Scots in Estonia

Scots in Estonia

Yes, Estonian tartan.

In 2005, the Estonian tartan was commissioned to mark historic and new links of Scotland and Estonia. The tartan was designed by the Perth-based House of Edgar. The design incorporates the blue, black and white of the Estonian flag, plus gold and red from the Lion Rampant.

Scots and Estonians both regularly wear the tartan on kilts to formal events. Iain Lawson and John Ross were introduced to Her Majesty the Queen while wearing the Estonian national tartan.

Recently, the entire stock of Estonian tartan fabric was purchased by an Estonian buyer, and production of new inventory is underway.

The ScotlandEstonia Connection

“E

ighteenth and 19th century Narva boasted a substantial Scottish community with approximately 200 families who dealt with Scottish-Baltic trade.

The Scots brought their families in summer months to the spa town of Narva, and toward the end of summer they would return to Scotland.

But the relationship goes back further. After the wars of independence in Scotland in the early 14th century there was famine. Estonian crops kept the population of Scotland alive.

East coast ports in Scotland are famous for trading with Baltic companies.

Estonia’s Honorary Consul in Scotland, Iain Lawson, always tells Scottish business people to not be surprised when Estonians know more about historical trading links than they do.

‘It’s very easy for the two cultures to get together again and rebuild those links,’ says Lawson.”

These are the stories of some who have rebuilt those links.

Exit Smiling

Clydebank’s Iain Lawson has built the market’s largest pest control businesses in both the Scotland and Estonia. And it’s a case study for mixing business and beer.

I

t all started when they shut off the beer. “It’s a common practice used to get football fans to buy spirits,” says Iain Lawson, “the beer just suddenly runs out.”

It was 1993, and Lawson was visiting Tallinn to watch Scotland play Estonia in a FIFA qualifier. “I was part of a group of six entrepreneur friends. The group’s rule was that if none of us had never visited a country where Scotland was playing, we’d go. And that’s how we arrived in Estonia.”

“We were in a night club on the second night when they shut off the beer. I saw a gent speak to the barman and the beer came back on. I figured that chap either owned the nightclub or he was someone important in Estonia. I went to thank him. Niitenberg was his name.

Turned out he was the economic adviser to the prime minister of Estonia.”

Niitenberg pulled up a chair at Lawson’s group’s table, and by the end of the evening he’d invited the group to the Scottish Club for the following evening.

“At the time,” says Lawson, “the Estonians were short of business contacts. They were trying to source stationery products and were buying them expensively from Italy. I offered to try to source some stuff for them.

I found the products at better prices, which resulted in several container loads of product to Estonia. And that was the start of it.”

From stationery to pest control

Lawson didn’t yet pack his bags and move to Estonia. His business was in Scotland, where he’d set up Pest Protection Services in 1981, and the company was on its way to becoming the largest pest control company in Scotland.

Previously, Lawson had worked in banking, sales, and the stationery

business, but he’d switched to the pest control business, working for Rentokil in the 1970s, when he needed to earn more money.

But in Estonia he had not yet entered the pest control business and was dabbling in other opportunities. “We rented some shops on Viru street, sold cosmetics, that sort of thing. That business we sold to Swedish company.”

In the early 1990s, the pest control business was run by the Estonian state.

But changing food laws and Estonia’s desire to export products west made state ownership inconvenient. “The state saw that it would aid Estonian exports across the board if larger companies met the European standards for hygiene,” says Lawson.

“In the west,” says Lawson, “the local council inspects food hygiene but the private sector carries out the work.

In Estonia, at that time, the state did everything – created legislation and inspected its own work. It was a huge conflict of interest.”

Lawson negotiated three years in order to take over the pest control business from the state. “My argument was along the lines of ‘if you want to do it under the umbrella under the state, nobody will believe it’s done to the proper standard.’”

His negotiations were at last successful.

On a Friday in 1998, the state-run business closed. The following Monday it re-opened under Lawson.

“Estonia’s exports soared after 1998.

I can’t say we were wholly responsible,” smiles Lawson, “but we helped create confidence.”

An exit never in the plan

Lawson’s theory on entering foreign markets is to partner with the best local talent you can find. He recruited Dr. Toomas Trei, then head of the health protection board, to join his firm as managing director.

“You ideally want to identify local talent and then tie up the western capital alongside the local knowledge,” says Lawson. “That’s a pretty successful formula in any country.”

Lawson was favorably impressed by the ambition and work ethic of Estonians, but he had to make sure he could keep them. “There’s significant training needed in pest control,” he says. “It takes a full year before an employee is contributing.” In the uncertain environment just after independence, Lawson knew he had to ensure employee loyalty.

“For the employees of the state pest control company who joined me on Monday, the first thing I did was to double their wages,” he says. “They first found that hard to believe, but I also gave them a system where if they put the work in, they got a good slice of the value-added. I created a situation for them where they could see directly the benefit of working in the business. That was very successful formula. Nobody ever left the company.”

With Lawson’s guidance (he spent one

week per month in Estonia) and Trei’s local leadership, PPS quickly expanded to cover the whole country. Nine years later Rentokil came calling.

Serendipitous outcomes

Lawson never intended to sell the company. “Business was doing very well,” he says. “Profit and turnover grew year on year.” But Rentokil had done their research and they knew Lawson as a competitor in the UK. They made Lawson an offer he couldn’t refuse.

Due to his agreement with Rentokil, Lawson cannot disclose the transaction’s financials. “I can tell you I received a much higher ratio than would be normal in the industry.

But I think this is quite common with multinationals. They often enter new markets through acquisitions five or 10 years down the line, rather than enter a market from scratch.”

“What’s important from Estonia’s point of view,” he says, “is that it demonstrates absolutely clearly to western investors that a stable political system allows you to plan, build a business from scratch and exit 10 years later with a substantial amount of money.”

“I’d like to tell you I planned it all,” Lawson laughs, “that we sought out Estonia for certain criteria.”

But despite lack of an exit strategy from the very beginning, Lawson is happy to admit that the result is not a bad outcome for a story that began with beer being shut off in a bar.

Iain Lawson’s Other Hat: Estonia’s Honorary Consul in Scotland

“The Scottish parliament began in 1999 and Estonia had no representative. They approached me in 2000. I’d always been an advocate of the country in business circles. My own background was that I was a very senior member of the government political party in Scotland. In charge of admin and fund raising. I’d been my party’s spokesman in trade and industry.

“There were a large number of opportunities. Since I became Honorary Consul, I’ve introduced about 400 Scottish companies to Estonia and about 90 Estonian companies to Scotland.

“One of the big attractions for Scotish companies here is the pure trading.

There are no language difficulties involved. Estonia is a new economy and the companies are relatively small. They’re looking to Scandinavia and Finland as first ports of call. Not many made it into large markets yet like the UK, Ireland, or France.

Those markets are where the Scots are very experienced and have deep penetration.

“It’d be quite a clever thing for small and medium sized Scottish and Estonian companies to get together and do cooperative deals. Take each other’s products and market and sell them in their own regions. I see a big opportunity there.

-Iain Lawson

Contract Manufacturing: IPA’s Upward Ride

Dispatched to Estonia by an international electronics conglomerate, John Ross chose to stay and become an entrepreneur. He hasn’t looked back since.

I

n 1996 John Ross arrived in Estonia to set up a factory for AMP, the world’s largest wire connector company. Ross had enjoyed a 17-year career with the company, and had not entered Estonia with plans in mind to become entrepreneur.

For three years, he ran two successful factories in Estonia, until AMP was sold to the electronics giant Tyco. Ross and three of his Estonian managers decided to strike out on their own.

“Bums on seats” is how Ross characterizes the simplicity of the early operation. “I took 30,000 euros in redundancy money and we set up an assembly operation.” Interconnect Product Assembly was born.

Ross’s modest investment in 1999 generated almost 1.5 million euros in turnover just one year later. Today, the company manufactures a variety of electro-mechanical solutions, from simple cable harnesses to complex fully functional assemblies. It offers design, prototyping, serial production, supply chain management, and hub sourcing solutions for four fields: Railway and transportation, energy

and infrastructure, industrial and commercial, and telecommunication.

“We’ll grow 20 percent this year, and we grew 45 percent last year,” notes Ross. IPA’s 2011 budgeted turnover is 12.5 million euros.

IPA was quick to move forward from the “bums on seats” model. “Over time we increased complexity. We did higher-value work,” Ross says. “We’ve grown steadily but haven’t increased work force.” IPA employs around 170 in its factory just one kilometer from the Tallinn airport.

Ninety-eight percent of IPA’s business is exported to customers in the UK, Sweden, Denmark, Belgium, Germany, Slovakia, Spain, Italy, Finland, the USA and even China. Clients include international names such as Ericsson, Siemens, Bombardier, and Vestas Wind Turbines, the latter of which may soon account for 35-40 percent of IPA’s business, which borders on Ross’s comfort point.

“We’ve consciously diversified,” he says.

“We focus on three to four industries and serve three to four clients in each industry. That way, no matter who is having difficulty we can do okay.”

Why Estonia?

Ross’s secret to doing okay has been sticking to what he knows in order to exploit opportunities in the market. In addition to knowing manufacturing, he seems to know something about Estonia.

He is sold on the country for the very same reasons that his former employer sent him here 15 years ago. “AMP did an appraisal of different economies in eastern Europe and Estonia came out on top.”

Then and now, Ross credits Estonia’s political stability and low amount of corruption. “The economics of the country were attractive. Inflation was predictable. Local and foreign companies competed on a level playing field. When you move your facility to a new country you need something that’s stable.”

“And Enterprise Estonia, the nation’s investment and trade agency, was making a huge effort to attract foreign investors,” adds Ross. “They gave you everything apart from money — no tax breaks, but they assisted you set up your company, make contacts, recruit employees. It was great.”

Location, Location, Location

In 2006, Ross and his Estonian partners expanded their operations and moved to a new 5,600-square-meter facility in Rae, one kilometer from Tallinn’s airport.

Prince Philip, Duke of Edinburgh, was on hand for the factory opening.

Ross admits that in most markets it isn’t normal to open a factory so close to the capital city (IPA is less than five kilometers from the city center), but it’s one of the pleasant oddities of business life in Tallinn.

“It’s affordable, even advantageous to have a factory in Tallinn,” says Ross.

“Estonian engineers move to Tallinn because that’s where the jobs are. And most of our customers can fly in and out on the same day. Most of our partner companies are within 15 or 20 minutes of the building.”

“You couldn’t do it so much in other countries,” he says. “The costs weren’t much different in Tallinn — maybe only 10 percent higher to build our factory here versus the more remote countryside.”

Stability Throughout

Though Ross’s story in part resembles a manufacturing fairy tale, it is not one completely devoid of difficulty.

The company struggled to maintain continuity and stability through the boom economy — a period in Estonia where businesses, in order to attract employees, were offering salaries well over what the market could support in the longer term.

“2007 and 2008 was difficult a period,” says Ross. “We resisted paying high salaries to attract people. We just knew it wasn’t sustainable. We lost employees. But we found new people and developed them. The companies who threw money at people aren’t

here anymore. And we maintained profitability throughout. There never has been a period we didn’t make money.”

In Ross’s opinion, the onset of economic gravity, the recession, has only benefitted the market as a whole.

“From 2000 to 2007 there was the expectation that salaries would increase 10 to 20 percent per year,” he says.

“People assumed it would continue, but the crisis gave everybody a fright.

It created an adjustment, and now people understand that things weren’t sustainable.”

Taking Care of Your Own

Ross says Estonia’s small size coupled with the changing nature of the products he manufactures “encourages you to look after your employees.” And he is after a specific type of individual, someone “flexible and dynamic.”

Media accounts occasionally draw attention to the lower productivity of Estonian labor, which Ross estimates to be about 70 percent of German or UK labor. “Estonia hasn’t had the same history of pressure on manufacturing,” he says.

As Estonia feels the same pressure, productivity differences are shrinking, but Ross says that the labor cost difference still makes setting up in the country very attractive.

“However, the biggest advantage,” he says, “is the zero tax on retained profits.

That’s what has helped me grow so

quickly. I rolled over profits to feed growth. I don’t know other countries which offer that opportunity.”

Continued Investment

Ross continues to invest in Estonia.

Eight months ago, IPA opened a machining operation shop just down the road in Jüri.

“We were buying a lot of machine parts from different companies and felt we were being let down in terms of delivery and responsiveness,” says Ross. “We thought if we could control that ourselves we could make it more manageable.”

And they have. Although the new business was mainly set up to service the needs of IPA, its response time of its 27-person team has been so good that local subcontractors and OEMs are now turning to them with their own orders.

The plant opened in January, and by July the operation was in the black.

“I’m chuffed about it,” Ross smiles. “It grew faster than we expected. Proof that I still think it’s a great place to do business.”

“Moving to Estonia,” he adds, “was the best thing that ever happened to me.

I’ve had twice the life my friends have had.”

Empteezy Does It

Estonia as an ideal hub: Springboarding to regional environmental markets.

“W

e probably started in Estonia two years too early, but it’s much better to be early in a market than late,” says Peter Cheney, managing director and half-owner of Tallinnbased Empteezy Baltic OÜ.

Cheney has been working since late 2004 to build up this regional distribution center of Empteezy Ltd., a Scottish maker of engineered storage and waste handling solutions.

The company offers equipment and supplies designed to avoid spillage of hazardous liquids or, if an accident does occur, to minimize harm to people and the environment and make cleaning up easy. Just as Hong Kong is Empteezy’s Asian distribution base and sales in the Middle East are dealt with from United Arab Emirates, so Estonia has proved an ideal hub for the entire Nordic and Baltic region, according to Cheney.

The Glasgow native says it was not market research that led him to this corner of Northeastern Europe, but rather a passion for football. Scotland was playing Estonia, and Cheney made the trip to Tallinn to cheer on Scotland with the Tartan Army. That was May of 2004.

“It was one of the few countries I’ve visited where you just feel completely relaxed and safe,” he recalls. Adding to the good first impression were the friendly Estonians he met (“who all seemed to speak at least six languages”) and a corner pub that served good Scottish beer. Having also noted the country’s solid transport infrastructure and attractive geographical location, he soon came back to set up shop.

Getting started took a while, partly because of the natural need to learn to the ways of bureaucrats and business people here, but mainly because back in 2004 the local market for environmental safety products was still just beginning to emerge. “We made a lot of inquiries, but people weren’t doing anything about environmental protection at the time because a lot of the rules and regulations weren’t in place yet. But over time they’ve

brought in more and more legislation that’s making companies comply with environmental standards, which of course has increased demand for our products.”

Empteezy’s Baltic unit now accounts for a modest but ever increasing portion of the group’s global annual turnover of some 35-40 million euros.

Repeat sales of “consumable” products – mostly industrial absorbent materials and safety kits – ensure a steady base of revenue, while more occasional sales of high-value products, like steel drum handling equipment and storage facilities, add what Cheney calls “the icing on the cake.” Customer profiles vary by country. In Estonia, Latvia and Lithuania, sales are largely to the oil transport and storage companies that dot the Baltic region, plus chemical industries. In Norway the main buyers are oil field suppliers, in Sweden it is the automotive industry, and in Finland producers of machinery and steel.

Lithuania’s Ignalina Nuclear Power Plant was a big client for a few years, but has since been decommissioned.

“Every company faces some turnover among clients, what’s important is to more than offset any loss with new business,” Cheney notes. And in fact, Empteezy recently supplied the Port of Muuga with nearly a kilometer of oil spill barriers plus storage and quick deployment systems, enabling Estonia’s largest cargo port to be completely closed off within 30 minutes of any spill.

And railway companies have started buying products in large quantities.

Further expansion will probably require

hiring new staff over the coming year and signing up some additional local distributors.

In terms of business strategy for the Nordic-Baltic region, Cheney stands firm on Empteezy’s global dedication to outstanding customer service, including trustworthy advice and information.

“We’ve succeeded to impress people with our rapid responses to inquiries, highly accurate quotations and speedy delivery,” he says.

Empteezy staff go out of their way to help potential customers assess their own specific needs, choose the right products from among the many variations offered, then install, train and maintain. As an extreme example, a client recently needed equipment but lacked office staff to do the related paperwork, “so we even prepared all the documents for them,” Cheney recalls. “We’re interested in longterm relationships and being a trusted source of information and advice. We pass on potential business ties that aren’t based on personal respect and integrity. It can take time here to get to the right people, but once you do get the meeting they tend to listen

up. Estonians have got a thirst for knowledge, and that helps. And it’s a small country where everybody knows everyone, and when you make one customer happy, they recommend you to others. That helps, too.”

But what really jump started Empteezy’s Baltic business was an initiative to educate the developing local market through presentations and live demonstrations of environmental protection products conducted by international specialists at the Port of Muuga. The invitation-only events, now held every second year in line with the industry’s product innovation and renewal cycle, attract representatives of dozens of companies from several countries. Officials from the Estonian government’s environmental agency joined the last of these “port demos” and later sent a letter of thanks and appreciation for the initiative. Like users, regulators too rarely have the chance to see such equipment in action.

“Environmental protection involves a lot of high-value products that don’t get used very often. There’s a tendency to take short cuts, to buy something that may not be adequate to your needs, and to just let it sit there. And then when it has to be used, it’s like ’uh oh, we don’t know how to work this’ or ’this is not exactly what we need.’

And by that time it’s too late. At the port demos we show how the products work and give people a chance to talk with the specialists. After that they feel more comfortable when it comes to making purchases.”

Asked whether, after seven years of experience, he would choose Estonia again today as a base of operations in Northeastern Europe, Cheney does not hesitate: “Definitely. Estonia itself is a very small market, but it’s an ideal base to reach many other countries: Finland, Latvia, Lithuania, Sweden, Denmark, Norway, even Germany. And there are some great hubs, transport-wise, as well.”

He also feels comfortable as a Scotsman residing in Estonia, which he characterizes as “a very relaxed place,” though “food was a bit of an issue at first.” Proud of his roots, he enjoys an occasional Scottish beer, and loses no chance to correct people who think everyone from the U.K. is an Englishman. He still finds it strange how people here celebrate Christmas the night before, on Christmas Eve. But Cheney now has an Estonian wife – who happens to speak six languages, works with him at Empteezy Baltic, and is willing to celebrate Christmas twice – once the night before and once on the day itself.

He also still loves football, attending nearly all the Scotland games. “Getting a flight from Scotland to an away match can be difficult, and the airlines tend to put the prices up. Coming from Estonia, though, I always get my flights much cheaper and with less hassle than anybody else,” he says with a laugh.

“That’s one of the funny benefits of living in Estonia.”

One Man and a Market

Robert Weir launched a luxury hobby business in a recession economy in a country lacking any tradition of golf. His timing couldn’t have been worse, but his results have been surprising.

“I

t’s my parents’ fault,” says Robert Weir, explaining his passion for An introduction to golf. Weir picked up his first golf Estonia club at age seven, a cut down seven-iron Not uncommon with foreigners, Weir’s given him by his father. “I learned the introduction to Estonia began with a game on the football field outside the popular Old Town bar. But this one was house. My parents gave me a handful owned by his brother. of Dunlop 65i’s and watched me from the window. I’d shoot at goalposts and “I came in 1998 for a year to help learn to shape shots.” my brother who had opened Ruby Tuesday’s. My brother needed someone Weir showed promise at golf, but he could trust. I was 21 years old, drifted away to other sports. “I always I worked in the bar and enjoyed life.” kept coming back to golf,” he says.

His most recent return was the most He also met his future wife, Annika. dramatic, turning pro in 2010 as a qualified coach.

Weir, however, was without a proper work visa and, like many foreigners at That he might contribute Estonia’s the time, would leave for Finland to golfing culture first occurred to him have his passport stamped every few in 2005, when he took his Estonian months in order to remain legal. brother-in-law to watch Tiger Woods win the British Open at St Andrew’s.

Well, mostly legal. “One time the border guard in Estonia had a good “Andres and I watched Tiger Woods look through my passport and didn’t let win the British Open by five strokes me in.” Weir had to return to Scotland. over Colin Montgomerie. We stood Annika, not yet his wife, packed his in the middle of the 18th fairway and belongings and sent them to Scotland. watched Tiger sink his final putt to win She soon followed. for the second time in Scotland. For me that signaled a turning point in my “We lived in Scotland 11 years,” says attitude towards golf.”

Weir. “Annika speaks with a Scottish accent.”

When the couple decided to start a family, they decided to return to Estonia.

“Annika’s social network and family was here. Her friends were having kids around the same time. Day to day life was easier here.”

No easy money

Success did not come easy. He’d entered a market which had just suffered heavily from the real estate crisis.

“You know,” says Weir, “you start something and what else are you going It was May 2008 when they arrived. to do? We opened a hobby luxury Annika was six months pregnant. Robert business in a tough economy. We played golf through the summer. had no choice. Things were planned and paid. We opened and took our Weir Golf punishment.”

Since he couldn’t play golf every The business was partly funded with minute of the day, Weir contemplated loans, and partly from a UK business his future. that Weir had sold, Tropical Sun UK, its “My first idea was to teach English. But core product a fake-tan spray. “I had the salaries were low and the prospects to sell that business in tough times,” poor. It didn’t get me passionate about he says, “So I got 30 percent of what it.”

I should have. Then I opened here in tough times. I got the double whammy!”

Weir examined the nascent Estonian The smaller sum he got for the sale, golf industry and looked for gaps. “It’s though, funded much of the Estonian not easy. There’s no tradition, and it’s business, so he was able to avoid being unlikely a friend or relative is going to too heavily leveraged. introduce you to the game. There’s a ‘green card’ system where people are Weir ran the customer end of the taught the basics, not just how to swing business, and Annika dealt with finance the club, but the etiquette of fixing ball and bookkeeping. marks and divots.”

Weir believed the market needed a simulator and that there might be opportunity to organize golf tourism to Scotland. He spent six months on a business plan, visiting a golf simulator company in Great Britain and attending the PGA show in the United States.

His theory was that a golf simulator would offer an easy, affordable introduction to potential Estonian golfers, as well as a winter recreational sport for any golf players.

The Weir Golf Studio opened its doors in January 2010.

When the economy began to brighten, so did Weir Golf. “It will take a few years to clear all debts,” Weir says. “But July 2011 sales figures showed our busiest month. Our sales tripled over the previous July.”

On the links

The contrast of Estonia’s winter and summer make the simulator business very seasonal — Weir says Estonians almost refuse to be inside in summer.

“Winter business is the simulator.

Summer is the pro shop.”

When Weir’s not in the shop, he’s on the course. And playing golf actually helps his business. “I can make 15,000 euros in sales a year by being on the golf

course. People talk to you. They’ve just finished their round and maybe they’re rethinking their equipment.”

As the business grows, Weir is looking to replicate the model. “We’ve built the business so that we can franchise it and offer it as a turnkey solution.” In January 2012 he plans to open a second location across town in Tallinn’s Rocca al Mare.

Advice to other Scots

As an entrepreneur, Weir praises the ease of doing business in Estonia.

“The people who run the country are quite young. Things happen quicker in Estonia than in the UK. There’s less red tape. So many people in very important positions are in their 30s. That’s really helped the country. Just based on that it’s a good investment.”

Weir also thinks Estonia’s paid maternity leave sets the country apart. “In the UK, it’s standard that a mom is back to work within a few months. Here, you get close to two years for each child. That’s brilliant from a family point of view.”

Weir advises Scots considering to relocate to Estonia to make a serious effort to learn the basics of the language. “People can sometimes be offish when you speak English. But if you make an attempt in Estonian you’ll be very welcome.”

Weir says language skills are critical for small entrepreneurs. A major corporation may have someone to handle bureaucratic hurdles, the small businessman often must go and sort out things himself.

A recent bureaucratic experience started out negative, but turned positive once Weir spoke some basic Estonian. “Just attempting the language made her

really go out of her way to help me. It was like she became my mum!”

The future of golf

Weir Golf’s future is very much tied to the future of golf in Estonia, and Weir wants to influence the market in a positive way.

He has marked his teaching rates to 25 Euros per hour to make golf more accessible to the market. (Most pros charge 40.) “I want to be a different kind of golf pro. The meat market idea with customers – have as many as you can –doesn’t appeal to me.”

Weir says few teaching pros play as much as he does. “I’m on the course three times per week, plus I play in all amateur tournaments.” His professional status means he cannot win amateur tournaments, but this fact contributes to the kind of pro Weir wants to be, and how he wants golf to be a part of his life.

“I don’t stress about playing badly. The US Open had something like 29 of the best club pros from the US, only one of them made the cut. The highest score by a pro was 97. The poor guy has to go back to his club and explain. But that’s

The Quest to be IP’s HQ

8

Inward investor and an exporter, Neil Mathieson, finds Estonia ideal for his software business. And he sees potential present for a large part of the economy to be based on that model.

“I

had an association with the Baltics for 20 years before I came here,” says Neil Mathieson, partner in TreasuryView, a financial technologies company. Mathieson’s academic years were spent studying transition economics, and the cases he studied were in central and eastern Europe. “The region dominated my life personally and professionally,” he says, “so it was easy to come live here.”

The brothers, Margo with a risk management background at Swedbank, and Lauri with capital markets experience at Deutsche Bank, had been operating TreasuryView for several years and had a risk management product they were selling in Germany. Convinced that financial risk professionals would embrace more innovative technology, Mathieson invested with the brothers.

He arrived in 2005, after 10 years in London, working for the Royal Bank of Scotland and ABN AMRO, where he managed corporate banking relationships with multinationals. But after ten years, city life was no longer for him. He came to Estonia not only for a first-hand look at what he’d studied, but to establish my own firm.

The economy showed good growth and quality of life was attractive.

“Margo and Lauri been trading successfully in Germany but wanted to make the product available in Englishspeaking markets” Mathieson says.

“We started out with an idea sketched on a small piece of paper. My task was to turn that sheet of paper into a commercial reality. We did our research, altered the functionality, established an office in Edinburgh as our base for the English speaking world and set about signing clients.”

In his early days in Estonia, Mathieson earned his living as a financial consultant to companies across Europe, helping raise capital and manage risk. But it didn’t take long for him to run into the Karp brothers.

Bridging the Gap

The appeal of TreasuryView is that it is able to connect two groups: bankers and their corporate treasury clients.

“From the inside I’ve seen how difficult

it is for banks to sell to their clients,” says Mathieson, “due to systems limitations and because clients often find it hard to validate what the banks say.”

TreasuryView bridges the information gap. “A treasurer uses it to diagnose his financial risk position,” says Mathieson.

“Say he’s worried about his exposure to dollars, or maybe he’s got a refinancing coming up next year. On the other side of the equation is the banker. He sits with the same information and diagnoses which products best suit the client’s need and market conditions.

The two can then collaborate, quantify the impact and discuss alternatives in real-time.”

Mathieson says the connection is made, however, by selling only to banks and advisors. “Internally it saves them time through automating need identification, solution development and pitching.

They also generate business through more client interactions, demystifying complex topics and improving conversion. It helps users react faster, gain deeper insights and communicate effectively.”

Many banks and advisors ultimately give a light version of TreasuryView to their clients. “A treasurer may have several banking relationships,” notes Mathieson, “so when the bank gives our product to him it promotes interaction and reinforces their brand.”

TreasuryView is entirely web delivered and its revenue is subscription-based: there is no capital expenditure required.

A bank pays based on volume and its tab

can run from 1,500 to several thousand euros per month. But Mathieson, as a former banking insider, says that’s small change when it creates successful sales people and clients are happy.

Why Estonia?

Given the international banking backgrounds of the TreasuryView partners, why did they settle in Tallinn?

“Our client relationships are very frontended,” says Mathieson. “They need to understand and trust the product and we their business need and usage pattern. Once a client is using TreasuryView, they don’t necessarily need to see you often, just that you are on top of their requests and market developments.”

What TreasuryView finds in Estonia is access to skilled IT. “We program it here, but we sell it abroad,” says Mathieson.

The company employs 12, which includes the staff in its sales offices in Frankfurt, Edinburgh and Vancouver, markets where there is complexity, volume, and banking wallets.

Mathieson also highly values the simplicity of Estonia’s business environment. “The country was built on FDI over the last 20 years. Something like 84 percent of the economy is export driven. With the euro the country risk is down, and Estonia’s credit rating was upgraded twice in recent months.”

“In the UK,” he adds, “increased red tape creates huge compliance costs.

That’s not a problem here.” And geography counts, too. Estonia is a

good intersection between Europe, the Nordic region and Russia. It’s a conduit for business.”

FinanceEstonia

Although Mathieson is personally convinced of Estonia’s virtues as a prime location for businesses engaged in intellectual property, he doesn’t think the message has yet reached the rest of the world.

Mathieson says Estonia gets too often dismissed by investors because its size (1.3 million people). “It’s a great environment to work in, domestically and internationally. Estonia needs to communicate this more because investors really like this place compared to other European locations.”

To this end, Mathieson recently joined FinanceEstonia, a non-profit organization committed to generating more financial services activity, attracting FDI and creating export sales for Estonian IP. As part of this organization, he advocates for Estonian companies to more aggressively sell in the language their potential clients understand

— meaning need-driven products rather than businesses created to access available funding.

“It’s hard for many Estonian businesses to scale beyond where they are,” he says. “But TreasuryView went about it the other way — you have to start with the client.”

TreasuryView is a case in point. After two years its product for the Englishspeaking world is profitable, and they’ve signed clients such as Sector Treasury Services, Evolution Securities, and a host of mid-sized banks and advisors.

This would not have been possible without representative offices abroad.

“Local guys have to do local sales. It’s a business-to-business relationship; clients have to know you and feel your knowledge of their market and needs.”

“We’re confident about our prospects at TreasuryView,” says Mathieson. “We hope it motivates local entrepreneurs to expand, and helps foreign investors recognize Estonia as an attractive location for international and IPoriented business.”

The Scottish Club

(An Unofficial Embassy in Estonia) Nobody knows the exact origins of Estonia’s Scottish Club, nor does anyone know the exact date it was founded. Most will agree it’s roughly 17 years old. And all will concede that whisky had something to do with it.

Iain Lawson’s version of the story goes this way: “Right after Estonian independence the country’s leading politicians and business people wanted a business club and they were looking for a theme to hang it on. They decided on the Scottish Club, because in Soviet time whisky was seen as the ultimate luxury item. The club staff all wore kilts.

A picture of Robert Burns and the great seal of Scotland were on the wall.”

Lawson recalls that of the 16 members of Estonia’s first cabinet, 14 were members of the Scottish Club. “To this day,” he says, “I think the majority are still members. Including the prime minister.”

“I support that view,” says the Scottish Club’s current president, Estonian Märt Haamer, “though ‘elite’ had a different definition to Estonians. In those days, the club was simply made up of the people who were very active. But for a large audience, ‘elite’ is exactly how it

appeared.” Haamer adds also that the club isn’t exclusive to businessmen: the membership includes a good number of cultural figures.

Since its inception 17 years ago, the club has served as a quiet refuge for its members. Located on Uus Street in Tallinn’s Old Town, the club boasts the city’s most attractive courtyard (known as Scottish Park), and a restaurant (open to the public) which has historically been one of city’s best. Although the club is non-profit, the building and grounds are owned by a company composed of about a dozen club members.

Through this arrangement, worries are minimized about the club continuing as a going concern.

Adjacent to the restaurant, the club has a private room and a whisky cabinet where members keep private bottles.

One member’s stuffed moose head hangs near the staircase. Bagpipes adorn the wall, but a sign cautions

members against “blowing into another man’s instrument.” (Diluting another man’s whisky is also frowned upon.)

More Scots in the club would be very welcome, says Haamer, “but Scotsmen in Tallinn tend to keep a low profile.”

In its early days, in the heyday of building a new Estonian government and society, the club focused on whisky and trips to Scotland. There were 250 members at its peak, each inducted with two sponsoring members who would guarantee that the new member’s bills would be paid.

One good example is John Ross, owner of Interconnect Product Assembly.

Ross is not a member of club, though Haamer says they’ve been working on him. Although not connected to courting him for membership, Ross’s contribution to Estonia was recently officially recognized by the club.

Today, there are 60 members in the club, and only one Scot among those.

“John’s really established himself and built something here. He employs over 200 people by manufacturing and exporting electronics. But John isn’t the type to seek recognition,” says Haamer. The club recognized Ross in its own manner – with a few friends, good whisky, and sincere toasts.

The club is looking for new blood, according to Haamer, and striving for a membership of different ages and background. Which makes the international crowd all the more attractive.

But shouldn’t there be more than one Scotsman in the Scottish Club?

Ross is in good company. Others honored by the club include Robert Burns and Sean Connery, busts of whom

grace Scottish Park. The likeness of Connery was erected in January 2011.

Connery was invited to the event but sent his regrets, and the event received several mentions in the international press.

Connery’s birthday celebration (August 25) was recently added to the roster of annual club events. Robert Burns night, the club’s birthday, and a summer and Christmas party round out the club’s annual schedule.

But one doesn’t have to be a secret agent or ploughman poet to receive a welcome at the club. Those who appreciate the finer points of Scottish culture, or those who like good food and company, are welcome. After all, the club’s origins are in whisky and friendship — though it won’t surprise anyone if a business contact is made.

Support for Scots

In addition to the informal support Scots may find in Estonia, the following organizations are committed to assisting businesses on a full-time basis.

Estonian Investment Agency (EIA)

The Estonian Investment Agency is part of Enterprise Estonia, the country’s largest support institution for business and entrepreneurship. Enterprise Estonia is a major implementing unit of the European Union structural funds in Estonia.

Concerning assistance to foreign investors, EIA´s business development managers work together with potential investors from the stages of providing initial information through the period when the first finished product rolls out the doors.

And they look after the foreign owned companies to help them prosper both in Estonia and internationally.

EIA´s free and confidential services include detailed investment information, preparing business trips to Estonia, facilitating business contacts, advice on financing, identifying suitable properties, negotiations with authorities, etc.

Visit www.investinestonia.com for more information or contact Tiina-Maria Väravas at EIA´s London office at Tiina.Varavas@eas.ee.

British-Estonian Chamber of Commerce (BECC)

The British-Estonian Chamber of Commerce is a non-profit organisation and is one of the largest and most active international organisations of its kind in Estonia. The BECC provides discussion opportunities between companies and their potential clients from the United Kingdom and Estonia in order to share and disseminate information and ideas. The BECC maintains good relationships with the governments of the United Kingdom and Estonia and with other important public and private bodies to facilitate better bilateral business affairs and increase members’ credibility in the business community.

The BECC organizes a vast number of events over the year, including large events such as the charity Burns Supper, the Guy Fawkes Fireworks Party and big business conferences to a monthly mingle and regular business get togethers. These are great opportunities to meet other business people!

The BECC is a membership based organisation and yearly membership starts from 256 EUR. Membership of the British-Estonian Chamber of Commerce gives

members the opportunity to share information in a weekly newsletter, promote company products and services through website portals, newsletters, event banners and event sponsorship, and of course, gives access to referrals through the BECC network.

For additional information, visit www.becc.ee or write becc@becc.ee.

UK Trade & Investment (UKTI)

With professional advisors across 96 markets, UKTI is the UK´s government department that helps UK-based companies succeed in the global economy and assists overseas companies to bring high quality investment to the UK’s dynamic economy - acknowledged as Europe’s best place from which to succeed in global business.

If you’re a company new to exporting, or an experienced exporter looking to move into a new market, our staff is on hand both in the UK and in Estonia to help maximize your international success.

UKTI Baltics Team offers a wide range of services to all British companies includes helping you to find local contacts, carry out in-depth research on Estonian, Latvian and Lithuanian markets for your goods or services, attend trade missions coming to Estonia or other Baltic States, etc. Further information can be received from www.ukti.gov.uk or UKTI.Tallinn@fco.gov.uk

The BECC’s winter season’s highlight is always the Burns Supper. The great Scottish bard’s life is celebrated in Tallinn with a gala dinner full of Scottish culture, haggis, neeps & tatties, good music, bad dancing and a charity raffle and auction. The event is attended by a lot of guests coming over from Scotland. You are all welcome!

SCOTLAND

GREAT BRITAIN

ENGLAND

Capital: Tallinn Area : 45.227 km2 ≈ Denmark Population: 1.340.000 Internet users: 74% Country Calling Code: 372 Currency: euro (EUR) Country credit ratings: Fitch A, Moody’s

A1, Standard & Poor’s A (May 2011)

GDP: EUR 14,5 billion (2010) GDP per capita: EUR 10.820 (2010) Index of Economic Freedom: 14th among

183 countries

Member of EU, NATO, OECD, WTO, Schengen area

Five Key Reasons to Invest in Estonia Progressive IT infrastructure

• 100% fibre broadband by 2015 • ca 1150 wireless internet areas on 45 000 km2

R&D know how and cooperation

• High quality universities – ranked 16th in the world • Government support to the centres of excellence and cluster initiatives

Competitive costs

• Cheapest electricity for domestic users in Europe • Labour costs are a third of those in Sweden or Finland

Low risk and good governance

• Estonia is ranked 2nd together with Denmark in the European Economic Sustainability Index • Lowest government debt in Europe • Low corruption

Multi-lingual and multi-skilled labour force

• Ample supply of specialists – key competencies lie within electronics, machine building, and IT • 55% of workforce fluent in one or more foreign languages

Estonian Investment Agency Enterprise Estonia Lasnamäe 2, Tallinn 11412, Estonia Phone: +372 627 9700 / Fax: +372 627 9701 E-mail: invest@eas.ee www.investinestonia.com

Tiina-Maria Väravas Enterprise Estonia London Warnford Court 29 Throgmorton Street London EC2N 2AT Direct 0207 947 4365 E-mail: tiina.varavas@eas.ee