Serhii Tokarev, IT entrepreneur and investor, spoke about the problems faced by start-ups in Central and Eastern Europe
Startups are doing great in Central and Eastern Europe. The only issue is that not enough of the founders are staying to grow the area in the long run. Even though the market’s jumped 15.5 times in value since 2014, investor Serhii Tokarev talked about what needs to happen to make the CEE startup scene even better.
Strengths of the Central and Eastern European market
CEE countries share several strengths:
1. Qualified and Experienced Workforce: A large pool of highly experienced professionals in the area supports the start-up ecosystem.
2. Focused on Results: Investors with knowledge of the region frequently comment on the practical perspective of local entrepreneurs. Start-ups from Central and Eastern Europe (CEE) create concept ideas quickly and convert them into tangible products as well.
3. Global thinking: Most founders of innovative companies are focused on international markets. They already work according to remote-first models and plan to quickly enter foreign markets.
4. Profitability: Because salaries in Central and Eastern Europe aren’t as high as in Western Europe or the US, it’s a pretty appealing place to do business money-wise. Startups can put together great tech teams early on without having to spend a ton to get good people.
Why the CEE market is still viewed negatively
The startup scene in Central and Eastern Europe is booming much faster than in Western Europe. There’s a lot of potential and chances here, but some big investors still don’t quite get what’s really going on.
Firstly, this concerns political instability. There is a wide range of risk levels across CEE nations. Poland and the Czech Republic are examples of CEE Countries that are part of the European Union with well-established regulation and support. Both of these nations and markets are among the Top 3 most Stable Markets Globally. Additionally, even with Ukraine currently under martial law, this nation continues to show sustained growth in the startup ecosystem and continues to attract large scale funding from International Investors.
Secondly, there is a perception that the CEE market is mainly about outsourcing. Although IT services exports brought Ukraine around $6.4 billion in 2024 and remain an important part of the regional economy, CEE is not limited to outsourcing. This is where globally successful companies such as Grammarly and ElevenLabs emerged.
Thirdly, people think Central and Eastern Europe don’t have much venture capital. But check this out: in 2024, Poland pulled in over €2 billion in investments! That makes it one of the fastest-growing VC markets in Europe.
Why startups don’t scale
‘I believe that the biggest challenge for the CEE market is the need to retain the founders of innovative companies and bring their entrepreneurial success back to the region,’ emphasises Serhii Tokarev. He notes that one of the strategic solutions lies in building strong educational and mentoring infrastructures, similar to the STEM ecosystem he supports in Ukraine. According to Serhii Tokarev, structured mentorship and career guidance programmes can strengthen the talent pipeline and help the region retain future innovators.
Due to the war, 90% of companies have moved their headquarters from Ukraine abroad. Similar processes are taking place in more stable countries: for example, 54% of large companies have left Estonia. Even founders working in the B2B software sector often focus on the US market and seek to relocate their headquarters there.
What is most important for the start-up ecosystem
Serhii Tokarev pointed out three things that could really help Central and Eastern Europe become a strong player in the global market:
1. Even if start-up founders move their main offices, they can still be involved. They can keep local teams or other work going in Central and Eastern Europe by managing things remotely.
2. Companies that have done well should think about coming back to Central and Eastern Europe. They can bring money, contacts, and what they’ve learned on the global stage with them.
3. Founders can not only act as mentors, but also create their own venture funds focused specifically on the development of Central and Eastern European startups.
Capital alone is not enough to transform CEE into a truly competitive startup hub. It is important that the founders of innovative companies remain in the region and scale up, as they form the basis for the sustainable development of the ecosystem.