The Startup Ecosystem of Latvia

Latvia’s startup ecosystem has the potential to become one of the country’s core economic engines. With easy access to Europe, an availability of skilled IT talent, a multilingual population, and an affordable cost of living, the potential of Latvia’s startup ecosystem is clear. However, it is also clear that Latvia’s public sector has not caught up yet with its successful Baltic neighbors. Led by the rise of Estonia, Lithuania’s public sector is heavily investing in targeted startup ecosystem growth. The Latvian response to the increasing gap from the two other Baltic countries has been underwhelming so far. The country’s top policy makers have yet to equip public sector ecosystem developers with policies that will positively affect Latvia’s economic growth in the long term.
Although the pace is slow, the country is starting to benefit from a number of public sector initiatives that make the location attractive, such as innovation vouchers and a startup-friendly regulatory system. Latvia has also launched a Startup visa program aimed at attracting foreign entrepreneurs. A key public sector organization that supports the ecosystem, Magnetic Latvia, operates under the Investment and Development Agency of Latvia (LIAA) and provides a one-stop-shop service for foreign founders looking to start a business in Latvia. More resource allocation will be needed to allow Latvia’s public sector developers to make a real difference.
The ecosystem also boasts several private sector organizations that contribute to the development of the ecosystem, such as BuildIt Latvia, an accelerator that helps hardware and IoT startups. The program was launched in Estonia but continues in Latvia, signaling the promising potential of the ecosystem. Venture capital investments are much needed to produce scalable startups. One organization furthering this goal is The Latvian Private Equity and Venture Capital Association (LVCA). The organization has a mission to promote the development of the venture capital industry in Latvia and the Baltic region.
A critical challenge for Latvia is brain drain, as qualified workers emigrate to other EU countries; the public sector should do more to demonstrate the benefits of staying in Latvia. The government should also continue to cooperate with the private sector in devising new strategies, such as the stock option policies that were amended in 2020. This type of cooperation could allow the Latvian startup scene to close the gap with its more successful Baltic neighbors.