Startup Wise Guys (SWG) is a B2B startup accelerator founded in 2012 in Estonia. The company has invested in more than 220 early stage startups with founders from more than 40 countries. They are the most experienced accelerator in the CEE and CIS region with 24 programs up to date. Wise Guys started their first sustainability-focused program in 2020, and we talked to Alexandra Balkova, Wise Guys’ Head of Portfolio and former Sustainability Program Managing Director about her experiences and future plans.
How did Startup Wise Guys go from humble, Estonian roots to one of Europe’s leading startup accelerators in less than 10 years?
Startup Wise Guys was founded in 2012. Initially the company started in Estonia as an international team of entrepreneurs who wanted to give back to the startup community by helping other young entrepreneurs. In the first four years it was a small, local company, but even from the beginning, we were committed to keeping an international perspective. Back then we used to have 1-2 programs per year investing in 10-20 startups, and the startups and mentors were from all over the world.
Then from 2016, we were joined by a new CEO who kicked off an era of expansion, essentially turning Startup Wise Guys into one of the largest accelerators in terms of portfolio size, not only in the region, but for all of Europe. First we expanded to Latvia and Lithuania, and last year we also expanded to Italy. We also have a number of regional projects in the Balkans, in Ukraine, in the Nordics and even in Africa. By now we have a portfolio of 220 companies and, on average, we invest in 40-50 companies per year. Sometimes even more.
How do you select the countries of your expansion?
When it comes to expansion, our strategy is to focus on underserved markets with big potential.
We tend to avoid the large markets, because they are usually already saturated and have everything they need.
That meant Central and Eastern Europe were some of the focus areas. Ukraine is another good example where we saw a lot of startups but a lack of ecosystem facilitators. There was no governmental support or accelerators – at least when we arrived.
Italy is another interesting example, because, even though it’s one of the largest European economies, the startup ecosystem has a lot of catching up to do. SWG is bringing a lot of new energy and a truly global focus to that ecosystem and it is exciting to be part of it.
Can you describe why you decided to start with sustainability programs and what your first experiences are?
The first sustainability program was launched in November 2020, but sustainability was in our plans long before that. We started by slowly introducing sustainability within Startup Wise Guys’ own operations. For example, we implemented a plastic challenge for our entire staff last winter, where we encouraged our entire team to avoid buying any single-use plastic products. This small change turned out to be quite difficult, but these team-wide initiatives make a real long-term impact. We wanted to get a feel for the mindset and challenges ourselves before kicking off the first sustainability program batch.
We are motivated to start working with startups who have the same mindset when it comes to sustainability. We have the knowledge to help startups to become successful businesses, and we felt it was time to apply that knowledge to support startups that have sustainability as the focus.
Our first pre-accelerator program that focused on sustainability started in May 2020, purely online. This grew out of a “Hack the Crisis” movement that was starting at the beginning of the first strong lockdown. By November we launched the main program, for which we selected 10 startups for investment. We are extremely proud of this achievement.
What do these startups do and where are they from?
The main principle guiding all of our programs is diversity. We have a rule that there should be no more than 2-3 startups from any country. That was also the case for this program, in which we have 10 startups representing 12 nationalities. The founders are from Estonia, Latvia, Ukraine, Hungary, the US, North Macedonia, Romania, Turkey, Nigeria, India, Iran, and Germany.
Regarding the verticals they operate in, we have fintech, cleantech, agritech, waste management productivity, retail and education. We’ve supported the potential of sustainable ideas in many different areas. Originally, one of the selected startups, VideoCV, did not have sustainability built into its core but after a few months of business impact coaching we helped the startup to transition into sustainability as well.
To give a couple concrete examples, we are working with a startup called Ringy that is creating marketplaces and incentives for recycling electronic devices, which, with the whole idea of planned obsolescence and this never-ending consumption of new electronics is a problem with a major carbon footprint. We are also supporting a startup called Effa that is making eco-friendly toothbrushes. When you start to think of how many toothbrushes are used once and thrown out in the hotel industry for example, this is also a very exciting new company.
What did you as an accelerator learn from this process?
This process certainly expanded our understanding of startup support and investment. We learned that we can offer sustainability coaching to all of our portfolio startups. Even if they do not have sustainability as a primary focus.
Also, after the first sustainability program we think that sustainability cannot be vertical. It has to be part of everything we do with startups.
We were definitely lacking a few modules in our other programs. For example a simple guidance for startups who do not know how sustainability is related to their activities and how they can embed it.
What are your further plans based on these experiences?
In some ways, we are all coming too late to the sustainability game. We should all be feeling a rising sense of urgency when it comes to addressing social or environmental problems. At the same time, it’s better late than never. We are doubling down on our commitment to sustainability across all of our accelerator programs. It’s something that we need to do as an organization to fulfill our ethical responsibility, but it’s also just good business for all founders and startups moving forward.
We are looking into our own sustainability agenda and how we can expand our impact the most, now and in the future. There are many things to be done on a global scale but we will be starting with ourselves and expanding from there. Our latest partnership with Danish proFounders on delivering a program focused on the systemic food problems in the world is just one example of new initiatives. Besides this we are exploring how we can help our portfolio, coming and current, through educational and action-based content. No one really has firm answers here so our journey will be partly experimental. It is an exciting journey and due to our network and large portfolio of startups we see that we really will be able to influence change that matters.
What is your definition for sustainability?
We had a broad definition initially and we were learning by doing. Initially we chose the UN’s SDGs [Sustainable Development Goals] and we included them in the scouting criteria. But later we stopped looking for specific SDGs and focusing more on the potential impact. We are working with extremely early-stage startups and often they do not have an understanding of the exact impact they can make on UN SDGs yet.
And what is your success criteria as an accelerator?
We are a traditional, equity based fund, so for us, the success criteria is how the startup develops in terms of business performance. Impact accelerators are different. But the startups that we select have to demonstrate the potential to be successful in the first place.
However, in this program, each of our startups has an extra boost in addition to the business criteria. They have to develop the sustainability angle of their activity with measurements and success criteria, and turn it into a central component.
Another aspect of sustainability is that even before this program, from day one, we are not looking for unicorns but rather startups that do not need to burn a huge amount of money and can live longer. For us the survival rate among companies is 77%, which is quite high compared to industry standard. In other words, we are also looking for financially sustainable startups. In the long-term, sustainability-focused startups will not succeed unless they survive financially.
So far, we have had tremendous success, with three out of the first ten startups in our Sustainability Program having already raised €1.2 million – before even graduating from the program!
Is the CEE region different or unique, if we are speaking about sustainable startups?
One thing that is important to understand is that, across the globe, it is generally the wealthier countries where sustainability as a mindset has managed to become more mainstream. That means that, when compared to Western Europe, Eastern Europe lags behind. There are regions like the Nordics where societies have become very conscious of the environment and sustainable practices thanks to decades of government policy and education.
For many countries in CEE, sustainability as a concept is relatively new, and the reality of the 1990s meant that most countries could not afford to prioritize sustainability. Like everything else in society, this has had an impact on the type of startups coming out of the region. The ecosystems have also not been well-equipped until now. However, we see this changing; slowly, we see how EU membership and economic growth have given way to taking sustainability more seriously. There is a boom in sustainability-focused startups across Europe in general and we see this in Eastern Europe as well. One of the reasons for us to focus on sustainability is that we thought this change was not happening fast enough.
We are strong believers that countries in the CEE region have a special opportunity to see startups and innovative businesses play a big role in their economies, and undoubtedly sustainability will play a role for the majority of them.
How can it be changed?
I think education and access to education is the answer. Right now, people are not aware enough – we often simply do not think about it.
Even in our own operation we have to continue with sustainability education on top of the existing business education – both online and in our regular programs – for all portfolio companies and on all possible levels. It shouldn’t be an afterthought or something considered a luxury.
However, I strongly believe we are on the right path. Sustainability is an increasingly important component for businesses, and startups have the potential to take the lead. Ultimately, the time will come when our culture will see sustainability as something that is expected and the norm.