Kristo Käärmann’s frustration began with a Christmas bonus. The Estonian management consultant, working in London for Deloitte, received 10,000 UK pounds from his employer in December 2007. A tidy sum—until he transferred it home to pay his mortgage in euros. When the money landed in his Estonian account, 500 UK pounds had vanished. The culprit? His British bank had quietly used an exchange rate five per cent worse than the market rate, pocketing the difference.
“I had been incredibly stupid,” Käärmann later admitted. “I had foolishly expected that my UK bank would have given me the exchange rate I saw when I looked on Reuters and Bloomberg.”
That ‘missing’ 500 UK pounds sparked an idea. Käärmann and his friend Taavet Hinrikus—another Estonian in London, this one Skype’s former strategy director—devised an elegant workaround. Each month, they’d check the real exchange rate, then swap currencies between their accounts: Käärmann’s pounds into Hinrikus’s British account, Hinrikus’s euros into Käärmann’s Estonian one. No fees, no ripoffs, no waiting.
Four years later, their solution became TransferWise, now Wise, valued at over 11 billion US dollars. What began as a migrant’s mortgage problem had reinvented an entire industry.
The Tallinn testament
Käärmann’s story illuminates a broader truth about European innovation: the continent’s most transformative companies often spring from the frustrations of newcomers. These are not tales of integration but of reinvention—migrants who don’t simply join existing systems but rebuild them entirely.
Nowhere is this more evident than in Käärmann’s hometown Tallinn, recently crowned the world’s best city for startups by Monocle magazine. With just 450,000 residents, Estonia’s capital hardly seems a natural rival to London or Berlin. Yet this Baltic city has produced something remarkable: a nation with 7.7 unicorns per million inhabitants—the highest density in the world.
The Estonian model reveals something profound about the relationship between migration and innovation. Twenty-five per cent of Estonian start-up founders are now foreign citizens, drawn by the country’s radical digital infrastructure. Additionally, through its e-Residency programme, over 100,000 people from 170 countries have gained access to Estonia’s business environment without setting foot in Tallinn.
Digital natives and distant shores
Estonia’s success also demonstrates that geographical limitations that force global thinking. Unlike entrepreneurs in large domestic markets, Estonian founders know from day one that survival means scaling beyond borders. Bolt, the ride-hailing company, expanded from Tallinn to over 40 countries to reach unicorn status. Veriff built identity verification software from the start with global markets in mind.
This approach mirrors the experience of migrant entrepreneurs everywhere: constrained by local circumstances, they build solutions that transcend them. What makes Estonia different is how systematically it has embedded this mindset. The entire economy runs on the assumption that good ideas must travel.
The practical advantages are striking. Entrepreneurs can launch companies in under 20 minutes with no paperwork. Office rent averages roughly a tenth of London rates. More importantly, the regulatory framework accommodates rapid experimentation in ways that larger, more established systems cannot.
London’s loss
The contrast with London is instructive. Once Europe’s undisputed start-up capital, the city has seen its dominance erode in recent years. Only one ‘rocketship unicorn’ has emerged from London in the past five years, while cities like Stockholm, Paris, and Berlin accelerate past it.
This shift reflects both Brexit-related talent flight and the harsh new visa regulations for potential start-up founders that Brexit imposed. It suggests that London’s advantages—financial infrastructure, regulatory sophistication, network effects—may matter less than previously thought.
This is clearly London’s loss. Migrants offer not just skills but perspectives: different assumptions about how systems should work, different definitions of what problems are worth solving.
Integration’s limits
Elsewhere, Europe’s embrace of migrant entrepreneurship remains incomplete. Only 46 per cent of migrant founders in Germany feel well-connected compared to 57 per cent of domestic entrepreneurs. This integration gap reveals a deeper tension: the very outsider status that fuels innovation can hinder the networking essential for scaling.
The challenge is particularly acute outside established hubs. Significant disparities in innovation performance persist between European regions, and migrant entrepreneurs often struggle with unwritten rules and uneven playing fields. Traditional integration programmes, designed around language training and cultural assimilation, miss the point entirely.
What works instead are initiatives that celebrate difference rather than eliminate it. Estonia’s Startup Visa has attracted over 2,700 applications from 88 countries, not by promising integration but by offering immediate access to European markets through digital infrastructure.
The reinvention dividend
The distinction matters enormously. Integration implies joining existing systems; reinvention means rebuilding them. Käärmann didn’t integrate into banking—he created an alternative to it.
This pattern extends beyond individual companies. Migrant entrepreneurs build international connectivity and reinforce economic activity in ways that purely domestic entrepreneurs cannot. They arrive with what might be called ‘institutional fluency’—an understanding of how systems work differently elsewhere, and therefore how they might work differently here.
The implications for European competitiveness are substantial. As the continent grapples with demographic decline and intensifying global competition, the capacity for systematic reinvention becomes crucial. The question is not whether Europe can attract talent—clearly it can—but whether it can create conditions for that talent to transform rather than merely augment existing capabilities.
Beyond the Baltic
Estonia’s experiment offers a template, but not a blueprint. The Estonian model works partly because of specific historical circumstances: the post-Soviet need to build institutions from scratch, the absence of legacy systems to constrain innovation, the cultural memory of adapting to radical change.
Other European regions face different challenges. Cities must balance innovation with established industries, newcomers with existing communities, global ambitions with local concerns. The solutions will necessarily vary. What should remain constant is the recognition that migration, at its best, offers more than labour—it offers new ways of thinking about old problems.
The test of European innovation policy in the coming decade will be whether it can systematically harness this potential. That means moving beyond traditional metrics of integration—language fluency, cultural adaptation, employment rates—toward measures of reinvention: new business models, transformed industries, problems solved that locals didn’t know they had.
Käärmann’s stolen 500 UK pounds seems a small price for what it ultimately bought: a new understanding of how money should move. The lesson for Europe is simpler still. Sometimes the best way forward is to let newcomers show you the way.
Whether Europe can systematically embrace this reinvention potential will largely determine its competitiveness in the decades ahead. The early signs suggest that the continent’s future may well depend on its newcomers—not despite their outsider status, but because of it.
Photo: Dreamstime.
