In 2021, the Lithuanian startup ecosystem saw a significant increase in investment and a several-fold growth in sales, exports and exits, but despite this, a large number of innovative businesses faced considerable challenges. Startups still cite lack of financial resources as the main and most common reason for their difficulties. However, talent shortage is no less of a problem for innovative businesses and one that is increasing rapidly. This was demonstrated by a survey of Lithuanian startups conducted by Startup Lithuania, the startup ecosystem development unit of Public Institution Enterprise Lithuania.

The results of the survey showed that talent shortage in startups is becoming one of the fastest-growing challenges. Over just a year, there has been a significant increase in the demand for specialists – at the end of 2020, 24% of Lithuanian startups identified this challenge as a hindrance for business development, while as many as 41% of innovative businesses noted it in the survey conducted in December 2021. The need for employees is growing steadily, with 78% of startups indicating that they plan to expand their teams in 2022.

“Last year, Lithuania’s startup ecosystem recorded unprecedented performance – startups became visible and attractive to top venture capital funds and attracted record investments with impressive growth rates. We know that growth would be even more impressive if there was no talent shortage, so we are ready to look for solutions to improve the regulatory environment by creating more favourable conditions for attracting talent from abroad and by harnessing the country’s internal potential for talent development,” says Aušrinė Armonaitė, Minister of the Economy and Innovation.

Challenges go beyond domestic talent shortage

According to Unicorns.lt, the number of talent in startups grew by 23% in 2021 and currently accounts for over 13 200 employees. Similar growth can be expected this year as well. A survey conducted by Startup Lithuania showed that 78% of Lithuanian startups plan to increase their workforce this year. A good trend has been observed – the same proportion of startups (78%) mentioned that their business has a low staff turnover, with only up to 30% of employees changing.

“The year 2021 was truly exceptional for the entire Lithuanian startup ecosystem: startups attracted record investments and recorded impressive growth in sales and exports. We believe that this was just the beginning of a growth spurt which will cause a snowball effect, where the ecosystem will develop and grow at an even faster pace. This is confirmed by the results of our survey of Lithuanian startups – this year startups are planning an intensive expansion into new markets and even greater team growth. However, as a facilitator of the startup ecosystem and maintaining direct contact with their founders, we inevitably notice that it is becoming more and more difficult for innovative businesses to grow their teams,” says Roberta Rudokienė, Head of Startup Lithuania, the startup ecosystem development unit of Public Institution Enterprise Lithuania.

According to Ms. Rudokienė, the country’s relatively small population increases competition for talent in the country, while rather complex migration procedures make it difficult to attract talent from abroad. Innovative businesses also highlighted this in the survey: as many as 19% of the respondents noted that they already employ talent from non-EU countries, 12% mentioned that they plan to recruit employees from non-EU countries this year, and another 8% noted that they would like to recruit them as well, but do not do so due to the complex procedures for employing foreign talent.

Startup growth: increasing not only the number of employees but also export opportunities

According to the survey, in 2021, startups took advantage of the right conditions to sell not only domestically but also to export actively. As many as 55% of the respondents have successfully exported their products and services to foreign markets, with as many as 14% of them exporting 100% of their products. The survey showed that startups choose a very wide range of export opportunities and identified as many as 40 countries in which they sell. The most frequently mentioned markets were: the United States (29%), Germany (27%), Latvia (20%), the United Kingdom (15%), and Estonia (14%).

When Lithuanian startups were asked about 2022 and their planned new markets for export expansion, they identified 36 countries. Innovative businesses were most interested in and most frequently mentioned the United States (9%) and Germany (7%). Latvia and the United Kingdom as future export markets were mentioned by 5% of the respondents.

At the end of 2021, a representative survey of Lithuanian startups commissioned by Startup Lithuania was conducted by the research company Vilmorus. A total of 204 startups operating in Lithuania were surveyed.

The detailed data of the survey are available HERE.