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Why is Wise 10 times more valuable than Eesti Energia?

On January 25, Prudentia Tallinn in cooperation with the Estonian Chamber of Commerce and Industry and TRINITI law firm held a seminar, for the sixth time in a row. This year, the seminar focused on the so-called new economy companies and their wider impact - how new technologies affect companies' business models and values, how investing in growth companies works and which legal aspects should be taken into account in relation to intellectual property. The seminar was moderated by Indrek Uudeküll and the speakers were Illar Kaasik, Rando Rannus, Peeter P. Mõtsküla, Siim Teller and Tiina Sõber.

Illar Kaasik, the Managing Partner of Prudentia Tallinn, spoke about the impact of the Fourth Industrial Revolution on companies' business models and values. Among other things, it was discussed whether there was a risk that technology companies Gelato and Printfull would take over the printing industry. Understandably, Wise, Bolt, Airbnb, Netflix and other technology companies influence the market share and profitability of many so-called "traditional" companies. Change cannot be ignored, and in order to be sustainable, an entrepreneur must see his or her opportunities in a changing world. Experts predict that the technology trends of 2022 are cyber security networks, quantum computing, AI, virtual reality, code-free authentication, 5G and other technologies. If it’s difficult to keep up with change, it’s always possible to sell your business and focus on new opportunities.

Rando Rannus from Siena Capital spoke about the opportunities to invest in attractive growth companies. The benefits are twofold - it’s often difficult for the growth company founders to realize the value they’ve generated, as the first exit opportunity can sometimes arrive only after a 10-year development period. Siena Capital makes it possible to convert a stake in a company into cash, also increasing the liquidity of the technology sector. At the same time, financial investors have the opportunity to make safe investments in attractive growth companies.

Peeter Mõtsküla from the TRINITI law firm talked about the legal aspects related to intellectual property. Peeter gave an example of cooperation with a partner from India who wrote code for a company. Although code is company property, in reality it’s largely owned by the partner and therefore may create unforeseen risks. Intellectual property is playing an increasingly important role in tech sector investments, as much of the created value is related to brands, software, new service models and customer bases. So the questions to be answered are whether the intellectual property belongs to the company or to the employee of the company, and how are the intellectual property rights protected? Peeter also gave examples of the well-known Skype sales transaction in which these topics repeatedly came up.

Siim Teller from Lemonade Stand talked about the start-ups investment company they created with Kristjan Rahu. When making investments, they take into account the investment environment (whereas there are many investors in the Estonian startup landscape) and the risk diversification methodology, but above all they invest in companies with a good business idea and a strong team. Having been active in the field for a long time, they can also support companies with their network of contacts, to provide additional competence for further development. Siim also introduced one of the companies in their investment portfolio more specifically - the company provides real estate management AI technology that ensure the optimization of energy costs and timely maintenance of real estate. The company already maintains 1 million square meters of real estate.

Tiina Sõber Prudentia from Tallinn talked about the differences between the valuation models of technology companies and conventional companies. Tiina gave a good overview of why technology companies are priced differently and what differences arise in the evaluation process due to the company's development phase.

In summary, the seminar was interesting for the participants, encouraged them to think about their company's business model and gave an opportunity to make new business contacts.

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