Lithuania reinvents as startup, technology hub of Europe

As Ukraine-Russia conflict drags, Baltic states scale up investment in DeepTech, defence, cybersecurity.

Vilnius (Lithuania): The first mass production of swimsuit in the Soviet bloc, they say, was done here, at the Sparta textile factory on Svirtigailos Street. Apart from the legends and a few surviving residential neighbourhoods, there isn’t much left of the vintage brutalist architecture in old town Vilnius.

The abandoned warehouses have been replaced by glitzy Nordic structures in glass and steel. Occupying 35,000 square meters of space in the heart of Lithuania’s capital, Cyber City is the tech district that hosts some of the fastest-growing startups in Europe, like Hostinger, Nord Security, Surfshark, and Oxylabs.

For a country with a population of less than three million, spread over 25,000 square miles, prioritising the high-tech sector in innovation and emerging technologies is both a compulsion and necessity borne out of the changing geopolitical situation in Europe and elsewhere.

Tucked away at the eastern Baltics, Lithuania is one of the fastest-growing tech hubs in Central and Eastern Europe (CEE), capturing 25% of the Baltics FDI. Its capital, Vilnius, ranks third regionally for VC attracted with focus on cybersecurity, FinTech, DeepTech, and defence.

The current startup ecosystem has grown more than six times in the last five years, and is currently valued at more than 16 billion euros.

For instance, Hostinger the web-hosting company that serves more than 4 million clients worldwide, including small businesses and influencers, started building things around AI six years ago. That’s before ChatGPT made headlines. 15% of the company clients are in India, mostly small and medium businesses who want to sell their products online.

“We try to play to our strength. In this age, it is not just about volume, it’s about leverage of the brainpower. Being small, we can move faster,” says Daugirdas Jankus, CEO or Hostinger.

Lithuania now boasts of more than a thousand startups, out of which some like Vinted, an online marketplace for second-hand apparel, have emerged as unicorns. Others include Nord Security (cybersecurity), Baltic Classifieds Group (online classifieds), Flo Health (women’s health app), and Cast AI (cloud cost-optimisation).

“Last year, we released Horizons for website-building for the part where you can generate codes. You can generate app code using that. After three months, we released Hostinger Reach, which can be used for email marketing,” says Mantas Lukauskas, AI Tech Lead.

Geopolitical compulsions and defence investment

Lithuania’s startup story started in the mid-sixties, when researchers at the Vilnius University discovered and mastered laser technology.

Twenty-three years later, as the country declared independence from the Soviet Union, a group of 11 physicists got together to form a company to develop and market industrial laser. That’s how Ekspla was born.

Situated on the outskirts of the city, the company is now one of the leaders in laser technology that has a wide use in material processing, and life sciences.

The technology developed is being further evaluated by an EU-funded consortium by creating new tools for early-stage detection of breast cancer.

“A lot of laser tools are now being used to make semiconductors. We can produce lasers that can be used for front-end applications or for packaging solutions,” says Ekspla CEO Aldas Juronis.

More than 60 companies with expertise in laser technology are currently based in Lithuania, specialising in ultra-powerful lasers, serving different markets.

For the three eastern Baltic countries, Lithuania, Latvia and Estonia, who joined NATO after the disintegration of the USSR, the conflict in neighbouring Ukraine has complicated the situation.

Like many European countries, investment is defence has shot up.

“There is a lot happening around us and we have to be strong and resilient. We have a strong network of universities to start from the first phase of innovation,” says Edvinas Grikšas, Lithuanian Minister for Innovation and Economics, in an apparent reference to the protracted Ukraine-Russia conflict, and the changing dynamics within NATO under the current US dispensation.

Lithuania has formalised a loan agreement of more than 6 billion euros under the EU’s SAFE defence funding initiative to enhance its military capabilities to militate against potential Russian aggression. The country plans to increase its defence allocation to a record 5.38% of its GDP.

German automotive and arms manufacturer Rheinmetall is currently building a factory near Baisogala to manufacture 155-mm artillery shells at an estimated cost of 180 million euros.

A brick-and-mortar chimney standing in the middle of Vilnius Cyber City is the only surviving relic of the Soviet era in this tony district. It’s like any other European neighbourhood.

(The journalist was in Vilnius at the invitation of the Lithuanian government)