Dish soap and laundry detergent. The mundane items adorning supermarket shelves in the former Eastern bloc in the 1990s were as far as one needed to look for symbols of change.
With the disintegration of the Soviet Union, shoppers began filling their grocery carts with Western brands, such as Henkel’s Persil, rather than the state-owned equivalents. And in less than three years, those Western products weren’t just appearing on store shelves; they were being manufactured in places like Hungary, Poland, the Czech Republic and Bulgaria. So began Central and Eastern Europe’s wobbly road to liberal democracy.
Two decades later, the budding tech scene in countries across the region known as CEE seems to be following a parallel trajectory. Silicon Valley is the brightest star in the tech universe, but Eastern Europe is starting to form a solar system of its own. Support networks, investors and an emerging culture of optimism are taking hold and quietly reviving the region’s international brand along the way.
Renewing an old image
Place branding hasn’t been around long. In 2003, Simon Anholt, considered a pioneer in the field, launched his company, Placebrands, and his earliest clients included Germany, Croatia and Slovenia.
Rok Klancnik, the director of communications of Slovenia’s tourism board at the time, told The New York Times that investing in the country’s brand was “not only useful, it’s necessary.” And that was 17 years after the publication of Malcolm Bradbury’s satirical guidebook Why Come to Slaka? about a fictional Eastern European country.
To be sure, the dozen and a half countries that make up CEE each face unique circumstances and challenges. But “Eastern Europe” is a brand in itself – and a controversial one. Economist correspondent Edward Lucas thinks the term belongs in the dustbin of history because it lacks accuracy – Prague, after all, lies farther west than Vienna – and because it’s a needless throwback to the Soviet era.
Inaccurate and outdated as the term may be, hop on a plane to Silicon Valley or London and the attitude toward Central and Eastern Europe pivots. To tech entrepreneurs and venture capitalists who have the region on their radar, CEE is synonymous with a burgeoning startup ecosystem teeming with promise. And that’s great news for the region’s brand – and its people.
The Skype effect
Latvia’s capital, Riga, is “the new hotbed of Baltic-based startups,” says Mike Butcher, European editor for TechCrunch and co-founder of co-working space Tech Hub. He says the mid-sized European country is “full of engineers who are all champing at the bit.”
Many of these engineers serve overseas companies who outsource their development, but they’re starting to found companies of their own. Take Uldis Leiterts, who works out of Tech Hub and is the founder of infogr.am, an award-winning infographics app.
After five years of working for a large news corporation, Leiterts decided to take the leap into the startup universe. When he arrived at Tech Hub less than a year ago the place was almost empty, but since then it has filled to near capacity.
Leiterts thinks the origins of the Baltics’ thriving startup culture can be traced back to the launch of Skype. The voice-over-IP software was developed by Estonians, and the company’s largest headquarters is located in Tallinn, Estonia’s capital.
“What Skype taught people working in the IT sector in the Baltics is that having equity in something small and ambitious is actually pretty good.” That, he explained (over Skype), was a novel idea in those days.
The past few years have seen a string of startup successes across CEE, including Czech Republic’s AVG and Avast, Latvia’s Ask.fm, Serbia’s Nordeus, Poland’s Filestube and Romania’s BitDefender and Soft32.
And of course there is Berlin, which was ranked as the world’s 15th most developed startup city in last year’s Startup Ecosystem Report (the second-highest ranking in Europe, after London).
The region is also attracting the attention of international brands and advertisers looking to connect with emerging markets. Speaking at a conference in Poland in April, WPP CEO Sir Martin Sorrell proclaimed, “At a time when Western Continental Europe is under considerable economic pressure and likely to continue to be so, the opportunities presented by Central and Eastern Europe, particularly in Germany, Poland and Russia, are extraordinary.”
Meanwhile, Futurebrand’s latest country brand index ranked Estonia among the top 25 countries considered “good for business” and marked it as a “future 15 country on the rise.” The report highlights Estonia’s tech success as the magic ingredient.
Moving forward, looking back
The explanations I was given for the rapid growth of the region’s startup communities were numerous, varied and often contradictory. For TechCrunch’s Mike Butcher, it’s all about the Soviet regime’s emphasis on math and engineering.
“When Lenin said, ‘Chess is the gymnastics for the mind,’ little did he know he’d be setting the touchpaper on a whole generation of engineers who are now reaping the benefits of that wise principle,” Butcher says.
For Uldis Leiterts, entrepreneurship in the region is a matter of necessity. Living standards in many Central and Eastern European countries lag behind the West. Young people who grew up on the web see tech startups as a means of improving the status quo.
Romanian entrepreneur Bogdan Iordache is part of that cohort. “I was born in a world where you had two hours a day of TV programs, a strict ration of bread and not enough electricity to go through a full day,” says the 34-year-old. Today, he organizes How to Web, one of CEE’s most important tech conferences.
Forbes’ Croatia editor Ivo Spigel, on the other hand, thinks the effect communism has had on entrepreneurial culture is less straightforward.
“In some cases, you have people who have been so frustrated by socialism that they are much more motivated and devoted to building something new,” he says, “but in other cases, you can still see those echoes of the-State-will-take-care-of–everybody mentality.”
A long way to go
Whatever the reason for CEE’s tech renaissance, the region still faces its share of obstacles. Mike Butcher says the East lacks maturity in the “softer” sectors. Despite improvements, “product marketing, user interface, design, media and communications still have some way to go.”
For Spigel, the biggest drawback is a lack of infrastructure for startups – including local investors. But even that’s starting to change.
Sofia, Bulgaria, for example, has recently become home to two accelerator programs that between them have attracted €21 million of EU investment capital. It’s investments like these that are drawing the world’s attention.
“I remember my grandparents watching the World Cup in Mexico on TV back in 1986 – not to see the matches, but to find out what the cities and people looked like,” says Bogdan Iordache when I ask him about the changes he’s seen in his home country of Romania over his lifetime.
“Now I live in a country where we have all the goods we want, we can travel wherever we want, whenever we want, and we can find information about anything. To say the two worlds are different is just not enough.”