Virginia’s population has been growing steadily, and state government offers various incentives to lure new businesses to the Commonwealth, but as Sandy Hausman reports, some entrepreneurs are leaving Virginia for a place that makes doing business a breeze.
Forty-five-year-old David Dixon is a lawyer specializing in cyber security. (That’s not his real name. He likes to keep a low profile.) He agreed to meet me in a Northern Virginia park to talk about his plans for a consulting business.
“I was approached by a large consulting firm in Switzerland, but I didn't get the job" he recalls. "The U.S. government puts a lot of restrictions on companies that can hire me, and the European marketplace does as well. For instance, if they were to hire me over a European, they would have to go through three or four months of looking for someone, write up this declaration saying, ‘We looked for someone but nobody matches his skill set.’ Banking over there is also quite a hurdle.”
Then Dixon discovered he could become an e-resident of Estonia – a small Baltic country that belongs to the European Union. He had to fill out a form, pay $50, and stop by the Estonian Embassy to leave a set of fingerprints. The country did a background check, and in less than three weeks, he was in. Starting a company, he says, is even easier.
“I can get online and file my articles of incorporation, and within five hours I’m a business.”
And he’s in good company. Estonia is home to more start-ups per capita than almost any other country in the world. It’s where Skype was developed, and Katri Gosmer, director of communications for the E-Residency Program, says it has brought in nearly 300 new firms:
“You can manage your company online. You don’t have to have a local director," she explains. "You can open a bank account in Estonia – which is an EU bank account. It’s all very simple and hassle free.”
If all of the business you do is outside Estonia, you pay no income tax there. If you run your business from Estonia, however, you pay tax based on a system far simpler than the IRS tax code. By year’s end, Gosmer predicts about 8,000 people will be e-residents. They won’t have the same rights as citizens, and they’ll still need a passport to visit, but they’ve escaped the bureaucracy and expense imposed by many governments on new companies.
So how did this little country leap into the 21st century, drawing hi-tech foreigners into its fold? First, experts say, many of Estonia’s older leaders were killed or imprisoned during years of Nazi and Soviet occupation, so when the U.S.S.R left in the early 90’s, the newly independent country had some very young leaders.
"The first prime minister was only 32 years old," says Indrik Vimberg, who works for the E-Estonia Showroom, built to display the country's Internet Technology prowess. "Boys like gadgets."
He adds that there was a cadre of geeky Russian guys determined to stay.
“We were lucky to have the Institute of Cybernetics established by the Soviet Union in the 1960's in our capital city, Tallinn," Vimberg explains. "After the collapse, all these engineers stayed here, which means we had local talent to build things.”
That was key, because the country didn’t have money to buy software from abroad. Today, Vimberg says, Estonia’s rapid adoption of technology has made it more prosperous and more secure. A land that has been invaded, over the years, by the Danes, Swedes, Germans and Russians may, at last, be assured of survival. Should history repeat itself, Estonia could run its government from embassies abroad -- using the cloud to hold elections, collect taxes and send athletes to the Olympics.