Mihkel Tammo: to revive Estonia’s economy, it is necessary to debunk myths hindering research-intensive entrepreneurship

The development of Estonia’s economy can be ensured in the long term only by high-added-value and research-intensive entrepreneurship. This has been said by President Alar Karis, former Prime Minister Kaja Kallas and many economic analysts, among others.

The sector’s importance is also demonstrated by the goal, set jointly by Startup Estonia and the Ministry of Economic Affairs and Communications, to create 500 deep technology companies in Estonia by 2030. While this number may seem overambitious, all the more effort should be made to remove obstacles from research-intensive businesses.

Everything starts with the attitude. This is why I am discussing the five myths surrounding research-intensive entrepreneurship. My discussion is based on the ideas that emerged during a debate on the same topic at Startup Day. I am sincerely grateful to the participants in the discussion – Martin Koppel, partner at 2C Ventures OÜ, Kärt Tomberg, CEO and co-founder of ExpressionEdits Ltd, and Dmytro Fishman, Associate Professor in Artificial Intelligence at the University of Tartu and co-founder of Better Medicine OÜ.

Myth 1. Investors are unwilling to invest in the work of researchers-entrepreneurs

This has changed in recent years. Investors increasingly value company founders who are top experts in their field. This is particularly true in medicine and biotechnology, where the technology needs to be reliable and viable. After all, no one would trust their health in the hands of someone who knows nothing about the human body.

In the middle of the last decade, we saw what could happen when science did not keep pace with business in health technologies. The US company Theranos claimed to have discovered an innovative way of analysing blood samples, which allowed them to get the necessary information from just a few drops of blood, with no need for taking several test tubes. At its peak, the company was worth more than 9 billion dollars. But then it turned out there was no working technology behind the idea. The company’s CEO has now been in prison for two years and will not see freedom for another eight years.

Ideally, there should be a manager beside the researcher. A manager who understands the market and knows to whom and how to sell the product. This is what investor Martin Koppel talked about during the discussion at Startup Day. The following myth is also linked to it.

Myth 2. Technology will sell itself

Every business has its challenges – and in the case of research-intensive companies, one is often the creation of technology. There is no point in selling an innovative cancer drug that does not cure cancer. The answer to the question of whether to create a technology at all should be given by the end user. This means it is essential to communicate with potential customers at the idea stage already and ask them if they need such a product or service.

We often tend to consider our children the prettiest and best of all. Focusing on the product and getting stuck in the subject is not just a problem for research-intensive businesses; it happens in other areas, too. Resource-intensive, long-term development work must be flexible and responsive to real-world needs. As important as it is for a research-intensive company to have a scientist founder in charge of the technology, it is crucial to have a business developer who knows the market needs.

Myth 3. Founding a company may cut through the researcher’s ties with the university

Leaving the university can be difficult indeed and sometimes probably unreasonable for long-term professors and established researchers. This is why we at the University of Tartu Centre for Entrepreneurship and Innovation focus increasingly on doctoral students and early-career researchers who are more willing to take risks and try an entrepreneurial career.

Kärt Tomberg, who has done research at the University of Cambridge and started her own company, said that a researcher should stay connected with the university and the science world to bring new knowledge into the company. That is, the researcher should wear two hats. A brilliant example of this is Dmytro Fishman, Associate Professor in Artificial Intelligence, who is developing a diagnostic tool to help radiologists in his company and is actively doing research at the university. It also gives the researcher a good insight into what is explored and developed in other research centres and companies. In this way, the researcher guarantees a competitive advantage in the company.

Unfortunately, this myth is partly true in Estonia today. Scientists are prevented from becoming entrepreneurs by the Anti-corruption Act, which prohibits the university’s academic staff from participating in making decisions concerning their own companies. This, however, can often make cooperation impossible because the researcher is the most competent in this field. To support researchers with the ambition and ability to do business, it is necessary to amend the law. Speaking at the opening of Startup Day, President Alar Karis said that entrepreneurial researchers need to be supported – and removing this legal barrier should be the first step.

Myth 4. There are not enough competent people in Estonia to develop research-intensive businesses

Estonia’s entrepreneurial and research landscape is full of very talented people. However, the mindsets of researchers and entrepreneurs are quite different, and it can be difficult for them to find one another. This is an area where universities can do more to bring researchers together with business developers, at hackathons and similar meetings, for example.

But we need to act even earlier – our role at the University of Tartu is to develop the entrepreneurial mindset of all students at the bachelor’s and master’s level already. How else could we expect a doctoral student, researcher, associate professor or professor to be able to come to a hackathon we organise? An entrepreneurial mindset is required to see the entrepreneurial potential in one’s research.

Myth 5. Developing a research-intensive business takes a lot of time and money

Some myths are myths for a reason. It is really true that doing research-intensive business is expensive, and it takes many years for financial results to catch up with the research results. Each field has its own wisdom that can be applied to slightly speed up the process. Compared to many other fields of the startup sector, technology-intensive companies move on very slowly in the beginning.

But is that necessarily a bad thing? Research-intensive entrepreneurship has a huge potential to improve people’s lives. And that is the way business leaders and investors need to think about it. The fruits we reap later are all the sweeter and can change many people’s lives.