With a population of around 1.3 million and a chilly perch on the Gulf of Finland, Tallinn probably isn't the first place you think of when considering the world's best business hubs. But the tiny Estonian city is on its way there--and for good reason.
Between free public Wi-Fi, a well-educated populace, and a business-friendly tax system, Tallinn is quickly becoming a force in entrepreneurial circles. Not only is it home to such tech stalwarts as Skype, the Estonian capital is also home to a science and technology park called Tehnopol, which is now helping support approximately 180 companies.
And considering that the top business hubs of tomorrow won't just be the biggest, Tallinn--arguably one of the most connected places on earth--handily made Inc.'s shortlist of the top "Global Cities of the Future."
Should you be heading there for work, or even considering starting up in this Baltic business center, here are five things you should know before you go:
1. Why it's called 'E-stonia'
Tallinn prides itself on, among other tech-infused accolades, its wired public spaces, which are plentiful. In 2000, the country passed a law declaring internet access a human right. From there, it launched into an expansive campaign to bring the internet to rural areas. In addition, at age 15, citizens get Estonian e-identities--granting them online access to an estimated 4,000 services, including banking, contracts, business registry, and tax services. As of last October, the government moved to allow foreigners to access e-identities too.
2. Taxes are a breeze
According to the Tax Foundation's 2014 International Tax Competitiveness Index, Estonia has the most competitive tax regime in the developed world. Estonia doesn't charge a corporate tax in the traditional sense. Instead, it taxes distributed corporate profit at the capital gains rate of 21 percent. Should a company invest its profits back into the business, it would face no tax expense. Estonia additionally provides a 100 percent exemption on all foreign-earned income, in what's known as a "territorial" tax system.
3. VCs are starting to take notice
Estonia reported hosting 66,000 enterprises within its borders in 2012, up by 4,000 companies, or 7 percent, from a year earlier, according to Statistics Estonia, the country's official data clearinghouse. The uptick was led mostly by microenterprises, defined as companies with fewer than 10 employees.
The former Soviet state is also starting to attract big-time venture investment. TransferWise, a money-transfer business co-founded by Taavet Hinrikus, Skype's former director of strategy, has received $33 million from backers like Richard Branson and Peter Thiel and venture funds IA Ventures and Index Ventures. The company is now headquartered in London but maintains a base of operations in Tallinn. Uber competitor Taxify raised roughly $1.7 million in funding this December to expand its footprint in Europe.
4. Resources don't abound
Silicon Valley tech firms aren't the only ones facing a shortage of qualified workers. While the country's universities have been promoting information technology courses--and subsequently churning out IT professionals--in recent years, the competition for these trained workers has been stiff. Venture capital can also be hard to come by. While there have been a few bright spots in the startup community, mostly companies report needing to move to other countries to attract investment capital.
5. It's beautiful
Tallinn has plenty of skyscrapers, but the city's oldest centers are the main draw. In the city's Old Town, which is divided up into two sections: upper town and lower town (or Toompea and All-linn, respectively), you'll find 15th-century construction, replete with cobblestone streets, brick-covered walkways, and medieval churches cheekily named Fat Margaret and Tall Hermann. It's also a UNESCO World Heritage Site.
While in Toompea, check out the onion-domed Russian Orthodox Alexander Nevsky Cathedral. Other must-sees include Toompea Castle, where Estonia's parliament meets, and St. Catherine's Passage, a tiny arched stone alleyway that has ancient tombstones hanging on the walls.