As one of the countries with the biggest brains emptying present in the Western Balkans since 2010, the ecosystem of young Albanian startups is still in its infancy. However, the potential for development is there, and by creating and nurturing a skilled and educated workforce, there could soon be a sustainable startup ecosystem with a particular focus on technology companies.
According to the Albanian Ministry of Finance, there are currently 150 Albanian start-ups in the country that have developed their capabilities, both inside and outside the EU thanks to the Innovation Challenge Fund.
One of the hottest startups in the country is Rubicon, a financial technology company engaged in providing financial solutions and developing a payment processing network. In May this year, the company raised €450,000 pre-seed to launch its innovative FinTech platform in Albania.
Soft mogul is another successful startup originating from the country, targeting the hospitality and guesthouse sector, with products and solutions that help customers manage hotel operations, provide better customer experience, to increase revenues and explore new markets to grow. In 2019, the company received an investment of $2 million.
Need for innovation and investment
According to Tirana-based ecosystem expert Ergest Nako, the country’s education system has a good basis for establishing a vibrant startup ecosystem.
“On average, 3,000 students graduate in ICT-related studies each year. Universities have a very good technology sector, but they lack training and entrepreneurial skills,” explains Nako.
According to him, Albanian universities had a very theoretical approach before and in the early 1990s, based on their links with the education system of other Eastern European countries.
“As such, they have developed very good curriculums for engineering and technical skills. In the late 1990s and later, universities began to tone down their approach to a more market-oriented and practical approach. However, nowadays the market still does not offer much attraction for those who are talented and skilled,” Nako tells The Recursive.
In 2013, the Albanian authorities even created a Ministry of Innovation, which began to develop various initiatives aimed at encouraging innovative startups. But four years later the ministry was dissolved and the authorities created a new department within the Albanian government to communicate with the business community. In recent years, the ecosystem’s growth has also slowed, Nako adds.
“Between 2013 and 2017, as part of a global movement towards startups and innovation, the Albanian ecosystem saw many initiatives from established organizations, but also from informal groups of people. At that time, young people who wanted to start a business had a lot of support and options to learn from ecosystem experts. After 2017, the ministry was disbanded, which was directly reflected in the ecosystem, where we saw a decline in new and existing initiatives. There were fewer events and also fewer startups and entrepreneurs. Nako tells The Recursive.
Challenges and obstacles for Albanian entrepreneurs
One of the main challenges faced by Albanian entrepreneurs at the moment is access to financing, as there are no angel investor networks or venture capital funds in the country.
According to Nako, one of the best options for startups to obtain funding is through donor-based programs that award up to 15,000 euros of startup capital in the form of grants. In addition, the market offers fewer opportunities and for Albanian startups, access to other markets is very difficult.
“Since 2020, a new tax law has been in force, which allows startups and SMEs with less than 120,000 euros to pay no tax on profits. This is a big step forward from the previous limit of 40,000 euros, but it is still not enough. The Albanian government must make the ecosystem more attractive for foreign investments and venture capital companies. There are very good practices from other countries that can be adapted to local needs to foster and develop a dynamic and sustainable ecosystem,” explains Nako.
For Jakob Modéer of the Swiss Entrepreneurship Program (Swiss EP), the lack of institutions such as innovation funds also harms the country’s startup ecosystem.
“Regarding the challenges of venture capital, I would also like to highlight that one of the most pressing challenges and bottlenecks for the ecosystems of Albania and Kosovo is the absence of a system appropriate and properly managed. innovation funds, like the one they set up in Serbia and North Macedonia, which injects millions of euros each year into innovative SMEs and startups”
Modéer, head of the Western Balkans program within the Swiss EPtells The Recursive.
According to him, the promotion of ideas and start-ups through public policies does not exist in Albania and neighboring Kosovo, which has direct harmful effects on entrepreneurship and the flow of transactions in both countries. .
“This is not to say that the lack of angel investors and venture capital is not detrimental to the growth of the ecosystem, but it is a different challenge where the solution must primarily be found within the private sector “, explains Modéer to The Recursive.
While examples such as those of Rubicon and Softmogul illustrate the great potential of the Albanian startup ecosystem, there should also be sufficient institutional support. Last year, the authorities presented a bill dedicated to the support and development of innovative startups.
“It is the fruit of work started a long time ago and supported by foreign donors, as well as by the recommendations of the European Commission which highlighted the need to develop legal instruments to stimulate startups.” Tirana-based economic journalist Nertila Maho told The Recursive.
“But the bill, at least for the community of those who know the startup ecosystem and the development potential they present, has been disappointing in terms of expectations,” says Maho, adding that there is still lots of work to do. made on such legislation.
“The bill highlights the long list of functions and skills of the new agency, as well as the countless conditions placed on startups regarding promotion or support measures. This is somewhat discouraging for an ecosystem that is still in its infancy and being contained rather than pushed to thrive,” concludes Maho.