Why Establish an R&D Company in the Baltic?
When you think of setting up an R&D center, the Baltic States probably aren’t the first things that come to mind. You probably think about options closer to home and are struggling to find something that suits all of your requirements. We encourage you to think a little outside the box and explore the unknown. Don’t worry; we don’t recommend the Baltic States lightly. As outsourced R&D partners, we have worked out of the Baltic States and know just how beneficial it can be. Here’s a look at some of the greatest benefits of setting up a shop at the Baltic States.
Cost of Setting Up an R&D Company
It would come as no surprise to you that setting up an R&D center is an expensive affair, but did you know that the location of the company plays a huge factor in the costs? For example, if you need to set up a 1,000 sq. foot R&D space with around 30 well-trained employees in San Francisco, you’ll have to shell out a hefty $3 million every year. The cost will only grow as your research center continues to grow and the rates in San Francisco increase. The Baltic States are much more affordable as both the one-time expenses and recurring expenses are quite affordable. This is because of the lower cost of living in the region, which means the salary for professionals is also lower. For example, the cost of living in Latvia is 30.51% lower than in the United States. Lithuania is more affordable than Latvia while Estonia is a little more expensive, but still 26.95% lower than the United States. The commercial property rates and rental costs are also lower in the Baltic States, especially in Lithuania. You can rent or buy space without adding significantly to your research and development expenditure. You are probably asking yourself, where does Netcore come in all this? Establishing an R&D company can be a very tiring and costly process, so why not establish one in a country that makes things easier for you? On top of that, why not partner with a company that takes the burden of setting up the right web applications for your company at the lowest prices in the industry? We are experts at giving your startup company website just the right visual touch that converts a web user into a customer at the most competitive rates in the industry. We have a task force dedicated to creating the perfect wireframe setup. We ensure that users on your site do not feel like they are in a maze. We create an engaging web interface that subconsciously guides your users to your set goals for better conversion rates. With the right informational hierarchy in your startup site, breakeven periods are greatly reduced.
Establishing an R&D Center in the Baltic is Easy
The Baltic States like Estonia have made it easier to establish a technology research and development center through their electronic residency program, which means setting up a business there is very easy and affordable. Some providers offer ready-made companies at a great cost, so you don’t even need to go through the initial set up process yourself. In Estonia, you can set one center up with a minimal capital investment of €2500. According to a survey conducted by the Swedish authorities; 75% of the respondents said it was easy to set up a company in Estonia, 48% said the same for Latvia, and 50% said the same for Lithuania. Surveys indicate that is has become easier to establish a company in Lithuania now than it had been in 2015. In contrast, only 10% and 13% state it is more difficult to establish a business in Estonia and Latvia now. Moreover, entrepreneurs will find themselves trying to overburden themselves with some technical aspects of laying out a business instead of focusing on the venture itself. That is where we come in. At Netcore, we are masters in app and web development. When you partner with thus, we take the heavy lifting bit of designing your online presence. We have an experienced team that will, for instance, design the elements in your web or app using globally-accredited tools like Invision to prototype your platform’s elements like transitions, navigations, and headers that may either be fixed or dynamic, depending on your preferences. All you have to do is conceptualize ideas, and we will bring them to life.
The Wonderful Tax System
Corporations, even R&D centers are taxed heavily on all of their revenue. Estonia is the only region in the world that taxes corporate entities after they have distributed dividends. An evaluation conducted by the Swedish government states that 61% of the respondents were satisfied with the corporate and personal tax systems of Estonia, 30% were satisfied the systems in Latvia, and 46% were satisfied with the systems in Lithuania. Lithuania and Latvia both have flat tax rates of 24% and 25% respectively. People under a specific income group aren’t taxed in Estonia. The corporate tax rate in Lithuania is 15%, in Latvia is 20%, and in Estonia can range from 14% to 20%. All of these factors make this a great place to establish a company. These states offer an even better tax benefit for companies in the R&D field. You get triple tax benefits in Latvia and Lithuania if you’re in R&D of specific fields like ICT, life sciences, biomedicine, technological sciences, etc. Wouldn’t it be convenient if the tax accounting part of your startup were to be completely automated? At Netcore, we develop custom e-commerce platforms that take the stress of tax accounting away. With our custom solutions, we open your startup to live analytics that not only show you your immediate tax burden but also communicate with your clients, letting them evaluate their tax responsibilities with every purchase they make.
You Have Access to a Great Talent Pool
An R&D center needs to have great employees to deliver good results. The beautiful tax breaks and overall affordability will mean nothing if you can’t succeed with Baltic recruitment and find good talent. While surveys indicate that these states have highly competitive recruitment environments, it is also apparent that you have a large talent pool to choose from. The Baltic region has invested heavily in creating a solid talent pool over the last 20 years. According to surveys conducted by Ernst & Young Global Limited:
- 86% of the population between the ages of 15 to 64 has upper secondary, post-secondary non-tertiary, or tertiary education in Lithuania.
- 84% of the population between the ages of 15 to 64 has upper secondary, post-secondary non-tertiary, or tertiary education in Estonia.
- 83% of the population between the ages of 15 to 64 has upper secondary, post-secondary non-tertiary, or tertiary education in Latvia.
You can choose from a labor pool of over 3 million talented individuals for your research and development team, which means there’s no lack of great people to add to your company. Their educational qualification isn’t the only thing that sets the three states apart. Here are some facts to note:
- The balance between salary and productivity is very good in the Baltic States, which means you definitely get good quality work for what you pay here. Lithuania has a slightly better salary/productivity balance, but all states perform quite well in this field.
- According to surveys conducted by Swedish authorities, over 70% of companies surveyed observed that employees from the Baltic States were very hardworking. Latvia ranked highest with 79% followed by Estonia at 78%, and Lithuania at 72%.
- Respondents to the same survey also they talent pool was quite easy to train, ranking in at 81%, 68%, and 73% for Estonia, Latvia, and Lithuania respectively. This means you can offer Baltic apprenticeships to young individuals here and nurture their skills to suit your company.
The talent pool consists of people with great skill in management, logistics, technology, information technology, administration, services, and business development. There’s no shortage of talent at this location, so you don’t even need to bring in employees from other countries to work here. With outsourcing, every business sector is slowly migrating from concrete structures to online human resource management. At Netcore, we make recruiting easy and managing employees even easier. We will provide you with custom web applications that will revolutionize the way you as an employer engage job applicants, recruits and long-term employees by leveraging on your ability to quickly crunch up data and analyze it fast and efficiently. This way, you only tap into the best qualified candidates while making adjustments to make sure that your employees work at optimum output levels.
The Talent Pool is Bilingual
According to recent statistics by G. Hogan, more than 90% of the population between 15 and 64 speaks a second foreign language, and more than 40% speaks English as a second language. In most other affordable places, language is always the primary barrier as the local talent has no grasp of English and can't learn the language easily. This isn’t a challenge in the Baltic States. Not only do most people there speak more than one language, but they are also easier to train. You can find English-speaking individuals during Baltic recruitment or help them learn the language after hiring them. You’ll find English-speaking people more often in Estonia, followed by Latvia, and then Lithuania. It is our goal at Netcore to make sure that our partners expand to the best of their abilities. With our multi-language international web app systems, we let you exploit the bilingual talent pool of the Baltic States by setting up your startup sites optimized for various languages but controlled from a central point. You will be exposing your company to new diverse markets, with each person with a front-end presentation of your site in a language he or she understands best.
Very Little Cultural Difference
Cultural differences are always a concern when it comes to Baltic recruitment. Fortunately, this region has a culture that’s quite similar to western culture. This is especially true among the youth and professionals in the technological development field. Most people in the Baltic States consider themselves to belong to Western Culture. They strongly believe they associate most with western values and ethics, which was pretty apparent when an attempt to brand them as the "New East" was soundly rebuffed by politicians and local population alike. Talent from the Baltic States will have no problem fitting in with your company culture, which will make putting together a technology research and development team that works seamlessly easy.
R&D Can Be Outsourced or Directly Managed
You can outsource or directly manage your R&D in the Baltic States. Outsourcing has its advantages as it reduces research and development costs, management hassles, and still provides quality of work. Around 57% of respondents in a recent SEB survey< claimed that they outsourced as an effective cost-cutting measure. 31% of respondents in the same survey stated that outsourcing allowed them to improve the quality of service and 28% claimed it gave them access to intellectual talent. If handled correctly, outsourcing can easily become a beneficial part of your research and development strategy. However, building in-house teams also have its own benefit, especially if you intend to maintain an R&D center in the Baltic States for a long time. While this process is a little more challenging, it offers a great number of benefits like:
- Better quality control.
- More loyal staff.
- Better brand awareness.
- Cost-savings in the long-term.
- Ability to hire carefully selected talent to your research and development team.
All these factors make creating an in-house team a better alternative to outsourcing. It’s a good idea to consider the pros and cons of both options carefully before making a decision. Whether you are outsourcing or planning to do direct management, Netcore will provide custom, enterprise level back-end UX and clean UI solutions such that your employees will not feel like they are miles away from each other. We aim to make employees as productive thousands of miles apart as they would if they were seated on the opposite ends of the desk. We will carefully craft productive platforms where messages, files, and money can be processed and passed between people and departments with the least amount of input from the users’ end. We have an experienced team of developers who will full use of PHP, Laravel, and Ruby to make this happen.
Convenient Time Zone
Baltic States are located conveniently, especially for businesses in North America or UK. They are up and working early and can offer near continuous service because it’s not nighttime there when people in North America start their day. There are some challenges in scheduling phone calls and conferences because of the time difference, but it is easy to develop a good system of communication to ensure there are no significant delays. If you have a good communication or research and development process in place, it is easier to work with the different time zones without experiencing problems. You might face a few hurdles at the beginning, but most businesses get it down to a well-oiled machine eventually.
Access to R&D Support
Most people don't know that the Baltic States are a bubbling technological hub with plenty of R&D support. Here's a small chart that gives you a clear indication of how many R&D personnel is available in the Baltic States in the percentage of total labor force:
That’s not all, Estonia ranks 35th in the world when it comes to University/Industry collaboration, Lithuania ranks 27th, and Latvia ranks 64th. This creates a rich environment for technology research and development in the region. Your R&D company can easily benefit from this environment. A well-established R&D company in the Baltic States will help your R&D center to reach new heights. We can help you along the road by providing efficient R&D support as well. Our company provides support in all aspects of establishing a company, and that includes:
- Planning – With wireframes, mockups, and documentation.
- Design – Sketch design, Invisionapp prototyping.
- Frontend - Vue.js/react.js, electron.js, HTML/CSS.
- Backend- PHP/Laravel.
We can assist with desktop apps, websites, mobile applications, intranet systems, IT systems, etc. If you need any assistance with R&D, we can help. Our competent team has several years of experience in this field and can provide comprehensive support as you set up an R&D office in the Baltic States. We have worked on fields like tech and software development, SaaS products, comparison and business listings, and IT systems. In our opinion, setting up an R&D office in the Baltic States is worth any amount of effort you put in. According to popular opinion, Lithuania is a great choice for the budget conscious while Estonia is awesome for people looking for superior quality across the board. Latvia strikes the right balance between the two. Feel free to share your thoughts and comments with us in the comment section. You can also send a message to the author if you want further clarification regarding the content of this article.