Eastern European countries are favourable host countries for new start-ups.
These territories represent a growing technology hub and a developing economic ecosystem with a focus on innovation. The IT and digital sector is growing rapidly. In Ukraine, it is growing at a rate of about 20% per year. Between 2016 and 2017, the Romanian IT services sector grew by 13.6%. In the second half of 2020 the IT sector accounted for 9.4% of Estonian GDP.
Eastern Europe is the cradle of many successful start-ups: unicorns, start-ups valued at more than one billion euros, are launched in Poland, Estonia, Romania and Ukraine. Estonia is the world leader in this sector, with the highest number of unicorns per capita (5). The start-up market is supported by a large amount of investment in venture capital. 600 million euros were invested in Poland in 2019.
Eastern European countries have a favourable economic climate for the development of such companies:
- R&D centres are flourishing in all Eastern European countries and are supported by the governments. Big international names have already set up research centres in Ukraine, Russia or Estonia, such as Google, Samsung, Huawei, Boeing and Telia. Amazon opened a centre in Bucharest in 2018. 16 Ukrainian unicorns have kept an R&D centre in their home country, such as Talkable, Readdle, Allset or Elementum (2018 figure).
- Incubators, coworking spaces and innovation clusters attract international talent and investors. Within these structures, collaborations are set up between investors, developers, universities, etc. Russia is home to nearly 300 incubators, the largest of which is Skolkovo, not far from Moscow. Similar structures are located in Ukraine (Unit.City), Romania (Cluj IT Cluster) or Estonia (Mektory). Learn more.
- The region is known for the quality of its IT training. More than 700,000 IT specialists work in Ukraine, Russia and Belarus. Poland ranks first in the world for the quality of its Java developers. Estonia’s digital education ranks highly in the PISA rankings and the IT talent pool of these countries is highly ranked in the World Economic Forum’s index. Finding and building a team of experts with experience to deliver your projects is easy.
- The legislative strategies pursued by the governments are advantageous and create a favourable climate for investment and innovation. The e-residency programme in Estonia, for example, allows you to set up and run a business in a 100% digital way. On the other hand, public financial support for the digital sector is granted and a simplified and advantageous tax system is introduced. The states are seeking to boost their still young economies.
Some examples of unicorn start-ups:
- Pipedrive, founded in 2010, is the fifth Estonian unicorn. It is a developer of web and mobile apps. The company is now present in 10 European countries and the US. (other Estonian start-ups: Skype, Transferwise, Bolt, Playtech).
- Grammarly is a Ukrainian AI-based start-up. It is an online English text correction software. Founded in 2009, the project attracted $110 million in investment in 2017, and another $90 million in 2019. It is valued at over $1 billion. (other Ukrainian start-ups: Readdle, People.ai).
- UiPath, founded in 2005, is the first Romanian technology unicorn. It is valued at 6 or 7 billion dollars. The company is specialised in the development of software robots used in the process of automating production lines. It works in collaboration with international companies and public services. Its headquarters have been relocated to New York.
Conclusion
Many successful start-ups are born in Eastern European countries. Thanks to a proliferation of R&D centres, incubators and foreign or public investments, entrepreneurs benefit from a favourable climate for development. More and more unicorn start-ups are emerging in these territories.
InterTrade Consulting can assist you in your projects in Eastern Europe and the Baltic States. Contact us for more information: contact@intertrade-consulting.com
