European tech pioneer Ivo Spiegel co-founded software and services company Perpetuum Mobile back in 1989. It may not seem like a big deal but let’s put things in perspective – the commercialization of the internet only began in the early 1990s.
Europe has caught up and even surpassed the U.S. in some areas, like Fintech, but the region has historically lagged behind. In terms of startups, the small, Balkan country of Croatia has kept a snail’s pace amid political instabilities and domestic and regional conflicts, which makes Spiegel’s accomplishments even more noteworthy.
In 1997, Spiegel and his team conducted the first e-commerce transaction unintentionally. They were selling e-commerce solutions to companies so they set up a web shop featuring computer products like hardware and printers, just to showcase for B2B clients what they could do. The hardware e-commerce site took off and became profitable in its own right.
Spiegel became active in Croatia’s startup scene in 2007, when there was no scene, no ecosystem, just a few people trying different things. He co-founded Tech.eu, a platform for European tech news and co-founded local incubator ZIP, which eventually merged with a local university. In 2016, Spiegel published European Startup Revolution, featuring his interviews with 28 of the most successful startups in the region, including TransferWise.
I was in Zagreb recently to speak about entrepreneurship and storytelling at Leap Summit and sat down with Ivo to learn more about Croatia’s ecosystem.
Amy Guttman: How are Croatian startups different or similar to their European peers?
Ivo Spiegel: If you’re a startup in Zagreb, you have much more in common with a startup in London than you do with a different kind of business in Zagreb. Capital is a challenge, but it’s easier than ever to access investors. All of the startups here have gotten some form of international funding. If you do your homework, then you know who’s willing to invest here and other places. The number of investors broadening their reach is growing immensely.
In Zagreb you have better access to top talent, but it’s not as cheap as it used to be. Still, the cost of salaries and the cost of living and doing business here is much cheaper than big cities like London and Paris. And, if you were born here, you have a valuable network of people to tap. Many startups see it as a competitive advantage over their peers in London. They can build strong teams. However, regulations here are not as good. For example, it’s almost impossible to create a stock option for employees. All the things that are standard in London are either complicated or not possible here. But, people are finding ways around it. Some are registering companies in Estonia to take advantage of the regulations that allow those things.
Guttman: Many cities and countries are actively recruiting foreign startups to help grow the ecosystem. Is Croatia attractive to foreign startups?
Spiegel: Croatia is not attracting foreign startups. Our president is a controversial figure. He set a strategy of being very isolationist. He’s travelled almost nowhere and almost no foreign politicians came here. The isolationist issue coupled with the fact that we really don’t have startup friendly regulations makes it difficult. Add to that the University of Zagreb, which you would normally see as a feeder for the ecosystem, isn’t very international and offers very few classes taught in English. But, there are newer, private universities that are doing better at attracting foreign students. On the plus side, as a small business owner, I’m relieved a big London startup isn’t coming here to snap up 300 great people because then I’d be left looking to replace my staff, so it’s not necessarily a problem.
Guttman: What’s the dominant sector in Croatia’s tech scene?
Spiegel: We get asked that question a lot, but there are none. The scene is so small, there’s no one dominant sector. Gaming is doing well here, we have some Fintech, AI, robotics, blockchain, agri-tech, tourism tech – but we’re talking about a few good examples of these – not lots of them.
Guttman: Does Croatia’s size give it an advantage or disadvantage?
Spiegel: Croatia is not its own market. Croatia is the size of Brooklyn – about 4M people. This is a common theme for all small countries and it’s sort of a competitors’ advantage if they can realize it. I’ve seen companies in other, larger markets, become successful in their home markets and that actually impedes them from growing larger or internationally. But, if you’re in any one of the small countries from Estonia to Greece, you start with international ambition from day one because no one’s content to simply conquer the Croatian market.
Guttman: Which local startups are the ones to watch?
Spiegel: Rimac Automobile – The guy everyone’s talking about is Mate Rimac. He’s built the fastest, electric supercar. He’s considered by some, the company holding the keys to the global automotive market. They took minority investment from Porsche late last year. It was the first if not the only external investment for Porsche. They’re our outlier. You can’t say success story yet, but by far the most successful company, so far. Croatia is one of the few countries in the region that has zero car heritage. Each of the former Yugoslav countries had an auto manufacturing presence. So, this guy was literally starting from nothing – no experts to consult. They now have their second-generation cars being built.
Microblink – It’s fast, intelligent data capture through AI. You hold your phone above an equation and it spits out not just the solution, but also all the necessary steps. This has repeatedly been number one on the app store for Apple’s education apps. They also have PhotoPay, which integrates with mobile banking apps to improve usability. Microblink has lots of different applications, for example, American police departments use it to automatically scan and read driver’s license data.
Memgraph – They built a completely new, from scratch, graph database platform with multiple applications. For example, for retail, it can provide real-time fraud detection, cyber security, and personalized recommendations. Facebook has their own internal tech to reach these graphs and there are a few external companies working on this, but Memgraph are faster than most.