November 10, 2020 — Croatia’s investments in the startups world began in 2015 thanks to the World Bank. Their initiative “Innovation and Entrepreneurship Venture Capital Project,” involved a loan agreement of 20 million EUR. Five years later, Croatia is 20th in Europe for investments in startups.
Five years ago, the World Bank began offering loans to Small and Medium Enterprises (SMEs) and startups in Croatia. Their objective was to strengthen risk capital financing to make the innovations’ sector competitive and more productive. Croatia had three goals: lower the cost base of starting a business, boost productivity, and increase exports.
Atomico is a Venture Capital fund investing firm. They have been producing the annual “State of the European Tech” report since 2015. The 2015 report from Atomico didn’t even mention Croatia. One year later, the country joined the report thanks to ten major startup investments. In 2019, the report revealed that there were 35,300 developers in Croatia compared to 29,700 in 2018 — an increase in potential. Those numbers kept improving in 2019. As a result, Croatia attained 20th place in Europe for investments in startups, reaching a record of 120 million USD (103 million EUR).
While the numbers have been improving — the road is still long and winding. Just like the road to get to those rising numbers has been.
Sklopp Startup Founder: Every Croatian Investor Rejected Sortcase Idea
“For me, the startup scene started two years ago,” said Petar Fabris, the founder of the startup Sklopp. “Up until that time, every investor in Croatia I had approached rejected my idea.”
Fabris founded Sklopp in 2019, after spending nine years convincing investors that his business wasn’t just another software company. He created Sortcase, which is an alternative to the traditional box suitcases. At first, it was an add-on mechanical linkage with retractable shelves. The dimensions of the shelves adjusted to the dimensions of the suitcase.
“In 2019, I left my previous job at an architectural office. Then, I took a month to develop a full suitcase with an embedded mechanism. After only two months, I won a place in FRC accelerator and received funding,” recounted Fabris.
The FRC accelerator is the product of Fil Rouge Capital, an investment fund manager which launched the program for startups in 2019. Applicants fill their forms and FRC selects the winning companies. They then receive an equity investment of €25,000 or €50,000 cash, access to a mentor network, and experts’ seminars. After they selected Sklopp, Fabris decided that staying in Croatia was a must — both for the program and financially.
“After the program, I could have done everything remotely from abroad but chose not to. It would require a higher burn rate than I have in Croatia,” explained the Slopp founder.
EU Study: Croatia Startup Innovation Ecosystem Still in Infancy, Unfriendly Bureaucracy
A company’s burn rate is the measure of negative cash flow. The rate determines the rate of the startup’s venture capital spending, before the new company generates any positive income. To even have venture capital, startups need investors, such as FRC. Or a Kickstarter campaign (such as the one planned by Sklopp), Funderbeam, or the European Union.
The EU is one of the main investors in Croatia’s landscape with the goal of reversing the findings of the 2018 “Startup Innovation Ecosystems In Southern Europe” study. The study reported that “Croatia is characterized by a startup innovation ecosystem which is still in its infancy. They cite the relatively minimal investment in innovation and development.” The EU emphasized that, despite the unfriendly bureaucracy, the country’s startup ecosystem is on the move. More local entrepreneurs are taking risks.
Entrepreneurs such as Petar Reic, the founder and CEO of Omoguru, is one of them. The Croatian startup launched in 2018, the year of the report. Perhaps they wanted to prove the EU wrong or right, depending on perspective. Thanks to the EU’s funds for SME innovation OP Konkurentnost i kohezija (Operating Program for Business Competitiveness), Reic was able solve the reading challenges of his daughter, who is dyslexic. And he did so through developing Omoguru web and mobile software.
Croatian OmoType Adaptable Font System Helps Dyslexic Children Read Faster
Reic developed the dynamic font system OmoType, which adapts to the needs of every reader through mobile and web software. This technology helps dyslexic kids read faster, make fewer mistakes and use less mental effort to read. Experts found out that in the Croatian language, the prevalence of dyslexia is between 9 to 12 percent.
“There actually wasn’t really a need to move from Croatia,” said Vanja Andric, Head of Marketing at Omoguru. “We wanted to focus locally first. Basically here in Croatia there are not any other available solutions.”
For research, communication, and optimization: the startup journey can be a rollercoaster. Thanks to local support from the Zagreb Innovation Center (ZICER), Omoguru was able to push forward. The ZICER hub offers startups a place for co-working, access to labs, and conference halls. It’s a space to inspire and seek inspiration. So is the Zagreb Entrepreneurship Incubator (ZIP). The ZIP program offers startups mentorship, workspaces, and educational workshops. In 2014, the Croatian Ministry of Entrepreneurship and Crafts awarded the incubator best entrepreneurship support institution in the country.
Institutions like the European Union and the FRC, and safe spaces like ZICER and ZIP are paving the way for Croatian startups, who are the clear winners.
enlightED Recognized Omoguru for Education, Innovation and Edtech in 2020
In 2020, enlightED Awards recognized Omoguru for its role in education, innovation, and edtech. They selected the Croatian startup from 450 participants, some of whom have been in the industry for much longer.
“It is important that edtech experts feel we’re doing great work and understand the value and the potential we have. Such recognition also reminds us to stay strong and keep going,” Andric said.
Still, Croatian companies require more investments for both to move forward. Otherwise startups might go abroad, a move Fabris is considering. But not all has been lost.
“The startup landscape is always changing,” said Andric. “Most of the changes are coming from additional available funding in Croatia and being able to obtain ecosystem support.”
These innovative startups can then address challenges like helping out travelers with the Sortcase or children with dyslexia with Omoguru’s web and mobile software.