A closer look at eastern Europe

The Kernel’s central and eastern Europe columnist Ivo Spigel explains why these regions deserve a bit more attention, giving a rough guide to the countries producing exciting start-ups. In the coming months, he’s going to give the area the in-depth coverage it deserves.

Twenty thousand computers? I was amazed. What a bold move by a government!

The move seemed all the bolder since it happened in the mid-eighties. The Hungarian government – governing a Socialist, Soviet-bloc country at the time – decided to import 20,000 Commodore 64 personal computers. Half of these were designated for school use and the other half would be sold to consumers. Fresh out of university in the former Yugoslavia, I was green with envy. “Where is our government now?” I thought “What are they doing?”

Computing and engineering roots run deep in Central and Eastern Europe. John von Neumann, one of the founding fathers of digital computing, was born Janos Lajos Neumann in Budapest in 1903. Nikola Tesla, born in present-day Croatia in 1856, had been a US citizen for 12 years when von Neumann was born.

Back in Budapest in the socialist eighties – 1982, to be more exact – Gabor Bojar founded Graphisoft. The company launched its premier architectural CAD software – ArchiCAD – two years later and went on to dominate the so-called “Building Information Modeling” niche to this day. Legend has it that Steve Jobs was impressed by ArchiCAD at the German CEBiT trade show in 1984 and provided the company not only with vital support in both cash and computers but also with access to the Apple distribution network. Honoring Jobs, Bojar and Graphisoft dedicated a life size statue to Apple’s legendary leader at Graphisof headquarters this past December.

Just a few days before the dedication of Jobs’ statue, another Hungarian architect made headlines in the startup world. “Let me show you this Prezi“ has become a familiar phrase in conferences worldwide, but not many people creating and running “Prezis” instead of PPTs know that Prezi the company was started by a Hungarian trio led by Adam Somlai-Fischer (yes – an architect). Launching their eponymous cloud-based presentation product in 2009, Prezi pulled in a $14 million investment round in December of 2011, led by Accel Partners. Typically for European startups, Prezi today has offices both in Budapest and in San Francisco.

Start-ups in this region have shown an uncanny ability to flourish even without funding. For some, this has meant keeping out of the PR limelight. Serbian ActiveCollab, maker of project management and collaboration software, has taken “PR shy” to the extreme: on their website they don’t even have Press section with favourable reviews and comments. They do, however, have more than 5,000 – apparently happy – customers.

Following this bootstrapping approach are their countrymen from Nordeus. Founded by three friends who used to work in Microsoft’s Danish research and development centee, Nordeus has emerged as a global leader in the red-hot category of social gaming. It was a real “David slays Goliath” moment back in June of last year, when tiny Nordeus’ Top Eleven web-based football manager game overshadowed EA’s FIFA Superstars. When I spoke with CEO Branko Milutinović recently, he appeared to be in no rush to take on funding any time soon – the company is profitable and growing at a very healthy pace. Attracting the best engineering talent in the region, developing new titles and covering the major mobile platforms seem to be much higher on their list of priorities.

No picture of high tech in Europe – let alone central and eastern Europe – would be complete without the mighty Estonians, known within the community by the friendly moniker #EstonianMafia. How small is Estonia? Well… Croatians and Slovenians regularly exchange jokes about which country is smaller. Compared to Croatia’s 4.5 million and Slovenia’s 2.5 million, Estonia’s 1.5 million citizens represent truly a small population. Measured by the country’s achievements in building digital businesses, however, entrepreneurs, investors and politicians not only from central and eastern Europe but from Old Europe would be well advised to take note of Tallinn.

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I met Tõnis Saag in Ljubljana at Mini Seedcamp last year. His startup – Sportlyzer – wants to help endurance sports enthusiasts achieve better results, faster than they would normally, by providing an online training helper. I asked Tõnis if he was an active sports person himself. “Sure,” he answered cheerfully. “I’m a karate black belt and instructor and I’m on the board of the Estonian Karate Federation.” I mention this just to illustrate that if you want to compete with the Estonian start-up mafia, this is the kind of adversary you’re likely to run up against.

Aside from Sportlyzer, the Estonian start-up machine, with quite a bit of help from their Finnish neighbours, has produced many more great projects and teams. Say, for example, you or your husband are mechanical engineers. Why not join GrabCAD – an online community of, by and for more than 70,000 mechanical engineers which has recently completed a $4 million Series A round, bringing total funding to $5.36 million. Erp.ly offers cloud-based ERP solutions. Want to save money on foreign exchange transfers? Sign up for Transferwise.

Closer to my own home, in picturesque Slovenia, two clever founders wanted to use semantics to make the internet work better. Boštjan Špetič and Andraž Tori started Zemanta (think “semantics”) and went on to become not only one of Seedcamp’s earliest investments, but also the first investment into central and eastern Europe from legendary New York venture capitalist Fred Wilson of Union Square Ventures. More than 80,000 bloggers rely on Zemanta each day to provide them with images, links and other content to make their blogs more valuable to their audiences. Another Seedcamp portfolio company, Vox.io is dragging VoIP into the 21st century by providing an extremely simple voice and video communication service directly from your browser.

Last but not least – my fellow Croatians. Surely your magazine, TV show or company has decided you need an iPhone or Android app? ShoutEm wants to be your WordPress, helping you do it yourself instead of paying someone tons of money. GISCloud is moving geographical information – hitherto prohibitively expensive – to the cloud. Amongst so much cloud hype, it’s nice to see someone offering a very clear advantage of a cloud versus traditional solution.

Salespod is another great example of bootstrapping (well, almost). With a modest seed round, they are providing mobile sales force solutions to a growing number of corporate clients. Like some of the other companies in the region, Salespod is growing quite well on their own now, but it would be hard to imagine them not looking for fresh cash to help grow the business more rapidly, sometime down the road.

Finally, Farmeron. Matija Kopić and his crew have attracted big fans in many startup conferences due to the fact that they are going after a market nobody else thought of before: farmers. Help farmers keep track of their data as naturally as they keep track of their livestock means they can not only save money, but also make more money from the same resource base. “Facebook for cows” might be a silly slogan, but the implications of Farmeron’s work on the livelihood of potentially millions of farmers is no joke.

This has been a very personal overview, necessarily incomplete. There are far too many great start-up stories in this region to fit into one column, however briefly each project was covered. But that’s why I’ll be returning to The Kernel each month, to take a closer look at one of the most fascinating – and perhaps unexpected – tech innovation hotspots on the planet.