With lower living costs than their Western European counterparts and a surplus of highly-trained tech talent, it’s no surprise that almost every country in the New East has been lauded as Europe’s next Silicon Valley at one time or another. But with so many contenders crowding field, which destinations really do go that extra mile to support eager startups and their founders?
The Calvert Journal has hunted down the best of the region’s up-and-coming technology, looking at the local employment and education market, funding, and opportunities for growth. That includes comparing how far your money will go on the ground via the Numbeo Cost of Living Index, where lower rankings mean lower prices. (As a bit of context, London ranks 34 on the scale of 536 towns and cities, New York is 12th, and Zurich is 2nd. The highest on this list is Tallinn, ranked 305). We’ve also included rankings from the World Bank’s Doing Business Index, newly released for 2019. This survey does receive its fair share of criticism, mainly that its a narrow measure doesn’t reflect wider business realities on the ground. While this is true to some extent — the index only takes ten topics into account when formulating the overall scores — we felt that it was still worth including.
Each city also has its share of startup success stories, some of which we’ve included some here. While there aren’t any “unicorns” on the list (startups valued at at over $1 billion), each story shows what really is great about all these cities: they all have so much more left to give.
Tucked away between Poland and Russia, Belarus struggles with all the usual hang-ups that come with being ruled by a post-Soviet autocrat for the past 27 years: local spending power isn’t what it could be, and there’s a heavy dose of bureaucracy to contend with.
Put politics aside however, and it’s obvious that the country’s startups are punching well above their weight. The Belarusian education system has always put a heavy emphasis on science, but with local opportunities lacking, a generation of well-versed programmers have been pushed to go it alone with their own projects. Companies such as Microsoft have been busy snapping up local startups for years now, with big names such as World of Tanks, MSQRD and Viber all hailing from Minsk. Interest isn’t just coming from the West, either. Hi-Tech Park, the country’s government-backed startup hub, recently announced new partnership with South Korean officials, while smaller companies from China, Norway, Israel, Great Britain, Austria, Cyprus, France, and Russia have also set up shop on campus. It’s this new momentum that the government now hopes to capitalise on with the imaginatively-named IT Decree 2.0. While companies registered with Hi-Tech Park already benefit from a special tax regime, the newly-launched initiative promises to simplify business regulations for tech firms, and relax rules on international work permits. It could well work. Between January and September 2018, some 200 companies registered with Hi-Tech Park — more than all the businesses who joined the hub in the 12 years since it was first founded.
When it comes to setting up shop in a new city or country, most founders look for three key traits: access to talent, ease of doing business, and funding opportunities. While Eastern Europe can tick the first two boxes without too much trouble, investment remains a sore spot. This is a Europe-wide problem, rather than just a regional one. Most European investors remain firmly locked in London, turning the UK capital into a veritable startup black hole — sucking up funding opportunities from elsewhere on the continent. Is this something you should worry about when moving east? Probably not. Generally, this pushes founders towards slower, but more reliable business models, meaning fewer unicorns, but perhaps less epic burnouts too.
If you are hoping to get serious investment however, then Moscow is the place to go. The EY Europe Startup Barometer recorded 78 rounds of funding taking place in Russia in the first half of 2018, putting it sixth overall in Europe and the easy frontrunner for Eastern Europe. Of those 78 rounds, 51 took place in the capital. Money, of course, isn’t the only draw bringing entrepreneurs to Moscow. Russia already has an unbeatable reputation for scientific rigour, and is keen to shake assumptions that Russians are reluctant to accept more innovative business models. More and more co-working spaces are opening their doors, while the Skolkovo Technopark, close to Moscow State University, provides a natural focal point for tech in this sprawling megacity.
When it comes to choosing New East cities with the potential to become major startup centres, we had tens of potential contenders. Our pick, however, is Skopje. Placed just north of Greece, landlocked Macedonia has seen a huge boom of tech firms set up local bases in neighbouring Bulgaria and Romania. Macedonia hasn’t benefited from the same influx of interest — partly due to its smaller size, but also due to its lack of EU membership. That leaves a lot of educated grads who find it’s easier to go it alone or join a small startup, than get a job across the border. Macedonia also stands out from other countries in the west Balkans thanks to a digital revamp of most of its bureaucracy. The country comes 10th in the World Bank’s Doing Business ranking — that’s one place below the UK and two places below the US.
The startup ecosystem still has a long way to go, but groups such as Startup Macedonia are already actively trying to improve the community by carrying out research and reaching out to more established partner institutions, such as those in Estonia. And while more work is needed before Macedonia’s fledging flounders hit their stride — particularly in terms of sales knowhow — some 80 percent of startups interviewed by Startup Macedonia said that they offered mentorship to those just starting out. That’s already a great sign for the future.
Back in 2000, while the rest of the world was still recovering from the anticlimactic non-arrival of the Millenium Bug apocalypse, Estonia declared that internet access was a basic human right. The announcement kick-started the country’s move to lead the world of e-government — allowing citizens to quickly complete basic tasks such as taxes through a simplified, digital portal. Today, the concept hardly seems revolutionary — but Estonia built its reputation as a digital innovator precisely because it got there first. It was also one of the first governments to truly throw its weight behind supporting startups, spurred on by the success of Skype, which was developed in the country.
Today, there are more than 550 startups in Estonia: the most in the world per capita, when you factor in the country’s modest population of 1.3 million. According to the EY Startup Barometer, some 208 million euros were invested in local startups in the first six months of this year (although that lump sum was spread among far fewer rounds than in cities such as Moscow). Officials are still protecting businesses with a corporate tax that’s only payable on dividends. There are dedicated startup visas on offer, as well as dedicated relocation guides for founders. Of course, there are drawbacks. The country’s small size and close-knit community (complete with chummy “in-joke” hashtag, #EstonianMafia) may seem a little claustrophobic for anyone who prefers to spread their wings. Luckily, in the digital age there’s always a solution. Simply register as an Estonian “e-citizen” and you won’t have to make the move at all.
Warsaw is a powerhouse on the Eastern European startup scene, drawing in companies who know when size matters. With a population of 38.6 million, Poland dwarfs its regional rivals in north-east Europe, bordering Czech Republic and Slovakia to the south, with Belarus, Lithuania and the Russian enclave of Kaliningrad further east. While the country’s nationalist-leaning government has sparked some hand wringing over the future of Warsaw’s more innovative business prospects, Poland still has prime travel connections, a strong middle class, and a rapidly growing market for luxury goods, as the recent opening of Vogue Poland proves. Poland’s size and solid education system means large local talent pool backed by solid tech know-how: Warsaw has 28 universities and colleges, including the Warsaw University of Technology. The country is also attracting talent from the wider region.
Data from the European Startup Initiative shows that while Central and Eastern Europe as a whole has a net outflow of 5 percent when it comes to startup founders moving abroad to set up business, with many moving west. Poland is one of the few places that buck that trend, instead attracting a new inflow of 13 percent. Not surprisingly, this trend has also caught the attention of plenty of multinationals, and most major companies will have some regional presence here. While that might mean more competition for recruiters, it also brings benefits. Google is just one of the companies investing major money in the Polish capital, opening a Google Campus with dedicated startup support back in November 2015.