Challenges and possible solutions for financing innovative Serbian companies

The development of the innovation ecosystem in Serbia is becoming more dynamic. The around 400 startup companies are slowly making Serbia a very interesting destination for investment. But there is still a major problem with financing startups at an early stage of development. The average investment size in a local startup company is a little over 15 thousand euros, not even a tenth of the global average.

An even greater challenge is the fact that more than 50% of local startups fail to obtain external financing, but are fully financed from the founders' own funds. At the same time there are more than 11 billion euros of local people's savings in the banking system, and over a billion euros of pension and investment funds, besides insurance companies, all of which do not support the most dynamic segment of the Serbian economy.

It is these challenges that have prompted WM Equity Partners, a team of experts with many years of experience in the field of access to alternative sources of funding, to create the Serbia Innovates Project together with the ICT Hub and the Centre for Public Policy Research. This project is supported by USAID with the aim of encouraging cooperation in the most promising branch of the Serbian economy and thus strengthening the entire economy. In implementing this project the emphasis will be on the cooperation of individual elements of the system - traditional companies, financial institutions, innovative companies, the educational community and the state, all with the aim of expanding technological innovation supported by sustainable sources of funding

It is important to point out that in the last few years, the number of alternatives for financing innovative companies has increased significantly. In addition to the grants provided by the Innovation Fund of the Republic of Serbia, NTP Belgrade organized the Raising Starts program, NALED and Philip Morris have organized Startech, and the Catapult accelerator program will start soon.

Private capital is slowly being mobilized through business angels groups, and two excellent examples are business angels under the Digital Serbia Initiative and Serbian Entrepreneurs. The first crowdfunding campaign was at the end of 2020 (Ventu), and new campaigns are expected this year.

In addition to the first VC funds, such as SC Ventures and ICT Hub Ventures, which have been financing local startups for several years, a number of regional VC funds have recently made their first investments. It is especially encouraging that the establishment of the first local entrepreneurial capital fund - TS Ventures - is expected soon.

Through all these forms of financing, it is important to create a local investment culture and point out the fact that the purchase and rental of apartments is not the only investment alternative in Serbia.

There is further encouragement in the public debate underway on the adoption of the Startup Ecosystem Development Strategy 2021-2025, where one of the key goals is focused on increasing the total amount of funding from private sources to Serbian startups to the level of 80 million euros, and where the formation of four local entrepreneurial capital funds is also expected. In order to help the development of private investment, the Republic of Serbia plans to implement two co-investment programs that will help develop groups of business angels and venture capital funds.

Through a component focused on facilitating access to alternative funding sources, the Serbia Innovates Project will support innovative companies to identify an appropriate source of funding and submit the highest quality application. They will be supported in these efforts by domestic and foreign experts and mentors with many years of relevant experience.

I can advise the founders of domestic startups not to miss this opportunity for comprehensive support and to follow the website to find a suitable supercluster to join.

A public call for a supercluster pilot was published on December 30, 2021, and those interested can apply through the Serbia Innovate website. The call is intended for consortia of organisations from all stakeholder groups in the innovation ecosystem such as businesses, startup community, science and academia, and public administration The pilot supercluster will be implemented in four following areas: high technology in agriculture and the food industry, gaming environments and virtual reality, web3 and blockchain technologies, and advanced solutions in medical technology and biotechnology.

Vladimir Pavlović, Director, WM Equity Partners

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