Dealroom, the leading provider of data on startup and scaleup ecosystems in Europe and around the world, has published two very relevant reports: the third edition of the report for the countries of Central and Eastern Europe (CEE), and the first edition of the report for the countries of Southeast Europe (SEE). Croatia is included in both reports as one of the region’s promising and fastest-growing startup and scaleup ecosystems (CEE/SEE). This report pays tribute to resilient founders in the region (CEE/SEE), and the high amounts of venture capital and other funding that founders have raised despite turbulent times. What was most impressive was the strength and endurance shown by CEE startups. Given the current situation, Ukraine found itself in the middle of a war, and the rest of the CEE region also felt the consequences. Despite the difficulties, combined venture capital investment in the CEE region has doubled since 2020. Furthermore, newly founded CEE startups are ranked in terms of jobs created per euro of venture capital invested, among the highest in Europe. In addition to being an effective value creator, venture capital in the CEE region has shown pioneering initiative and created a diversified investment portfolio, branching out into new investment sectors such as Gaming, Web3 and Crypto.
Dealroom’s report focusing on the South East Europe (SEE) region states that SEE is one of the fastest-growing ecosystems in Europe, and has grown significantly faster compared to the broader CEE region. VC funding in SEE reached an all-time high of over $1.3 billion in SEE-based startup VC funding. Both publications provide an overview of the CEE/SEE ecosystem and how uncertain times have affected it. The reports explored CEE/SEE startups, their funding and value creation. The reports include mentions of current and future projected blockbusters as well as prominent rising stars. The CEE report included a deep dive into the emerging sectors of business software, games and web 3, and a segment dedicated to Ukraine. The SEE report included a special feature dedicated to Bulgaria.
The startup and scaleup ecosystem in the CEE region has changed dramatically since the first venture capital investors appeared in the region in the early 1990s. Today, the combined enterprise value of SEE startups is four times higher than five years ago, and now in 2022 it amounts to € 190 billion. In this report, countries considered to be part of CEE include: Estonia, Lithuania, Latvia, Poland, Czech Republic, Hungary, Slovakia, Croatia, Romania, Serbia, Bulgaria, Montenegro, Slovenia, North Macedonia, Bosnia and Herzegovina, Albania, Kosovo, Moldova, Ukraine, Belarus. Of the listed countries, Croatia, Lithuania and Ukraine had the highest combined growth in the value of companies in the startup and scaleup ecosystem. Croatia took second place in terms of growth. With more than 44 unicorns in 2022, the number of unicorns has more than doubled since December 2020, making 2021 and 2022 the strongest years for unicorn creation in CEE. A particularly successful unicorn founded in Croatia, Rimac Automobili, with a total funding of € 880 million, became a unicorn in 2022 and was valued at more than € 2 billion. Infobip is also a Croatian unicorn, and a few success stories coming out of Croatia include: Nanobit, Fonoa and Cognism. Croatian scaleup rising stars valued at less than € 200 million include Aircash, Gideon, Photomath and Microblink.
For easier access to capital, many startups decide to move their formal headquarters outside the region (CEE). Statistics show that this is done by as many as 17% of startups and scaleups that have raised more than € 1 million more in venture capital funding. Some of the most popular moving destinations were found to be London and the US East and West coasts. The aforementioned Croatian unicorn Infobip has moved its headquarters to Great Britain. It is important to note that regardless of the startups that formally move their headquarters, the development team and most employees remain in the region. Croatia has one of the lowest relocation rates of headquarters outside the country’s borders. Dealroom estimates the combined value of Croatian startups and scaleups to exceed € 5 billion, of which about one-third of the value is represented by companies whose headquarters are formally outside Croatia. Still, the development team and most employees remain in Croatia.
The CEE startup scene is known for its resilience. With 23% of CEE startups funded by venture capital, SEE startups are shown to receive VC funding at the same rate as the rest of Europe. After VC funding, CEE startups develop from Seed to Series A at almost the same speed as startups in the rest of Europe.
Interestingly, bootstrapping (or self-financing) is essential in late-stage startup successes coming from the CEE region. Almost a quarter of the unicorns founded in CEE raised their first external financing through a venture capital round, which earned them unicorn status. This also applies to Croatian Infobip, bootstrapped before the first round of financing, with which it acquired unicorn status in July 2020.
Venture capital activity in the CEE region exceeded all years prior to 2021, and at the current rate, 2022 will match last year’s levels. Four countries stand out with the most collected venture capital, and more than 70% of the total venture capital investments in 2022 were invested in these countries, with Estonia in first place with € 1.4 billion, the Czech Republic in second place, Croatia third place with € 865 million, and fourth in Poland. CEE has so far shown remarkable resilience until 2022. The average funding per startup, which is decreasing globally, is currently increasing in SEE to € 260 thousand. Finally, the report found that the estimated value of startups and scaleups in the Enterprise Software sector in SEE has a combined valuation of $14.8 billion, which exceeds Fintech, Transport and e-commerce combined.
SEE is one of the fastest-growing ecosystems in Europe, as SEE startups have grown 49.9x since 2012 in combined enterprise value. This growth is significantly faster than CEE startups, which grew 9.1x and surpassed the European average of 12.1x since 2012. In terms of sectors, Enterprise Software, Fintech and Transport are the leading sectors in CEE, with these three industries generating more than $24 billion in enterprise value. VC funding in the region is at an all-time high, with the report reporting combined VC funding of SEE-based startups to reach more than $ 1.3 billion in 2022 and VC funding growing 5.9x since 2017.
Unfortunately, access to venture capital funding is very uneven across the SEE region. Similar to the broader CEE region, SEE is known for bootstrapping and traditionally less engaged investors. Recently, entrepreneurs have started to seek VC support more often than before, and investors, both domestic and foreign, have also begun to show more interest in SEE startups than ever before. The report states that Croatian and Bulgarian startups are up to three times more likely to be VC-backed than startups in Albania, Montenegro and Kosovo. On the plus side, SEE-based startups attracted more funding than in 2019, 2020 and 2021 combined. For example, Rimac, a Croatian unicorn, received € 500 million in the Series D financing round in June 2022.