Michael Chaffe, CEO of Wolves Summit, an integrated digital marketing platform for investors and tech companies, offering year-round engagement through digital events, corporate innovation challenges, and startup scaling activities points to several aspects that have defined the region over the years:

1. Entrepreneurial spirit – public-private initiatives: We can observe a great deal of change in the number of new enterprises which is important, as until the 90's it was (more or less) forbidden and has been stigmatized for a long time afterwards. This rise is mostly due to the entrepreneurial programmes implemented by the state governments, but luckily, we see more private initiatives from the corporate side too.

2. Quality and talent: The quality of the startups is slowly rising, however, it is still difficult to find true gems, but it is getting better - let's take the example of the most recent Polish unicorns.

3. Sector focus: In terms of sectoral changes, we used to be a lagging herd behind the .com bubble and the mobile application era. We saw a lot of copycats, but in recent years we observed a shift towards industries where you can find truly innovative solutions – such as Healthcare, Automotive industries and precision agriculture.

Chaffe also highlights some of the key characteristics that have shaped the venture capital funds in the region. In central and eastern Europe the investor market is still dominated by government funds. He adds:

Do we have a significant number of people with a significant amount of disposable income – like in Germany, the UK or the US? No. We have a few high-net-worth individuals, but it is not enough to efficiently fuel and create an angel investment culture. Do we have family offices? No. Not really a characteristic of the post-communist countries. Do we have institutional investors? Or sector-focused corporate investor? As we did not have many success stories, we are not typically the first choice of investors. As with any other emerging startup ecosystem, CEE welcomes the government support, but I am glad to see more corporations and private players backing regional founders. At Alpha Wolves and the Summit, it is our job to facilitate the conversation between these players as well as the decision-makers.

Júlia Sohajda, Managing Partner at Vespucci Partners also points out to the early beginning of the regional startup ecosystem on the CEE market and the noticeable developments experience in recent years:

In my opinion 10 years ago the word “startup” was still quite unknown to most of the population in the CEE region. The companies launched here were mostly copied from the Western World and implemented in the CEE region and grown locally. So no world class unicorns were built. Up until Skype from Finland, which was founded in 2003. I believe that one of the reasons the Finnish innovation ecosystem is one of the most developed in the region is because they had a big success early on and this fueled the development exponentially. By now the number of unicorns has increased exponentially in the region. 34 unicorns have been created in CEE, up from just 5 in 2012. And even within this 10 year period time frame, most have been created recently. To be exact 12 of them were actually created just a year ago, in 2021. So we see a lot more successes recently and this definitely shows that the startup ecosystem is starting to mature and bring results that shed light on the region, such as UiPath from Romania. Such big accomplishments are still needed in higher numbers across the region, so that the successful founders can become angel investors, serial entrepreneurs and both capital and knowledge can flow back into the community – says Sohajda.

In the context of the development of startups on the CEE market in the last 10 years, one more thing can be noticed - in this region, compared to others, definitely more investors base their company's development on their own funds:

The region lacks a strong VC scene at later stages beyond series A, however, it’s attracting a lot of overseas investors into some of the later rounds. A founder culture of bootstrapping companies for longer may mean more control for founders at the earlier stage (31% of CEE-founded unicorns have been bootstrapped, compared with only 7% in the rest of Europe), but it also makes way for overseas investors participating in later rounds who have more investment. 

American capital accounts for more than half of the funding invested in CEE startups. The likes of Accel (UiPath, vinted, Deepnote, Turbine), Index (Productboard, Printify, rohik Group) and Bessemer Venture Partners (Pipedrive, MaintainX) were synonymous with CEE VC funding in the last 3 years. Some consider this detrimental to the ecosystem, with a rising trend of CEE startups leaving the region, or at least moving their headquarters, to financial hubs such as New York and London. Despite this, the developer community and remote working (which costs a fraction of what the same profile of individual costs in Europe or Silicon Valley), allows companies to be distributed between the two demographics – says Jonathan Hollis, Mountside Ventures.

What are some of the trends shaping the central and eastern Europe tech in 2022?

In the context of VC, there are already emerging trends that will be visible in 2022, as Michael Chaffe notes:

There is a lot to develop here. We believe the best way to do so is to bring good people to the ecosystem from whom the startups can learn. It can happen via webinars, panels or even face-to-face conversations and I believe events like Alpha Wolves has a massive role too - not to mention our smaller, regional satellite events like the one we organised in Budapest in January 2021. These initiatives also lead to better connections, boosted discoverability or even access to skilled international team members or capital - which are also missing.

According to Jonathan Hollis, three main trends can already be distinguished – more diverse funding options are becoming available for founders, more transparency from the ecosystem that VC capital might not be for everyone and the diversification of the LP base for emerging fund managers including other VCs, exited founders and portfolio founders.

Júlia Sohajda, Vespucci Partners emphasizes two important aspects that have become increasingly important in recent years:

I think it’s the overarching trends such as ESG and diversity. These policies are starting to become part of most VCs’ due diligence process. Another one is definitely the role of crypto and blockchain in the VC world and whether that could mean disruption for it – says Júlia Sohajda.

One cannot forget about the impact of the pandemic on the situation on the startup and scale-up market. According to Michael Chaffe, paradoxically, positive effects can be noticed here – companies have started to think and act more globally and thus become more attractive to large investors from outside the CEE region:

International and private investors bring a lot of changes as I mentioned previously. But besides that, we observed - especially during covid - that the startups/scaleups started to think internationally and instead of serving their local customers they realised that they should set their foot in other countries. This is an obvious choice when we talk about market sizes like we have in Slovakia, Hungary or Croatia.

Chaffe also emphasizes the importance of events such as Wolves Summit or Alpha Wolves, which allow startups, scaleups and investors to exchange experiences, ideas, and as a result – to establish successful cooperation.

Building a truly flourishing startup ecosystem will not be possible without systematic support for entrepreneurship and innovation on the EU and national levels. Wolves Summit has helped startups gain visibility, and to create a network of international innovation and investment that did not exist earlier. The conference has also helped Warsaw & Wroclaw to firmly establish itself on the map as a startup hub. In the last five years, Wolves Summit has become an unmissable European stop on the global tech calendar, drawing more than 20,000 participants. With 14 editions under its belt, Wolves Summit has facilitated thousands of corporate-startup engagements and delivered 100+ hours of immersive educational content, and expert Q&A sessions, all in an exciting and unique format. The last time I checked the stats, we had 35,000+ 1:1 meetings facilitated between startups and investors in the Wolves Summit’s matchmaking software – Michael Chaffe points out.

How can this market develop further, and what should startup owners keep in mind?

Júlia Sohajda (Vespucci Partners), has several tips for the founders operating in this region:

Always discover the needs of your customers first and develop your product accordingly, instead of perfecting it behind closed doors based on assumptions. Only to realize that the market would have wanted it somewhat differently – emphasizes Sohajda and adds that perhaps this tendency to fear sharing your ideas with the world before they become perfectly polished results from the culture of Central and Eastern European countries, where we are often afraid of failure and refusal. According to Julia, this has to change.

The representative of Vespucci Partners also emphasizes that if startups from Central and Eastern Europe want to stay competitive on a global scene, they must increase the pace of their activities.

I think that most startups don’t operate at the speed that startups in the more developed ecosystems do, such as in the US. And this is something they have to change, otherwise they will remain behind their competition – says Júlia Sohajda.

One of the opportunities for the development of the startup and scale-up market in the CEE region are, among others, industry conferences. We asked investors how they assess the impact of events such as Wolves Summit and Alpha Wolves on this market:

We need more of these types of conferences bringing the community together, and also attracting people outside core regions to bring in different experiences! – says Jonathan Hollis.

Júlia Sahajda shares this view and emphasizes the importance of technology conferences in the context of connecting companies with investors:

I think that Venture Capital is a „networking business” and innovation is a social game. So in my opinion events like Alpha Wolves play a crucial role in providing a platform for the different ecosystem players to meet in one place, get to know each other and form connections that will bring about collaboration and business opportunities.

In turn, the organizer of Alpha Wolves, Michael Chaffe, reveals how the idea of ​​creating such a conference was born and how it can affect the development of technology companies operating in the CEE region:

We did an unofficial survey amongst our regional investor partners, and we found out that their biggest problem is that they know every possible investor partner in their country, but they have a very limited connection to the regional/international investor community. It means that it is very difficult for them to do cross-border investments or even exchange ideas on their portfolio – not to mention raising funds for themselves. We believe Alpha Wolves in that sense is a much-needed platform that solves the “who-knows-who” issues and creates a stronger international investor community on a regional, as well as on a global level.