Croatia’s Entrepreneurial Impulse
Proud to have beaten the odds arising from a transition to independence since 1991 and the legacy of a war that only ended in 1995, Croatia officially joined the European Union on July 1, 2013. Last month, I accepted an invitation to visit with President Ivo Josipovic at his retreat on the Brijuni Islands and found a nation already embarking on its next mission.
Croatia missed the early waves of investment in Central and Eastern Europe but has recently been working to improve its investment climate with macroeconomic stabilization measures. The next challenge is a tough one—structural and cultural reform. For instance, speaking at the Institute for Innovations last February, President Josipović said that among the public and even in some court rulings, business failures were still perceived as a criminal offense. He personally called to change this through the recognition of entrepreneurs.
That tourism is still Croatia’s most important economic sector is easy to understand if you visit. After my meetings with entrepreneurs in Zagreb and then with the President at his official residence on the coast, I traveled all the way from the Brijuni Islands—driving through Lovran, Vodice and Split—to end my journey in Dubrovnik and I was hard pressed to find a single view less than breathtaking. But the economic landscape is changing. According to the Center for Entrepreneurship, Innovation and Technological Development at the Croatian Chamber of Economy, the number of new enterprises in Croatia grew by 71% between 2001 and 2011. This accounted for just more than half of Croatia’s GDP (the share of SMEs in the European Union is an average of 58%).
More importantly, the entrepreneurs I met with in Zagreb were world class. Take Josipa Maić and her startup, Teddy the Guardian, which has combined an established tradition of textiles with new exponential technologies using medical sensors and open source platforms to monitor children’s health. The plush teddy bears that she produces can track pulse, blood pressure, body temperature and oxygen saturation sending recorded values wirelessly to a parent’s smartphone. Josipa is young, very smart and has already been recognized in TechCrunch and Fast Company. I also met the entrepreneurs behind several other firms such as Iderma and Poslovni Portreti Ltd and Poslovni Prijatelj Ltd. I learned of web hub communities like Zelena Energija focusing on renewable energy; Business Cafés like Zaokret, investors like InterCapital and even met representatives of big companies interested in new entrepreneurs at Microsoft and Hewlett-Packard.
The challenge for the current government is to empower these entrepreneurs to grow. To achieve this goal, since last year Croatia’s Ministry of Entrepreneurship and Crafts has been undertaking an “Entrepreneurial Impulse” program that encompasses measures ranging from shorter startup procedures (which are now at the EU level or better, according to the World Bank), to fiscal incentives (e.g. VAT exemptions for companies under certain revenue thresholds, 0% state health program contributions for new SME employees and an exemption from the tax on reinvested profits), to an SME funding program. Reported results from the first nine months of the Impulse program show that SMEs saw their revenues during this period increased by 1.5%, their exports increased by 9.3%, their total employment increased by 2.1% and investments in SMEs grew by 3.2%.
With a business management background himself, Minister of Entrepreneurship and Crafts Gordan Maras, seems to understand the challenges entrepreneurs on the ground face to grow their businesses. He has personally led meetings with foreign entrepreneurship leaders, such as discussion panels with the British Embassy in Zagreb, where examples of successful innovation initiatives—such as London Tech City—were discussed and contrasted against Croatian counterparts like the Zagreb Entrepreneurship Incubator (“ZIP” Incubator) and Osijek Software City.
Croatia’s Investment Promotion Agency has also been working to promote Croatia “as a knowledge-based economy” with a focus on ICT (information and communication technology) and biotech. The Office of the President of the Republic of Croatia partnered with the Croatian Chamber of Economy, the U.S. government and others to create the Brown Forum to help government leaders from the region identify best practices to support entrepreneurs.
I saw a lot of strong political commitment here to create and grow entrepreneurship. The next challenge is for the government to strengthen its ties with universities and the bottom-up startup communities across the country. This consolidation is already taking place in parts of the ecosystem. For example, the University of Zagreb is an important partner of the ZIP Incubator, collaborating through its Technology Transfer Office (TTO) with incubation and education activities geared toward startups with a special emphasis on students, scientists and the academic community.
One objective of my visit was to encourage the varied voices featured in Croatia’s Global Entrepreneurship Week 2012 video to collaborate more closely to build a resourceful, interconnected, startup ecosystem through a coordinated GEW Board. In the video, more than 70 representatives from various business sectors and regional and local government leaders speak about the value of the entrepreneurial path, including President Josipovic, EU Ambassador in Croatia Paul Vandoren and the mayors of a number of cities (Zagreb, Split, Vukovar, Koprivnica, Kostajnica, Vodice and more).
As one the wealthiest of the former Yugoslav republics, a flourishing entrepreneurship ecosystem here could bode well for the entire Balkan region. In my conversations with President Josipovic, it was clear that Croatians view their biggest challenge as restoring an entrepreneurial mindset in their citizens—in many respects undoing the attitudes encouraged during Yugoslavia’s socialist years. The entrepreneurs I met with can clearly play an important role here as role models. More importantly though will be the commitment from the highest levels to encourage ideation, risk-taking and challenges to the current ways of doing business. I was therefore most pleased to hear after my visit that President Josipovic joined the GEW Croatia Advisory Board, along with the Mayor of the City of Split and the Prefect of Dubrovnik-Neretva County. With such sincere interest from the leaders of a nation and such energetic talent in local communities, any nation has a fighting chance of reaping the economic and social rewards from higher rates of new firm formation.