreneurship Promotion Fund (EPF) is the principal method of financing youth entrepreneurship. It also supports other key target groups: unemployed, disabled, young people (under 29 years old) and older people (50 years old or older). The EPF supports new businesses by offering soft loans with government guarantees. The beneficiaries are also able to recover up to 95% of interest paid and invest these recovered funds into further growth.

The Entrepreneurship Promotion Fund (EPF) is a microcredit programme in Lithuania (financed from ESF) managed by INVEGA. The EPF programme contributes to the goals of INVEGA which include the promotion of an entrepreneurial and self-employment culture in Lithuania and sustainable SMEs. EPF provides microloans, up to a maximum of EUR 25 000, to start-up entrepreneurs and the self-employed (those in business for under one year). An unusual and unique feature of the programme is that these microloans are part of a package of complementary support for beneficiaries. This complementary support includes free training, advice and additional financial support (e.g. interest rate subsidies, partial employee subsidies). INVEGA also offers loan guarantees of up to 80% of the value of the loan for those start-up businesses that create jobs and employ staff.

The EPF aims to increase start-up entrepreneurship and self-employment in Lithuania and includes priority groups from disadvantaged and under-represented people in entrepreneurship. Included in priority groups are: young people under 29, older people over 50, people who are disabled and people who are unemployed. The programme has surpasses its targets annually for these disadvantaged groups. Funding for the support package has been achieved through EU ESF monies to create the Holding Fund, which also receives a contribution from the LCCU. ERDF and state funds contribute to the interest rate and the funding of the financial guarantees.

INVEGA selected a consortium of 57 credit unions to allocate LTL 50 million (approximately EUR 14.5 million) to SMEs by 2015. The objective of this financial support was to create 1 000 new jobs by granting 1 200 loans to individuals or SMEs and deliver business training for up to 5 000 people. INVEGA provides two grants to support new entrepreneurs that youth benefit from. First, the Support for the First Job Grant covers 23.3% of wages (up to EUR 115 per month) for enterprises to hire people who are 29 years old or younger into their first job. The total budget for this grant is EUR 9.3 million. This is a youth employment measure but youth entrepreneurs can also benefit from it.

The second is Grants for Entrepreneurship Promotion. This grant is for borrowers under the Entrepreneurship Promotion Fund and can be used to partially cover salaries (up to EUR 7 230.50 by all beneficiaries of the Entrepreneurship Promotion Fund (except social enterprises), but the priority is given to those entrepreneurs who belong to a social priority group, including youth entrepreneurs (29 years old and younger) as well as entrepreneurs starting from unemployment, entrepreneurs with a disability and entrepreneurs over the age of 50; and up to EUR 5 792.40 by all other entrepreneurs)- these entrepreneurs can get bigger amount of money than others for the funding partial payment of salaries.

The Lithuanian Public Employment Service provides two subsidies. First, a targeted subsidy is offered to youth entrepreneurs (or entrepreneurs with a disability) to support business start-up. It provides up to approximately EUR 19 000 and up to 50 hours of training are offered through Enterprise Lithuania, which would be expected to increase their chances of starting a sustainable business. If recipients of this grant close down they may be required to partially or fully repay the grant. If the start-up ceases operations during the first year, 100% of the subsidy must be returned or 80% during the second year and 50% during the third year. The aim of this approach is to motivate the entrepreneurs so that they work to be successful in order to not have to repay the grant. There is merit to this approach, but it is not clear how an entrepreneur that faces disadvantages due to their personal characteristics (i.e. their age or a disability) would be expected to pay back a large sum of money.

Since 2017, the Lithuanian Public Employment Service has been providing self-employment support for young people under the age of 29. The support is intended to cover the one-time costs of establishing a business - setting up a workplace and purchasing equipment. The maximum funding provided by the Lithuanian Public Employment Service is up to 19 thousand euros.

The second subsidy is a small grant that can be used towards covering the costs of a business license, social security contributions or medical insurance. The monthly grant is up to approximately EUR 70, depending on the region. Approximately 4 000 youth entrepreneurs received this subsidy during the first half of 2014.

Despite the availability of these grants for youth entrepreneurs, it is clear that there is a trend towards the use of loans or loan guarantees to support youth entrepreneurs. This is highlighted in the Entrepreneurship Action Plan 2014-2020 which emphasises the role of these instruments under the second objective.

Support is also provided by EPF to entrepreneurs to assist them with preparing the loan application. Each entrepreneur works with a loan manager to complete the required documentation for the loan application. The loan manager presents the application and business plan to the Credit Union Board, who takes the final decision about financing. Another strong point with INVEGA is the speed at which loans are issued. Unsecured loans are issued within 4-6 weeks and secured loans within 8 weeks.

Enterprise Lithuania organises events to support start-ups to build connections or attract funding from Silicon Valley or European investors. Similarly, the “3-Stop Road Show” provides an opportunity to the 20 best Lithuanian start-ups to visit Stockholm, London and Tel Aviv where they present their companies to international investors, entrepreneurs, business angels and venture capital funds. In addition, Enterprise Lithuania organises acceleration events, which aim to promote the quick expansion of high-tech companies.

This risk capital market is not well-developed in Lithuania, so the next best option is pursued – the “Road Show” takes youth entrepreneurs to other markets. This is an expensive and resource-intense process when all of the promotion, selection, travel and follow-up are considered. However, a small number of entrepreneurs stand to benefit greatly from this opportunity and will likely lead to positive outcomes for Lithuania, such as job creation. Due to the nature of business angel and venture capital investment, high-tech businesses are often favoured excluding non-innovative and agricultural start-ups. This therefore excludes the bulk of youth entrepreneurs (OECD, 2015).