The Startup Ecosystem of Croatia

However, despite these advancements, the broader ecosystem still faces significant challenges in Croatia startup support. These include risk aversion, unfriendly business regulations, and difficulty accessing funding for startups to scale. At times, it seems Croatia follows a problematic approach common in the EU: encouraging entrepreneurship with grants instead of allowing private sector stakeholders and investors to lead the way. While grants help, they also create a closed system rather than opening up to the EU and global market.

Another major element slowing ecosystem growth is Croatia’s status as a popular tourist destination. It is hard to persuade the young population to embark on an uncertain startup journey when easy money from accommodation and tourism services are so accessible. One more disadvantage of local ecosystems is the failure to celebrate its heroes. Such achievements are often minimized, and there is sometimes the perception that it was even unfair for them to succeed. This is not a mindset that benefits ecosystem growth, but instead pushes potentially successful entrepreneurs away. While Croatia has a skilled talent pool, there has been an increasing trend of young people leaving the country to register their companies. In response to this brain drain, and in an effort to supplement the domestic workforce, the country has issued a Digital Nomad Visa. However, the impact of these kinds of visas are debatable, as digital nomads don’t tend to stay in a location very long. Also, most young Croatian IT companies choose outsourcing work over building their own brand. This is another effect of the lack of early stage investors, particularly pre-seed and seed-stage VCs, which would allow Croatian startups to grow and scale.

Addressing this investment shortfall is crucial, but it is just one part of a broader set of systemic reforms needed to support startup development. Reducing the administrative burden is another potential area of improvement. Croatia requires reforms of tax and regulatory mechanisms to remove various barriers and pitfalls for young companies and startups, as well as to incentivize innovation. In response to these challenges, CRO STARTUP is a national startup association that actively works to overcome such core obstacles in the startup ecosystem, but it is limited in power without stronger government support. The country has made near term progress by cutting red tape, yet there is still work to be done in digitizing business processes. As a positive development in this area, the National Development Strategy 2030 aims to enhance the digital transformation of the economy and society as the first priority.

To support these changes, Croatia has seen growth in targeted local initiatives, such as ZICER, Startup incubator Rijeka, the Bird incubator (founded in early 2021 with the aim of helping startups with software ideas related to data analytics, artificial intelligence, and machine learning), Poduzetnički inkubator BIOS, and the Science and Technology Park Step Ri. With success stories such as Infobip and Rimac, and with growing influence from the tech sector, we are confident that Croatian startup ecosystems will continue growing in the years to come.