In the previous post I mentioned that I’m visiting the Alumni Business Camp. In the session “Trends in Europe”. several people presented their observations on current trends in Europe concerning startups and entrepreneurship. These are some of the key findings:
Nordic countries: Open for technology innovation, potential in investments on R&D
In the Nordic countries (Sweden, Norway, Denmark, Norway, Finland, Iceland) the past years were pushed by innovations in the telecom sector. Companies like Ericsson or Nokia became world leaders in mobile technology. Other industries were also in the focus: Oil industry in Norway, automation and automobile industry in Sweden, machine manufacturing in Denmark. In these countries, there are a few key players, so when founding a company, take into account to get these key players as your partners or customers.
However, as many of these industries peaked, the Nordic countries have seen new players on the floor. In the past years, many startups emerged in the computer games industry: Rovio (who doesn’t know Angry Birds?), Supercell (producing several web-based games like Clash of Clans), Mojang which is the company behind the block-building game Minecraft. Also, the music industry is big: Sweden is the 3rd biggest music market in the world and is the ground for companies like Spotify.
Public institutions are open for innovation, therefore tech companies which require a lot of funding for R&D efforts have opportunities in these countries.
As the markets in the Nordic countries are rather small, companies that start there work on a quick world-wide expansion.
BeNeLux: Devices are king, content is not
The markets in Belgium, the Netherlands and Luxemburg are very service-oriented, as there are many exports/imports companies and logistics gateways to the world – like for instance the port in Rotterdam. Other than that, the main exported goods are machines and chemistry. The industries in BeNeLux are very adjacent to European Markets.
Media is trendy, people aim for more convenience. People invest in devices but don’t want to pay for content, therefore content producers lack income and reduce employees.
In BeNeLux, E-Commerce activites are growing, e.g. Coolblue which is an IT hardware company which delivers material the next day. Banks grow ideas as well as there are more low-cost banks and new payment methods.
In real estate, green aspects are getting more important. Passive houses, proper isolation and managed systems are on the rise. The kitchen turns into the main spot of the house and cooking is hip again.
Some counter-movements could impair startup ideas:
- Nomophobia (people that are afraid of getting off-line/without battery).
- Youngsters don’t embrace privacy as much anymore.
- People looking for temporary isolation from phones.
- Shared workplace – employees don’t have their own desk anymore.
Starting a company in Luxemburg is usually the simplest way from the taxation point of view, so it could be seen as the starting point for companies operating in BeNeLux.
Russia: Looking for Western expertise for designing products and services “Russian style”
In the past years, Russia embraced capitalism and especially consumption. Many new supermarkets, small shops, cafes, beauty places opened, real estate (especially residential) was booming. Due to oil and gas supplies, the adjacent industries are currently hot as well. Due to the economic rise from oil and gas, all kinds of consumer goods, electronics, household goods and furniture had a big rise.
Yandex is the strongest search engine in Russia with 60% of market coverage – Google only holds about 30%.
VK.com (previously called Vkontakte.ru) is the most popular social network in former Soviet countries, and Facebook is far behind.
How is the situation changing? Markets seem to be filled, new opportunities are now in specific niches, Quality is king. At the moment, there is a big lack of venture capital and financing of startups – banks take interest rates of 20-22% p.a. for startups. Russians start getting used to pay for entertainment which used to be free. Investment opportunities open up for people with foreign money to invest in Russian real estate, as the inflation rate is rather high (7-8% p.a.).
Online shopping is getting hot as only 2% of the citizens (30 million Russians) do online shopping yet. There are many unused opportunities.
Local tourism within Russia (dedicated sightseeings) are growing as online travel opportunities grow. Educational services are a field that has the potential to grow. Health technologies and medicine market is also getting more interested, as the Russian system only provides basic support.
Consumption could also rise in second-hand trade of luxury brands as well as charity shops.
Moreover, the children industry seems to be on the rise: private kindergardens, tutoring etc.
Opportunities open up when Russian ideas can be scaled to global level. Ideas from the western world seem to be adapted more, therefore topics concerning recycling could see a future. Western Europeans have big chances to build up in Russia due to their experience.
Concerning the economic situation, Russian companies expect negative effects on the economy due to the political crisis with Ukraine and the western embargos.
Bureaucracy needs to be taken into account. Knowledge of Russian language is crucial, as well as networking with the right people in order to improve processes.
Western Balkans: Struggle with bureaucracy, regulations and mentality
Within Yugoslavia, companies were working in a large, protected and well-interconnected market. After the decay of Yugoslavia and the Balkan wars in the 1990s, the markets broke apart. Many people became unemployed. Unemployment rates vary from 9% in Slovenia (which already was well-developed within Yugoslavia) to 44% in Bosnia and Herzegovina.
Currently there are many obstacles for startups:
- Many legal structures that involve exchanging stocks are not possible.
- Administrative issues need to be dealt with. Imports of sub-components are difficult because of old regulations.
- The Banking system is not efficient: electronic transactions need to be backed by actual paperwork.
- Accountants are not responsible for the accuracy of his work, therefore company founders are in full risk.
- Legal disputes take a long time to deal with.
- Going bankrupt takes a long time in Serbia and in some cases it is extremely difficult, therefore re-starting a company is difficult.
- Venture capital is unknown, the mentality in these countries avoids taking risks and investing into the Unknown.
Trends in the Western Balkans involve Internet based services, Apps, Hardware/Software and the games industry.
Certain advantages apply though: the new ecosystem is stable, labour work is quite cheap, as the startup scene currently is quite small, and fast prototyping is possible.
Baltic states: Hipsters’ and startups’ paradise
What’s hot in the baltics? Startups!
The general environment allows a quick deployment of startups, like Transferwise or Ask.fm. There are many incubators and mentoring programs available (e.g. StartupWiseGuys, Garage48.org, Techub.Riga, Gamefounders)
Due to hipsters being open to new innovations and naturally being early adopters, startups have good possibilities for testing new technology innovations.
In these times, food culture and socializing habits are changing: hipsters developed the cities; the hip bars and pubs move out of the tourist-flooded centers towards undeveloped areas, where specialised products are being created, for instance craft brewing/microbrewing. 10 years ago, vegetarians were seen strange in the Baltic States. Nowadays vegetarian/vegan eating habits became more common, embracing organic production.
Sustainable efforts are being taken as well, for instance by re-selling used furniture and clothes. Real estate development turned from building skyscrapers towards reusage of old buildings.
One particular project that is very interesting for potential company founders is what Estonia is planning: the Estonian E-Residency. 15 million digital IDs ready to be given out which allow secure access to Estonia’s digital servics, giving opportunity to use digital signatures in an electronic environment. Do the banking, encrypt files, no need to apply for a regular residency, no need to know the laws of all European regulations. By using that E-Residency, people have the possiblity to create a company on the go.
What are your observations from the talk? Feel free to add a comment.
EDIT: added links.