CEE Startup Landscape

Central and Eastern Europe (CEE) is emerging as a vibrant hub for startups and innovation. Countries like Romania, Estonia, Serbia, Poland, Croatia, Czech Republic, Hungary, Slovenia, and Lithuania are making significant strides in the startup ecosystem. The region’s GDP growth consistently outpaces the EU average, reflecting its dynamic economic landscape and resilience.

With over 26,000 startups in the CEE region, their combined enterprise value has more than doubled in the past five years, soaring from €89 billion in 2019 to €213 billion in 2023. Poland leads with nearly eight thousand startups, followed by Romania and Czechia with over three thousand each. The CEE region boasts 52 unicorns, collectively valued at €129 billion, representing 60% of the ecosystem’s total enterprise value.

Croatia and Lithuania have experienced the fastest growth in combined enterprise value since 2017, with Croatia surging by 16.6x to €10 billion and Lithuania by 15.7x to €4.7 billion. In 2023, Estonia topped the charts for startups as the most tax-friendly country in CEE and founder-friendly when it comes to bureaucracy, with the best free Wi-Fi network, coding in school curricula, and an e-residency program.

CEE has established itself as a leading region for Enterprise Software, with this sector accounting for a significantly larger portion of VC activity compared to others. The combined valuation of CEE Enterprise Software startups, at €80 billion, surpasses that of Fintech (€30 billion), Transportation (€19 billion), and eCommerce (€19 billion) startups combined. As the ecosystem continues to mature, CEE is witnessing the rise of promising startups in various segments, including disruptive technologies like Gaming, Web3, and Crypto.

Amidst macroeconomic challenges, DeepTech has emerged as a beacon of success. Leveraging its abundant engineering talent, CEE is actively participating in the global DeepTech wave. The EU aims to channel $47 billion in private capital to support DeepTech startups including CEE.

CEE founders are also embracing the AI revolution, with over 900 active AI product startups in the region.

Establishing a vibrant startup ecosystem relies on a solid enabling infrastructure. This includes access to funding and talent, a supportive regulatory environment—especially regarding IP, taxes, and data protection—and high-speed broadband connectivity. Additionally, opportunities for networking, learning, and collaboration are essential. In CEE region, opinions on new regulations, especially on the EU’s AI Act vary. Some express concerns about implementation challenges and potential competitiveness. This legislation, along with the Digital Markets Act (DMA) and Digital Services Act (DSA), impacts tech startups in the region. While DMA and DSA prioritize transparency, uncertainties surround DMA’s effect on startup growth. Furthermore, the forthcoming Data Act aims to enforce data sharing, potentially benefiting startups. EU initiatives for startups include regulatory sandboxes, investment programs, and efforts to define startup categories.

Across CEE region, startup support is evident through accelerator and incubator programs, such as the Baltic Startup Wise Guys in Riga, Vilnius, and Tallinn, and Seedcamp, which continuously invests in CEE startups. Co-working spaces also play a crucial role in startup success, fostering community-building and collaboration. Examples include HubHub (with branches in Prague, Budapest, Warsaw, Bratislava, and London) and the Cambridge Innovation Centre (Warsaw).

Despite current geopolitical risks, the investment landscape in CEE remains one of the fastest growing in Europe, experiencing a 7.6x increase since 2017. Offering a unique blend of advantages including lower operational costs, a skilled workforce, and supportive regulatory frameworks, the CEE region presents significant opportunities for investors.

Recently, CEE founders encountered challenges in fundraising, leading to cautiousness among VCs. However, the region witnessed several impressive funding rounds.

“The difficulty of obtaining external financing or relying on customer cash means that one must be proactive and, above all, ready to adapt. The economic situation exposed business realities; the bar was raised high. Only good and the best projects won,” says Magda Surowiec, managing partner at Unfold VC.

In 2023, CEE companies secured €2.1 billion in VC investment, with over 940 funding rounds across 114 cities. Early-stage funding accounted for €900 million, while Series B attracted over €1.2 billion across 340 deals. Notably, in Q1 2024, startups raised €630.1 million, compared to €566.5 million in the same period of 2023.

VC funding for CEE-based Crypto and Web3 startups has surged by 5.6x since 2021. Web3 and Gaming startups in CEE mutually reinforce each other, capitalizing on the region’s renowned expertise. Estonia (€1.3 billion), Slovenia (€427 million), and Serbia (€289 million) concentrate over 70% of the combined value of Web3 startups in CEE.

With over €2 billion in exits since 2020, CEE has demonstrated a winning streak in Gaming. In the past five years, startups focusing on logistics & delivery, mobility, and vehicle production in CEE raised over €1 billion. Additionally, medical device startups raised €77 million in funding over 2023, marking significant growth compared to €20 million in 2022.

The region has witnessed several impressive funding rounds, often led by international VCs. Lithuania saw two $100 million rounds with PVcase and Nord Security. Czechia experienced Keboola’s $32 million Series A, while Romania’s FlowX.ai raised a $35 million Series A and DRUID secured a $30 million Series B. Poland’s Vue Storefront raised a €20 million Series A. Average funding rounds, primarily involving regional investors, have seen an uptick compared to the previous year, increasing from €0.8 million to €1.2 million.

The region has seen remarkable growth, with the number of unicorns more than doubling from 21 to 52 in 4 years. In Poland alone, there are five unicorn startups: Allegro, InPost Group, CD Projekt, Pracuj Group, and Techland.

2023 saw a significant drop in funding across CEE, particularly at growth and late stages, but Q1 of 2024 has already seen three startups from the region achieve unicorn status: Prague-based Mews, ElevenLabs with offices in Warsaw and New York, and Techland from Wroclaw.

Currently, CEE region boasts 52 unicorns valued at €129 billion, making up 60% of the total ecosystem value. Croatia, Ukraine, and Estonia stand out with twice the number of unicorns per funded startups compared to the European average.

Here are some startups to watch:

The countries within Central and Eastern Europe are uniting at a European level to amplify their digital voices and ensure their interests are effectively represented. Additionally, fostering collaboration at the EU level, particularly between institutions like the European Institute of Innovation and Technology and the European Innovation Council, holds immense potential. Such collaboration can identify promising companies within the CEE and streamline their access to funding, fostering growth and innovation within the region.

Startups can view Central and Eastern Europe as a good starting point for fast and cost-effective business and product testing before expanding into larger and more competitive markets. While the startup ecosystem is developing rapidly and investments are available here, it’s important to prioritize client needs and revenue over securing the next round of funding, as successful startups from CEE did when they went global with strong PMF, growing their businesses on new markets.