New EstBAN member Net Group: start-ups who can bring costs down in this environment are more attractive for investors.

The commercial and technology company Net Group has joined the Estonian angel investor network EstBAN, as one of the strategic goals of Net Group is to contribute to the development of start-ups with a large innovation potential and benefit to the society.

According to Net Group’s founder and CEO Priit Kongo, joining EstBAN is an important milestone. “One of the strategic goals of Net Group is to build scaling start-ups and becoming a member of EstBAN is one of the logical steps on this journey. EstBAN has without a doubt the best dealflow, or the flow of start-ups seeking financing, in Estonia. Being a member ensures us access to start-ups who are sure to include those we could support as a business growth and technology investor. Starting companies often lack technological know-how but we have this capability. In addition, we are in the process of building our own start-up investment portfolio, in order to share the success of growth together with founders and other investors,” Priit Kongo explains.

According to EstBAN CEO Anu Oks, it’s important for EstBAN to consolidate a strong infrastructure of partners and companies who create value for both start-ups and thereby also to investors around the network of investors. “Net Group is an ideal partner for EstBAN, providing new investing opportunities to the network by itself, but also helping our members assess the technology and watertightness of intellectual property,” Oks says.

Net Group Head of Innovation Siim Lepisk states that Net Group can also bring its own dealflows to the angel investors of EstBAN. “In addition to Net Group’s own spin-offs, we also help undertakings with a strong traditional business experience, as it were, to build new digital business models as separate spin-off start-ups. We always seek for business growth opportunities with a client before resolving technological challenges. We’re a strategic partner for several start-ups who we’ve helped grow in both business and technology. Now we also plan on bringing these companies to angels and providing an opportunity to take part in their growth,” Lepisk says.

Siim Lepisk provides the example of cooperation with the start-up FitSphere which directs and motivates people to be active via rewarding. In cooperation with Net Group, the company has found an entirely new value offer with the primary focus on environmental sustainability.

Start-ups need to cut their costs

Discussing the situation of start-ups in general, Siim Lepisk concedes that the current economic environment is difficult for start-ups. “Companies who have built their business on aggressive growth are currently operating in an economic environment with extremely high risks. We can see that many start-ups have been forced to cut costs because the cash flow from customers may end well before the next round of cash comes in. The growing economic environment of last year brought the market values of start-ups to heights that have now dropped by a half on average. We are assessing that the economic climate will still cool significantly this year but provides good growth spots for strong founders. We want to stand alongside undertakings in finding their growth opportunities,” Lepisk explains.

According to Priit Kongo, one way to cut costs is to, for example, contract the services of a CTO (Chief Technology Officer) instead of hiring one. “The wage growth of CTOs has not yet stopped but building a digital solution doesn’t just take a CTO, you also need developers, designers and other roles in a developer team. At the same time, investors may no longer grant funding to born-digital start-ups after a certain stage without a CTO. In any case, the role of a CTO is crucial in both start-ups and traditional companies, because they are the one who needs to make optimal technological choices with business in mind, bringing the company to a new level. It definitely pays to consider outsourcing the CTO service to optimize cash flow,” Kongo says. He adds that it also comes with a flipside – if a start-up can show the ability to cut costs, it is this much more attractive to investors.

On the photos from the left: Siim Lepisk, Priit Kongo, Anu Oks.

Net Group

Net Group is an international business and software development company. The Estonian software company has 23 years of experience, providing solutions to companies and organizations combining innovative business models and technology. Today, the solutions of Net Group are being used in over 20 countries – not just Europe, but also for example in Iraq, Tanzania and Oman.

The Estonian Business Angels Network EstBAN is a network of private investors investing in companies in early stages of development, which aims to develop the entrepreneurial environment and contribute to angel investments. EstBAN currently has over 280 business angel members. Read more at www.estban.ee.