Over the course of 2023, various governmental organizations have invested more than 4 million euros into supporting the Latvian startup ecosystem.
After collecting data from various organizations, including the LIAA Startup Support Division, the Riga Investment and Tourism Agency (RITA), other LIAA departments, and the Ministry of Economics, over 4 million euros of grant funding has been directed to supporting startups, their events, and startup-supporting initiatives.
The funding can be broken down into three main sources:
Each source and department has been contacted to gain a holistic understanding of their investments into startups and the overall state of government investing into the Latvian startup ecosystem.
The City of Riga
The City of Riga, with a combination of the Riga Investment and Tourism Department and the municipality itself, has directed a grant for 505,000 EUR – over half a million – into the startup community.
That support is divided into several subcategories:
- Accelerator and incubator support – RITA had allocated 120,000 EUR to this, with a maximum of 40,000 EUR that could be allocated to one project;
- Riga's startup community's support – support and funding for events such as conferences and hackathons. The budget for this was 85,000 EUR, with a max. of 20,000 EUR available for one project;
- Support for relocating highly qualified specialists – for companies looking to relocate foreign talent, RITA offered a total of 150,000 EUR. One company could use this support for up to 5 employees, which would receive up to 1,500 EUR for three months each.
- Funding the Startup House – currently under construction, the new Startup House is yet to be unveiled. But the City of Riga has dedicated 150,000 EUR to this project.
The Ministry of Economics of Latvia
The Ministry of Economics had allocated a grant budget of 200,000 EUR to the startup ecosystem.
That funding went to a range of organizations including:
- The Latvian Startup Association Startin.lv – for maintaining the database, Startup Awards, and participation in international startup events;
- Techhub Riga – for monthly meetups, and participation in international startup events;
- LatBAN – monthly investment sessions;
- Techchill Riga;
The amount of funding for 2024 has been announced, and it's double that of the year before – 400,000 EUR will be allocated to the Latvian startup ecosystem.
LIAA – Investment and Development Agency of Latvia
With LIAA supporting a variety of businesses and initiatives, including those related to startups, they too play a role in directing investment into innovation ecosystem activities.
LIAA Startup Support Division
The startup division at LIAA has directly invested as grant a total of 321,641 EUR into supporting the ecosystem. The form of support varies, but can be divided into three sub-categories:
- Event support and organization – such as TechChill in Riga and Milan, Startup Day and Startup Awards, Community Forum, Hack Code X roadshow to the Balkans, funding the Slush 2023 matchmaking event, the Future Hub clean tech pre-accelerator, and more.
- Ensuring the dissemination of information – through supporting the Latvian Startup Ecosystem 2023 overview, developing and disseminating a monthly newsletter on Latvia's startup ecosystem's news (subscribe here), and providing valuable and insightful information on the Startup Latvia website.
- Education – developing and implementing a program for learning to fundraise, as well as investor presentations.
On top of the aforementioned activities organized by the startup division, the employees work to support founders in making use of the various policies available to startups – making use of startup law legal previsions, startup visas, etc. This time, effort, and salaries of the startup division's employees are not included in the calculations of the department's investment into the startup community.
LIAA investment into the startup ecosystem
LIAA is a vast organization that supports many activities, many of which also benefit the startup ecosystem. After identifying activities and investments that specifically support the startup ecosystem, it was found that a variety of LIAA departments (excluding the Startup Support Division, whose contribution is listed separately), have invested a grant total of 1,235,457.60 EUR into startup ecosystem-supporting activities.
- Maintaining Labs of Latvia – the country's only dedicated startup news outlet, which is available both in Latvian and English;
- Funding various incubators, accelerators, and workshops to specifically boost the growth and competitiveness of innovative business development, such as the Innovation Academy and the City2Sea accelerator;
- Funding events created specifically for developing early-stage innovative businesses, such as the Ignition event in collaboration with the Commercialization Reactor, Tech Picnic, and Deep Tech educational courses, and Ideju Kauss;
The Norwegian Financial Instrument is a grant provided in tandem with the governments of Norway and Latvia, managed by LIAA. The grant supports a variety of activities, most of which relate to green innovation and manufacturing digitalization.
Startups have received 1,030,432.24 EUR worth of grants through this financial instrument over the course of 2023.
The funding instrument mechanism works as follows: the startups request funding, the government of Latvia issues the funds from its own budget, then requests reimbursement of 85% of the sum from Norway. As such, the 1M+ EUR received from the grant are provided partially by both Norwegian and Latvian budgets.
Funding through the startup law
The startup law makes it possible for startups to greatly reduce their expenses in order to be more competitive in the early stages of their business growth – to hire more experienced talent without overwhelming the budget.
One aspect of the startup law is a reduction of taxes that have to be paid. This is an amount of money that is simply something that the startup has to pay less of.
The other aspect – co-financing highly qualified talent – is a direct investment from the country's budget, and therefore, it belongs in this list of governmental funding into startups.
The state issues funding grant of up to 45% of an employee's gross salary. Through this support mechanism, startups have received as a grant a total of 757,350.11 EUR in direct funding. This sum makes up 34% of the total amount of support provided through the startup law. The remaining 66% are made up of tax reductions, which amount to 1,470,150.22, bringing the total of funding through the startup law up to 2,227,500.33. The tax reduction value was not included in the funding ecosystem calculations, as it reflects money saved, rather than funding received, by startups.
Honorable mention – incubators and innovation vouchers
The LIAA innovation voucher program, which reimburses small and medium-sized businesses for up to 85% of specific growth-related expenses, has issued 804,758.88 EUR worth of funding - as a grant, to startups. While all recipients must have technological capabilities, not all are technically startups. Therefore, the 800,000+ EUR grant cannot be fully attributed to funding for startups. The precise amount is not known, therefore it has not been added to the overall ecosystem funding calculations.
Honorable mention also goes to the LIAA business incubators. With 11 incubators around the country, they work toward developing business viability. Again, the incubators' services are used not only by startups, therefore the investment into incubators cannot be entirely attributed to the overall ecosystem investment calculations. Since 2017, 13,419,777 EUR as grants have been invested into running these incubators, from which many startups have also benefited over the years.
Support from all directions
With information collected from a variety of sources that support startups and the startup ecosystem, it becomes possible to determine that more than 4M EUR have been invested into startups and the startup ecosystem over the course of just one year.
While it may be easiest to focus on one source of funding to ascertain the country's literal and figurative level of investment in the growth of startups, this collection of data demonstrates that the full picture can only be appreciated when all of the puzzle pieces are connected.