The startup scene in Central and Eastern Europe (CEE) still faces some problems.
It’s not about money or politics; it’s more about there not being enough good mentors around. IT entrepreneur and investor Sergey Tokarev explained what needs to be done to change the situation.
The startup scene in Central and Eastern Europe has exploded since 2014, growing over 15 times in value – that’s way more than the rest of Europe! Poland’s leading the pack, pulling in €2 billion in investments just this year. So, the Polish Development Fund is backing them, and they’ve got a huge pool of talent with 280,000 software developers. Plus, they’re producing some seriously cool stuff like ElevenLabs and Docplanner.
Ukraine stands out for its largest human resources potential (340,000 developers) and a base of 2,500 start-ups. Romania has about 202,000 technical specialists and a dynamic ecosystem (approximately €19 billion) that has become the basis for the emergence of UiPath and eMAG.
‘Each CEE ecosystem has its own character, but it is their shared strengths that make this region a serious competitor,’ notes Sergey Tokarev.
Advantages of the CEE ecosystem
Central and Eastern European countries have many common features that make them unique and competitive:
- Cost-effectiveness. Salaries in CEE are lower than in the US or Western Europe. This allows start-ups to build strong technical teams without excessive talent costs. In addition, companies can make more effective use of pre-seed and seed funding, giving them more room for product development.
- Results-oriented thinking. Investors who know the area tend to like startups in Central and Eastern Europe because they’re practical. They can often get a product up and running fast, even if they don’t have much money.
- Global mindset. Start-up founders in this region often develop solutions for an international audience. They already operate under a remote-first model and plan to enter foreign markets as quickly as possible.
- Skilled workforce. Central and Eastern Europe have a ton of well-educated STEM pros. Big international companies really value the skills and experience of engineers and developers from there.
Myths about the CEE startup ecosystem
Even though the area is growing fast, people still get some things wrong about it.
Political instability in the region.
The risk levels in Central and Eastern Europe differ quite a bit. For instance, the Czech Republic and Poland are part of the EU, have robust legal systems, and are general stable markets globally. On the other hand, Ukraine is at war, yet its startup scene keeps growing and attracting international investor attention.
CEE is only about outsourcing.
In 2024, Ukraine’s outsourcing service exports hit $6.4 billion. IT outsourcing has always been a big deal for the area’s tech scene, but there’s more to the story.
Lack of venture capital or interested investors.
Lately, a bunch of venture capital funds have popped up around here that focus on Central and Eastern Europe. From 2017 to 2023, their numbers doubled. Among private investors and funds focusing on CEE, there is a widespread belief that there is more capital than there are start-ups ready to attract it.
CEE is a hub for competitive technology companies such as Grammarly and ElevenLabs. Since 2014, the total value of startups in the region has grown six times faster than in Western Europe. This has been made possible not only by outsourcing but also by the rapid development of product startups.
Why don’t CEE startups scale even when capital is available?
‘In my opinion, the biggest challenge for Central and Eastern European markets today is retaining startup founders and bringing their entrepreneurial success back into the ecosystem,’ says Sergey Tokarev.
He notes that similar issues are visible in Ukraine’s AI sector, where long-term growth requires not only investment but also a strong local talent pipeline supported by modern technical education. Sergey Tokarev emphasises that cooperation between the state, business, and the academic sector could significantly strengthen the region’s ability to scale deep-tech and AI products.
For example, due to the war in Ukraine, about 90% of companies have moved their headquarters abroad. However, even in stable CEE markets, there is an outflow of businesses: according to Dealroom, 54% of companies have left Estonia. Founders of B2B products targeting the US market also often relocate their HQs, as this is a rational and commercially justified step.
‘Only those founders who remain part of the region’s ecosystem can change the situation. Moreover, it is important to consider the prospect of returning. Startups that successfully enter international markets can bring their experience, connections, and capital back to CEE,’ adds Sergey Tokarev.
What is more important than money
According to the IT entrepreneur, there are three ways that can contribute to positive changes in the processes of fully realising potential and ensuring the return of entrepreneurial success to the region:
- Founders can manage remote teams, maintain an operational presence in Central and Eastern Europe, or stay connected to the regional market in any other way.
- After moving abroad, founders should consider returning with capital and established networks, becoming investors or mentors.
- Some founders may even establish their own venture capital funds.
Capital alone is not enough to transform CEE into a global startup hub. However, over time, thanks to experience — both successful and unsuccessful — standards can be gradually raised. The most important factors remain attention, time, and practical advice from reputable entrepreneurs.
