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Start for freeThe Changing Landscape of Eastern European Startups
The startup ecosystem in Eastern Europe has undergone significant transformation over the past decade. A panel of prominent venture capitalists recently shared their insights on this evolution and the exciting future ahead for the region.
A New Generation of Experienced Founders
Bogdan, General Partner at Underline Ventures, noted that most Eastern European countries are now entering their "second generation" startup ecosystem:
"Apart from Estonia, we are basically at the second generation ecosystem. We already have in each country in Eastern Europe a handful of early stage startups which have managed to grow to be billion dollar companies or be evaluated at hundreds of millions."
This marks a major shift from 10 years ago, when most founders were first-timers with limited experience. Today's founders often have significant operational experience from larger tech companies or are serial entrepreneurs on their second or third venture.
As Bogdan explained:
"Now they are second time, third time founders. This is radically different to what we had a decade ago. A decade ago almost everybody who started a startup was doing this for the first time."
This increased experience and expertise among founders is expected to fuel even greater growth and success in the coming years.
Scaling Up Across the Region
The panelists highlighted how startup success stories are emerging across Eastern Europe, not just concentrated in a few hubs. As Enis from 500 Emerging Europe noted:
"If you look at the 32 unicorns in Baltics and Central Eastern Europe in total, 30 of them are fully global and most of them are US-focused companies. You don't have a region here - this is not a region where you can expand from Bulgaria to Romania to Poland and become a unicorn."
Instead, the most successful startups from the region are taking a global approach from day one, often targeting the US market. This allows them to reach unicorn status and beyond.
A Collaborative Ecosystem
Despite increased competition, the Eastern European startup scene remains highly collaborative. Zarko from Eleven Ventures emphasized this as a key strength:
"One thing that I'm extremely happy about how the local system evolved is that it remains still, and actually this is intensifying, very cooperative in nature. Although we are competing for talent, venture funds are of course sometimes competing but oftentimes actually stacking together."
He noted that this spirit of cooperation and knowledge sharing is not as common in larger, more established markets. It gives Eastern European startups and investors a unique advantage.
Growing Investment Activity
The panelists represent a new wave of venture funds focused on Eastern Europe, bringing more capital and expertise to the region. Some key stats shared:
- Underline Ventures is raising a €20 million fund
- 500 Emerging Europe has a €70 million fund for the region
- Eleven Ventures is actively investing from its latest fund
This increased funding availability, combined with more experienced founders, is expected to accelerate startup growth significantly.
Key Factors VCs Look For
When evaluating potential investments, the VCs emphasized that the founding team is by far the most critical factor. As one panelist summed it up:
"The team gets us from zero to one. The rest are just red flag reviews."
They look for founders with deep domain expertise, strong execution skills, and the ability to attract top talent. The specific idea or product is seen as secondary, as great teams can pivot and find product-market fit.
Leveraging AI and New Technologies
The rise of AI and other emerging technologies is creating both opportunities and challenges for Eastern European startups. The VCs highlighted a few key points:
Urgency to Adopt AI
Zarko emphasized the need for startups to rapidly integrate AI capabilities:
"We are actually trying to develop and I think it is and should be a theme across the other VC colleagues here to really educate and prep and help portfolio companies to be ready and to utilize this technology as quickly as possible."
He noted that VCs have a key role to play in pushing startups to embrace AI before it's too late.
Talent Challenges
The panelists discussed the shortage of deep AI expertise in the region. There's a need to attract talent with backgrounds from top global universities and companies to help local startups implement advanced AI.
Separating Hype from Reality
With the AI boom, the VCs cautioned about the need to "sift through all the fluff" as every company claims to be an AI company now. They emphasized taking a pragmatic approach to AI adoption.
The Road Ahead
Looking to the future, the panelists were highly optimistic about Eastern Europe's startup potential. Key predictions included:
- The scale of startup activity growing at a much faster rate in the next decade
- More billion-dollar companies emerging from the region
- Venture funds from the region achieving greater success
- Continued collaboration giving the ecosystem a competitive edge
As Bogdan summarized:
"My expectation is that in the next decade we'll see this new generation of startups being built by more experienced founders who have seen how the sausage is made. And the scale of this industry in the next decade will be significantly bigger."
Conclusion
The Eastern European startup ecosystem has come a long way in the past 10 years, maturing into a vibrant scene with global ambitions. With experienced founders, increasing capital availability, and a collaborative spirit, the region is poised for even greater success in the decade ahead.
For founders and investors alike, Eastern Europe represents an exciting opportunity to build and back the next generation of innovative, world-class technology companies.
Article created from: https://www.youtube.com/watch?v=pjuOb3PmVNM&feature=youtu.be