Gintarė Verbickaitė, Head of Unicorns Lithuania
After two years of inertia, Lithuania’s economy is returning to a path of growth, driven not by industry and its exports, but by services – more specifically, information and communication technology (ICT), as reported by the Bank of Lithuania. In the first half of 2024, the ICT sector accounted for a quarter of the country’s economic growth, with its value-added increasing by 10% year-on-year.
According to data from the Bank of Lithuania, in the first half of 2024, the contribution of economic activities to real GDP annual growth strengthened, with GDP being slightly over 2% higher than a year earlier. Of course, other sectors also contributed significantly, but the Chairman of the Board of the Bank of Lithuania, Gediminas Šimkus, noted that the leading role is no longer played by industry or exports, but by the services sector, with the ICT sector growing substantially faster than the overall economy.
As of Q2 2024, 60,300 Lithuanians are employed in the ICT sector, which accounted for 5.1% of GDP last year. While the sector’s contribution also includes the value created by traditional ICT companies operating in the domestic market, its growth and transformative impact on the economy largely stem from successful technology startups operating globally and growing exponentially rather than incrementally.
According to a database monitored by Unicorns Lithuania together with Startup Lithuania, which tracks over 1,000 active technology companies in Lithuania, startups and their spinoffs currently employ over 18,000 talents and paid more than EUR 370 million in taxes last year. Compared to the end of 2020, there are now a third more startups, two new unicorns, and 60% more talent working in startups. Technology companies that emerged from startups, such as Tesonet, Hostinger, and Omnisend, have built global businesses without any external capital. For example, the Tesonet group surpassed EUR 0.5 billion in revenue last year, while Hostinger recorded EUR 2.4 million in EBITDA. Gross margin indicators in technology companies are exceptionally high, with capital being invested and creating value through employees: generating jobs in Lithuania and contributing employment-related taxes. Over the past decade, an entire generation has grown up witnessing how great businesses can be built without investors.
In Lithuania, we can now count at least a second generation of startup founders. We are also observing the first signs of the multiplier effect. Analysis by analysts from venture capital fund managers Practica Capital and Firstpick shows that former Vinted employees have already founded at least 18 startups, some of which have already attracted external investment. Additionally, three startups have been established by former “Nord Security” employees, and at least one startup founding team includes former employees of both unicorns. Moreover, startups are themselves becoming investors, establishing incubators, organising hackathons, and so on – nurturing an ecosystem in the country. This ecosystem increasingly includes not only young, innovative tech companies with high growth potential but also founders, a venture capital ecosystem, and, gradually, participation from not only local or regional investors but also major venture capital fund managers from Western Europe and the USA.
The ICT sector and startups are steadily moving towards becoming the main driver of Lithuania’s economy. The potential is evident, and the initial results are promising – but will we manage to stay the course?
