Despite the crisis, Croatian start-ups are recording constant growth with the support of investors and Algebra’s incubator

Lauren Simmonds

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Despite investors’ caution towards risky investments, as much as 958.3 million dollars were invested in domestic start-ups in the first three quarters of last year alone – it was concluded at the Algebra startup meetup, which was held at Algebra’s Zagreb campus, in the Algebra Spark Event Space.

Algebra LAB, as one of the oldest startup incubators in Croatia, has had an uninterrupted series of incubator generations since 2012, thanks to the systematic support available to them in the innovation ecosystem that combines higher education with entrepreneurship: 

“At Algebra LAB, we try to ensure that both sides profit symbiotically in development – our students from the fact that their incubator is located in the building where they study and listen to lectures every day, and that they can find themselves in the world of entrepreneurship in a short period of time, and our start-ups from the fact that some of their mentors and lecturers work in the higher education system, which means that they are constantly at the source of new knowledge and information. In such a collaborative system that combines cutting-edge innovation and science with entrepreneurship, we see the key to getting out of every crisis, of which there has been no shortage in the last ten years. Algebra LAB has spawned many successful entrepreneurial stories today – Farseer, Velebit AI, Sport React. We invite all those who are thinking about starting their own business and need support on the way to the realization of an innovative idea to join the new incubator generation for which the enrollment cycle starts at the end of the year,” said Maja Brkljačić, head of Algebra LAB.

Startup Report magazine was also presented at the event. “The appearance of unicorns, Infobip and Rimac, as well as big exits such as Nanobit and Gamepires, and now Photomath, encourage the growth of investors’ interest in Croatian startups, so last year a record number of startups received investments. However, due to the war in Ukraine and the hectic exit from the pandemic, investments are less than before, although the situation in Croatia is still very good. It was the second best year so far,” said Bernard Ivezić, editor of the magazine.

Four new venture capital funds are coming to the Croatian market. In the next five years, the amount of money that will be available for start-ups will be 10 times higher than it was in the past period – about 300 million euros. A lot of money also means big problems for funds that have to start competing for start-ups, which makes the entire ecosystem quite dynamic and competitive, especially in an environment of crisis and economic uncertainty.

The impact of the economic crisis and the crisis caused by Russia’s aggression against Ukraine on the investment climate is not negligible, which was discussed at the panel discussion, along with Maja Brkljačić, by Matija Nakić, the founder of the Croatian fintech Farseer, which flourished in Algebra LAB, Miryana Joksović, co-founder of Arcion Labs and member of the ACAP Board, and veteran of the Croatian startup investment community Vedran Blagus, principal of the oldest Croatian VC fund, South Central Ventures. Representatives of the start-up scene had the opportunity to hear first-hand useful tips for surviving a turbulent social and economic environment, as well as the importance of leadership from experienced start-up founders:

„In a crisis, it is important to always lead by example, and this is what the leaders of every start-up should focus on. Investors expect this period to last 24 to 36 months. It is the most difficult for seed stage startups that are not in the portfolio, because for them the risks are the greatest, as well as the dependence on investors. This is precisely why good networking with potential investors is most important – my advice is not only to look at them, but also at their portfolio companies and the companies they are connected to, because building that network of acquaintances is the key to future success,” said Miryana Joksović from Arcion Labs and referred to the recent layoffs in the tech community: “Most of those who were previously employed in large companies can hardly adapt to the start-up culture, so the question is how to connect these talents to the start-up ecosystem because they are used to different work standards atypical for the dynamics of small entrepreneurs who are just starting to build their companies.

 The fact that every crisis, including this one, can be an opportunity was seen by Matija Nakić, the founder of Farseer, on her own example: “Our process of getting the investment was not dramatic and we managed quickly. Investments have slowed down if we look at the environment, while in the last two years there has been a lot of capital and there has been a significant jump in employment and funding in IT companies. I love crises and I think they are a good opportunity to rethink yourself and your business model. People who left large IT companies like Google will surely find a job quickly because they have excellent knowledge and will return to the ecosystem and bring this new knowledge to young companies. I believe that we have an interesting couple of years ahead of us, especially with the growing influence of AI.”

“In 2021 and 2022, capital was cheap not only for start-ups but also for funds. In the last quarter of 2022, there was a significant drop in investment. There is money, the investments have been shaken, but they have not stopped” – emphasized Vedran Blagus from South Central Ventures.

Despite the data on the reduced investment wave as a result of global economic events, the panelists agreed that the challenging period facing the domestic and global start-up scene is only a prelude to the continuation of the prosperous period. Namely, start-ups now face new challenges in the form of investments in research and development, as the basis of new innovations that can help overcome the crisis:

“As far as the activities and interests of start-ups are concerned – there has been no reduction, in fact there are more of them than ever before. There is a large number of applicants and those interested in our Lab, and the so-called scene or material fatigue does not exist, according to what we see – and that is the reaction to the events and the applications themselves, you can see the liveliness of the scene. In Croatia, there are more and more investment funds that heal the wound of the lack of early capital, such as Fil Rouge Capital and South Central Ventures, which enable start-ups not to think about money, but about their product or service they are developing. I see no reason for concern for the Croatian start-up scene, except for the caution required when hiring new people – especially when changing culture and moving to scale-up” – said Maja Brkljačić, head of Algebra LAB, adding that the number of 500-600 of startups from the beginning of last year, according to some estimates, rose to as many as 900 as estimated at the end of 2022, thus signaling that the start-up scene is growing despite unfavorable circumstances.

At the event, two start-ups from Algebra’s LAB (EcoWashers and TablePop) presented their innovative ideas to the public through five-minute pitches. EcoWashers allows the user to order a vehicle wash on a smartphone in a few steps, and through the dry ecological washing system, it uses a unique nano-technology that is safe for the environment and a minimum amount of water. TablePop is a platform that allows guests to order and pay contactless in restaurants by simply scanning a QR code. In addition to them, the start-up IoTaaP presented its innovations and experienced member of the start-up and technology community Ivo Spigel presented his new fintech project Pontyx to the attendees.

Algebra Spark Event Space and Algebra Spark Coworking, an innovative and unique space in the western part of the city, was introduced to the audience by Hrvoje Josip Balen, a member of the Board: “Unlike other similar co-working spaces, Algebra’s rooms are specially designed and focused on business development and the creation of an entrepreneurial microclimate suitable for serious companies that focus on business growth. Algebra’s innovative space enables companies to organize larger or smaller business events, lectures, workshops, as well as a number of other private or commercial events with all the necessary infrastructure. Interested companies and individuals can also rent additional space of over 12,000 m2 within Algebra Rent Space, which includes top equipment and technology with the aim of achieving the maximum level of functionality – through the synergy of office spaces with Algebra LAB, as a scientific research center intended for small and start-up companies.”

Algebra’s Spark Coworking Space is also used by Matija Matija, a young start-up who designed the Lanke website, which shows all available new real estate projects in one place. Matija reflected on his stay in Algebra’s offices: “I was most impressed by the location, which suits me because I myself am in the western part of the city, and on the other hand, the quality and equipment of the office, which contains everything I need in one place. Last, but not least – I appreciate the peace that the office space offers, which I need to focus on work, which I’m not sure I would find in other similar coworking spaces in Zagreb.”

Due to their focus on innovation in business, start-ups are one of the segments of the economy that will significantly influence the future development of the entire society, and their role is not only in their own progress, but also have the potential to significantly accelerate the growth of other economic branches. Today, start-ups are not limited only to the IT sector, but also appear in agriculture, hospitality industry, and banking, where they help accelerate the growth of entire ecosystems, and their incidence in Croatia is growing year by year, which, in addition to private investors, is mostly contributed by incubators such as Algebra LAB -a, who provide them with support in the early stages and beginnings of business ideas.

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