Startups in Serbia

Serbia is a country on a crossroad.

Serbia is located between two different geographical, ethnological and historical regions — those of the Europe and the Middle East. The history of Serbia has been shaped by continuous competition between those two parts of the World. On top of that, the division between East and West has been reflected in internal political and territorial structures of Serbia itself.

Serbian Kingdom had became prominent in Europe in early 13th century but existed for a relatively short period of time (for about 130 years). In a mid-15th century Serbia lost its sovereignty to the Ottoman Empire and stayed within its realm until late 19th century when it obtained de-jure independence (recognized by the Congress of Berlin in 1878) after Russian victories over Turks army.

It was the first country to enter the World War One after Austria-Hungry had accused Serbia in masterminding the Sarajevo episode. During that war Serbia lost more than 20% of its population.

After the Second World War Serbia became one of the most prominent republics within the newly formed socialist Yugoslavia which also included Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Slovenia. From the early 1980th Yugoslavia’s regions had received an unprecedented level of political and economic independence. By the end of 1990th most of former Yugoslav commonwealth entities became independent states.

That dramatic breakup had lead to regional wars and it became the major point of contentions in Europe at the end of 20th century resulting in current political tensions existing between Russia and the EU. In 2008 the province of Kosovo became the latest region which was separated from Serbia. However, Kosovo’s new political status remains a divisive issue within the international community.

Economically Serbia depends primarily on its agriculture production. Serbia is world’s second producer of plums and raspberries. Serbia’s industrial sector was heavily affected by UN sanctions and NATO bombing in 1990th and now is in a process of a very slow recovery.

For most part of XX century Serbia was the heartland of centralized Yugoslav economy closely managed and controlled from Belgrade and characterized by corruption and over-bureaucratization. Long after dissolution of the Socialist State Serb telecommunications sector had stayed under the auspice of one government led corporation. As a result, although Internet penetration in this country has reached Western European norm of around 60%, mobile usage is still relatively low.

Additionally, outdated commercial laws as well as excessive tax levies on SME have negatively affected local investment climate, which led to shortage of seed and VC financing in Serbia. Country’s manufacturing sector competitive advantages are undermined by the lack of innovations. However, Serbian big corporations are slow to adapt new products and services developed by high-tech founders.

On top of that, local startups are faced by shortage of qualified personnel as many talented Serbians continue to leave this country for better opportunities in EU. In past several years, Serbian government had sponsored several projects aimed at fostering the grow of country’s startups ecosystem. Few of those initiatives have resulted in significant breakthroughs.

At the same time, developed fixed Internet infrastructure, low costs and absence of significant competitive pressure provide high-tech entrepreneurs with multiple opportunities on B2C markets, including FinTech, e-commerce, EduTech and entertainment.

Business Notes for Startups Founders:

  • political climate: moderately friendly;
  • economic climate: not friendly;
  • regions to focus: locally;
  • industries to focus: FinTech, e-commerce, EduTech and entertainment;
  • major limitations: slowing GDP growth rate, dominance of big, corporate, government linked businesses, high taxes, low-income population, excessive administrative barriers;
  • stimulus: low costs, good education, low competition;
  • opportunities: to develop Internet based e-services for compact users groups.

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