Kosovo, the best tech startup ecosystem you didn’t know about
Kosovo might we one of the most overlooked early investments ecosystems. Behind all its problems, small size and lack of inertia, we also find extremely rare and crucial elements to catalyze a thriving ecosystem. A future balkan version of Estonia, or Israel, awaiting opinionated investors to handhold them above the fold.
Brief background of Kosovo for investors
1 in 3 live in poverty, 1 in 10 live in extreme poverty (3rd poorest country in Europe) and it is a transitional economy, just coming through a combination of war, political conflicts and a rural agricultural economy. Yet it has 88% Internet penetration rate. This is the highest, by far, in the region. Higher than the average in Europe. (The story how the 3 co-founders of IPKO made this extreme oddity possible is a story of its own league on entrepreneurship and grit).
This digitally enabled population is also the youngest in Europe (70% of the population is below 35 years old). Half of its population wants to emigrate, but cannot. The Kosovo passport is one of the weakest in the world. Remittances from those who managed to emigrate are 40% of families’ income. It is fair to say that almost everyone has some support from abroad and that the Kosovar diaspora is a powerful element (there’s even a “Ministry of Diaspora”). Politicians are not focused on entrepreneurship.
Land for angel investors
To put it bluntly, Kosovo has a captive highly tech-skilled youth who prides on their new nationality. They are just barely starting to believe its potential, to invest in themselves, with very high hopes. Meanwhile the country infrastructure and government does the same. Most non tech-skilled people dream of a stable ~300 eur/month junior government job. Few venture into non-tech private sector for ~600 eur/month junior salary. Meanwhile a growing number of tech-skilled people do european or american outsourcing gigs for ~2000 eur/month. This ecosystem of backoffice developers for european companies want to break free from service contracts, and donor-dependence grants and contracts. They want to build and own a product, own the result of their work and grow it. Their growth opportunity is huge, this opportunity to be a first mover investor to validate their dreams and shape the path is rare. Specially in a world dominated by Silicon Valley funds obsessed with hyper growth for ever-growing valuations that lure FOMOing LPs.
What are the missing pieces? 1) A combination of ruthless angel investors to both push good ideas into investable seed companies and fuels the kindling of investment 2) a strategy to create local heroes to lift the mental blocks of what’s possible, and 3) shift from a mindset of copycat fear to one of strength through stakeholder differentiation and co-creation.
The reality today on the ground in Kosovo (mostly Pristina), is that there is a fair size ecosystem of functioning companies with skilled developers doing service contracts and trying to figure out how to become a product company without being able to reach investors, on a small local market without public support or awareness towards entrepreneurship.
We have visited Kosovo several times in the last 4 years and we can see the pace of change picking up. Our advice to startups is to help them find ways to lengthen their runways without investor money. To explore non-debt/equity growth models. To align their service contracts so they subsidize early product development and then do a spin-out (like Development Seed did with Mapbox). To pursue hyperlocal strategies (like the kosovar company Giraffa is doing). As much as our work with them can focus on making them attractive and investable, there is no such network yet. Making the ecosystem attractive to investors is rather done not by individual startups, but by a deliberate strategy to rebrand the ecosystem, from making local people famous to sending delegations in both directions (inviting investors in, and touring startups out). Making Medium posts like this one also helps, hopefully 😀
Let’s name some of the leaders:
“Innovation Center Kosovo”, has undoubtedly played a central role incubating entrepreneurship. It is rare to find a stakeholder who has not benefited from their work. Their struggle, in my opinion, is that their donor-funded model is at odds with a mature multipolar ecosystem, specially when helping new stakeholders rightfully aim to use donor funds to kickstart their own growth.
The european and american backoffice service ecosystem we mentioned earlier includes many functioning, successful, and growing companies: like Open Data Kosovo, Frakton, Kutia, Zombie Soup, … A growing number of them consider, to varying degree, how to pivot/diversify/grow internal products.
Jcoders which masterfully fills an educational gap as both a social enterprise and a for profit business.
Meridian markets has grown a brilliant and very successful model basically mixing WholeFoods, WeWork and Starbucks on a single space.
Hackerspace, and Bovenet makerspaces. These are all fantastic sandboxs to help young adults and curious minds in general, learn coding, tinker with electronics, and get some hands on experience with 3D printers, robots, … basically help hungry minds realize their potential.