In the startup environment of Latvia, we most often look and compare ourselves with our Baltic neighbors or look for opportunities and new markets in Western Europe, but the Balkan region is also developing more and more actively in Europe. It becomes an attractive market for investment as well as for company expansion. In order to better understand the common features and opportunities for Latvian and Balkan start-up cooperation, the Latvian Investment and Development Agency (LIAA) together with the hackathon “HackCodeX” team met with start-up ecosystems in Serbia, Romania and North Macedonia.
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Similar to the Baltic States, startups in the Balkans are also looking for an opportunity to make the region attractive for investment and innovation, learning from best practices, as well as developing their own “unicorns”, proving the potential of the Balkans. In recent years, rapid growth has been observed, as well as the much-needed state support for the development of start-ups has been achieved in several countries. It should be noted that not all Balkan countries are in the European Union (EU), which also reduces the available support mechanisms. Each of the countries has its own business specialization, as well as differently developed ecosystems, but the desire to prove itself in the world context, as well as to form close friendships with the ecosystems of other countries, is common.
Romania – outside the Balkan framework
Romania’s startup ecosystem is the fastest growing in the entire region, attracting more than 101 million euros in investment in 2022. The rapid development is also one of the reasons why Romania is setting itself apart from the rest of the Balkan region, collaborating more with the startup ecosystems of Bulgaria, Greece and Ukraine. The largest companies attract investments mainly from EU investors, but local investors and venture capital funds have also become more active. Romania has a very large domestic market, which also encourages competition among urban start-up communities. However, at the same time, most companies are developing within the country, which reduces the number of start-ups that are able to develop their activities outside of Romania.
A Romanian startup success story is UiPath, a software company founded in 2005 that produces robotic process automation (RPA) software. From 2015, “UiPath” has attracted several million investments, until in April 2021, it decided to put the company’s shares in public circulation, raising 1.3 billion US dollars on the New York Stock Exchange. It was one of the largest IPOs (initial public offerings) of US software companies in stock market history. UiPath’s achievements have led to more interest from venture capital investors in Romanian startups, and more companies looking to replicate UiPath’s breakthrough.
In Serbia, there are more financing than active companies
Serbia is the leading country in the Balkan region, which is why several international companies choose to establish their regional offices in Belgrade. Recently, along with additional support, state support for start-ups has also developed rapidly in the parliament in Serbia, both by providing financing and offering support mechanisms and creating friendly regulation. An example is tax relief when investing in start-ups or venture funds. It is relatively easy for companies to attract financing from both Serbian and US and Swiss investment banks. It is also beneficial for foreign companies considering product development in Serbia. In general, mutual cooperation between large companies and start-ups, jointly introducing innovations, is widely developed. Various accelerators are widespread, as well as companies individually ready to invest in startups or create their own investment funds for the development of various innovations.
According to an overview of the startup environment by the startup support organization “Digital Serbia Initiative”, the main areas of development in Serbia are video game development, mobility solutions, business improvement tools, artificial intelligence and data analysis.
Serbian startups have attracted more than 70 million euros in venture capital funding over the past four years, providing jobs to more than 1,700 people.
Although there are many opportunities for companies to attract financing, during the discussions it was mentioned that one of the biggest challenges for Serbia is to identify new markets in order to develop companies in other countries as well. Currently, there is a lack of sufficient information and contacts that would allow even smaller companies to grow outside of Serbia, so it is especially important to establish contacts with community organizations and entrepreneurs in other countries in order to share experience and identify new development opportunities.
Highly qualified professionals and future potential
About 400 start-ups are currently active in North Macedonia, mainly representing the artificial intelligence, educational technology and e-commerce sectors. As the head of “Startup Macedonia” Igors Madzov stated in the discussion, the goal is to further develop the financial technology sector as well, which could be interesting for Latvian companies that already have extensive experience in this field. Companies point out that there is currently a lack of sufficient support from the state. Growth stage startups are not getting the support they need mainly because the ecosystem has focused on the early stages. There are also positive changes in this area – in 2021, the government of North Macedonia approved the 2022-2026 2018 Accelerated Economic Growth Plan, and it also includes a 27 million euro hybrid investment fund focused on start-ups and innovative companies.
One of the strengths of North Macedonia is the highly qualified technology workforce, which is promoted by promoting the development of study programs, as well as learning the basics of computer science in schools. The highly skilled workforce (especially engineers) at affordable prices has made many companies look for talented workers directly in Skopje. At the beginning of 2022, the Latvian software company “TestDevLab” decided to expand its operations and open an office in Skopje. Now, a team of more than 70 ISTQB certified QA engineers work in the North Macedonia office of “TestDevLab”.
During the discussion, looking for the common features of Latvia and North Macedonia, it was highlighted that both countries have a similar mentality of small countries. The representatives of North Macedonia stated that it is challenging for entrepreneurs to implement a growth mindset in their business. Startups focus on the B2B (Business to Business) business model, offering products that optimize existing processes directly in local companies. “Startup Macedonia” admits that it would rather see innovative products and services with growth potential to break out of the Balkan market. Entrepreneurs from both countries, as well as industry professionals, are hardworking and motivated, and want to prove themselves in the international arena.
What is the potential benefit of cooperation for Latvian start-ups?
Getting to know the start-up communities of these countries, you can see that a positive image of Latvian start-ups and their ability to succeed in the global arena has been formed in the Balkans. It was global thinking and the desire for growth that was mentioned as one of the aspects that Balkan entrepreneurs could learn from Latvia’s experience.
Several companies are also interested in using the opportunity provided by Latvia for a start-up visa, which would allow them to fully develop their business in Latvia.
In Serbia and Romania, joint cooperation between start-ups and large companies is more widely developed to promote innovation, which is currently still at an early stage in our market. The experience of these countries in establishing cooperation with international companies has proven that this is the next step in the development of the ecosystem. We must also take into account the above-mentioned aspect of the highly qualified workforce, which is also looking for opportunities to try out opportunities in European companies. Luka Stirbats, head of the Romanian start-up studio “Creative Motion”, gives a practical example: “Romania is a great place for Latvian start-ups to validate their products, taking into account lower customer acquisition costs and the potential of a larger number of users. Meanwhile, Romanian start-ups can learn from Latvia’s experience the global approach and understand how to think big from day one.” The start-up ecosystems of the Balkan region are very open to sharing experiences and learning new things, creating valuable collaborations and developing innovative projects together.
2023-05-20 11:11:07
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