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TThinking of going international? For startup entrepreneurs, the European Union-based ones in particular, Eastern Europe is one of the most popular directions. But what country should they choose?
This article examines the current European business conditions. It also aims to assess the threats and opportunities that the Bloomberg’s three Eastern European Best for Business countries provide to the entrepreneurs. The conclusions are based on the data provided by ESM, GEM, and WEF, as well as (of course) Bloomberg (European Edition).
Other sources were quoted as needed.
Time To Go International
In 2015, European startups raised — on average — 2.5 million Euros in external capital. More than half of them were operating on international markets. 8 out of 10 of the remaining half were planning further internationalization in the next 12 months [ESM 2015 REPORT, pg 7]. As of 2016, their earnings have risen up to 2 billion Euros. 77.7% were operating on international markets or planning further internationalization [ESM 2016 REPORT, pgs 6 to 7].
More than 90% have rated their current business situation as good or satisfying [ESM 2016 REPORT, pg 7].
Interestingly: 47.0% of those planning further internationalization intend to expand to other European countries [ESM 2016 REPORT, pg 33].
The meaning behind these statistics is simple:
THE CONCEPT OF INTERNATIONALIZATION ITSELF IS NOTHING NEW IN BUSINESS. IT IS THE OPPORTUNITIES THAT THE EUROPEAN UNION PROVIDES THAT MAKE THIS OLD CONCEPT ATTRACTIVE ANEW.
Some more numbers. 2015 saw 7.6% of startup founders coming from EU countries other than the location of their startup [ESM 2015 REPORT, pg 7]. 2016 saw the share increase by 8.6 percentage points to 16.2%. “79.6% of male founders formed their startup in their country of residence”, the European Startup Monitor 2016 report states, “This is only the case for 75.8% of the female founders”. Meanwhile: The share of non-EU founders has grown from 4.3% to 4.8%. “The percentage of female founders from non-EU countries (5.5%) is slightly higher than the percentage of male founders from non-EU countries (4.6%)” [ESM 2016 REPORT, pg 42].
“The highest share of non-EU founders was found in Poland (33.3%)” [ESM 2016 REPORT, pg 42].
The pros of well-prepared-well-executed internationalization seem obvious. The reasons to go international — both strategic and financial — are there. The question Should I go international? is no more. The question is: Where to?
For the EU entrepreneurs the answer is simple:
Eastern Europe is the place.
Place To Go International
Eastern Europe is the place indeed. That being said: Some locations are preferable to the others. Some countries can prove to be better.
There is a number of factors that are worth taking into consideration before expanding. The things to consider are numerous and varied. Depending on the profile of their startup, entrepreneurs might find themselves looking into things as far from each other as workforce costs and road infrastructure, not to mention various costs, taxes included. Some of these factors matter more, others — less. Some are important. Others are trivial. The general rule is that the more things we take into account, the better our chances of succeeding. Besides that, there are no rules, there are only pros and cons, differences, threats, and opportunities.
The most attractive Eastern European directions for expansion are Poland and the Czech Republic, with Poland named Bloomberg’s Best for Business in East Europe, Czech Republic its close peer. What makes Poland stand out among the other Eastern European countries is — Bloomberg’s Piotr Skolimowski reports — its fast-expanding consumer market and fast-improving infrastructure (this includes roads and bridges). The same goes for the Czech Republic. The difference between the two is — the conclusion can be drawn — that the later has suffered much more economic damage due to the global financial crisis of 2008 and the following recession.
The third Bloomberg’s Eastern European Best for Business is Hungary. Whether or not it is as good as Poland and the Czech Republic remains questionable. There are reasons to doubt it (some of them — political). That being said: Hungarian regulators are doing a lot to strengthen the bonds between the government and the entrepreneurs. Numerous tax breaks and low workforce/workspace costs do a lot to make up for political problems. Still: It might be better to start there — rather than to expand there.