Overall, Albania is currently behind in terms of startup activity. Its low local market size mixed with brain drain might lead the country to a slow growth. It is important to re-align the efforts of private sector and government with the needs of the local community in a bottom-up support approach led by entrepreneurs and organizations supporting Startups versus a top-down approach lead by the government. Another weakness in the ecosystem is the lack of capital, and, to a lesser extent, other support systems. At present, investment is seen as a high-risk proposition, without a proven value proposition or proven track record of success in innovation. Moreover, many support networks such as co-working spaces, accelerators, and incubators feel that there is not a critical mass of serious, highly qualified startups in order for their work to become financially self-sufficient. On the other hand, ecosystem support such as financing for accelerators/incubators is largely based on donor funds, which affects sustainability, strategic and mid-to-long term planning by these institutions. (SEE Report by ABC Accelerator and EIT Digital).
According to SEE Report by ABC Accelerator and EIT Digital, the number of support events for startups ecosystem is larger than those of the rest of the Balkans states, however there seems to be no available funding for those participating in these events with a big gap on early seed and seed money. Compared to other Balkan states, Albanian Government has taken a much more passive support role when it comes to provide seed funding, banks and other financial institutions continue to treat startups equal to established enterprises, with the only option being regional funding ventures such as Slovenian Angel Investors, South Central Ventures, Slovak Innovation Fund and Hungarian Angel Investor Network. Current national agenda on entrepreneurship and new business initiatives does not sufficiently encourage entrepreneurs and startup growth, potentially decelerating the pipeline in the short term.
The current role of the government has a passive nature and it is not in line with current economic development as Albania’s GDP growth for 2017 was 3.8 and for 2018 growth increased to 4%, supported by energy production and a strong tourism season. Although private investment is losing pace, government infrastructure spending is stepping in to support investment growth. A strong labour market continues to support falling unemployment. Albania’s economic growth is projected to slow to around 3.5% by 2019–20 and growth will rely increasingly on private consumption, fuelled by labour income gains, and net exports that are supported by growing foreign demand and expanding market access. Investment will also contribute to growth, as the government continues to invest in infrastructure and the business environment improves. In terms of economic growth, Albania is outperforming Western Balkans region although challenges remain in attracting foreign investments and preventing brain drain to Europe.
The number of startup support entities as well as stakeholders in the entrepreneurship landscape is increasing. Although 2018 would not be classified as one of the best years in terms of startup activity, ecosystem development was in full swing due to an increased interest shown by private and public sector. Financial corporations, such as KfW, Raiffeisen, Pro Credit Bank, NoA, institutions such as Ministry of Infrastructure, Ministry of Education and various foreign embassies and organisations have held support activities aimed at increasing awareness in general with the short to medium term objective of providing direct funding to potential startup’s and helping accelerators to build upon their current experience. Most of the activity is centred in Tirana although some effort is being placed in Korca and Shkoder to replicate smaller scale local labs which will potentially feed larger organisations in Tirana. A number of major initiatives have been announced, such as the building of a tech park by the Municipality of Tirana, which will coinvest with Albania American Development fund in building the tech park.
GIZ have increased their effort and expand the intake of newly formed companies and funding by 50% compared to 2018 whilst UK-Albanian Tech hub is on its way to holding its second round of acceleration programme. Additionally, central government will open a new tech space within first quarter of 2019 covering an area formerly used by Innovation Hub. Further plans are being put in place by the Swedish Embassy and two of the largest telecom companies Vodafone and ALBtelecom to provide support for the ecosystem in general. Swiss EP through funding from the Swiss Development Fund will continue to provide mentors for Albanian ecosystem for at least the next 3 years. Albanian tourism and agricultural sector is due to receive almost 200M in structural funding for the period 2019-2021, contributing to a positive environment for Albanian as well as regional startup’s/entrepreneurs to challenge existing companies in offering products in these industries.
Vast majority of startup’s coming out of Albania are IT related and generally offer solutions in a number of industries. Due to the nature and structure of Albania’s economy, most entrepreneurs are focusing in offering services for tourism, agriculture and ICT industries. Additionally effort is being placed in providing solutions or products for the manufacturing companies, financial institutions and software outsourcing due largely to the demand from private companies. The latter sector is growing rapidly and its attracting the attention of large multinational companies such as Lufthansa, PwC etc. We are seeing progress being made in Big data and IoT with a number of startup’s receiving funding and scaling regionally with others waiting in the pipeline. Low level of public investment into the ecosystem and the missing public programs to match grants or support start-up’s in the seed phase, is one of the main reasons why Albanian startup’s lag behind the region in terms of numbers and quality.
Largely all of the current startup support actions and the most effective are driven by the privately funded ecosystem players with little or no input from government. Since 2009, the Government of Albania developed two strategies supporting innovation: the National Strategy for Science, Technology and Innovation 2009- 2015, and the cross-cutting strategy “Digital Agenda for Albania 2015-2020”. The 2009 strategy focused on supporting centers of excellence, building communities of excellence in research and innovation that attract good scientific actors, increasing public R&D spending, diffusing innovation in 100 businesses and organizations, enabling integration with European counterparts, and officially recognized the importance of innovation in Albania. The 2015 strategy was developed with the vision of: “A society based on knowledge and information, through the consolidation of digital infrastructure in the whole territory of the Republic of Albania; improvement of the quality of online services and increase of governance and transparency”.
The main aims were investment and policy measures to improve the ICT infrastructures, new digital services for citizens, and improvement of their livelihood. One key difference between this strategy and previous is the focus on ICT as enabler for innovation by providing more efficient and transparent public services, notably in education, as a means of driving growth, a competitive economy and socioeconomic inclusion. The National Strategy for Development and Integration, the Instrument for Pre-accession Assistance and similar documents connected to the EU accession process broadly lay out visions and strategies for the government and society. These include a number of details related to innovation, ICTs and entrepreneurship, but only briefly, not laying out a specific strategy for these areas, but including them as small features in a larger vision for national development. Critically, all of these strategies note that there is a need for all ministries to contribute to pushing forward the agenda. Many ministries and sectors are developing independent strategies, and need to be better aligned.
One of the major concerns regarding legislation and regulation is the lack of effective support for the innovation ecosystem. Increased and improved provision of services, especially to entrepreneurs, should be a priority. Beyond this, access to funding for various projects is a particular concern. Presently, there are a number of plans that have not been fully executed, projects that are not fully supported, or activities for which funding and support have lapsed. There are government-run resources, such as research programs, accelerators and incubators. These projects, along with their counterparts coming from academia and the private sector are not optimally effective, because they are not receiving the support and funding they need to thrive.
Main trend is the increasing positive engagement form corporations based in Albania and in the region through either their local branches or through the inclusion of Albanian startups in their regional events or programs. A number of Albanian startup’s have been invited to take part in a CEED Tech-Slovakia during 2018, others have been invited to participate Elevator Lab, a fintech program by Raiffeisen International, selected entrepreneurs will represent Albania in GES19. Due to a larger Albanian population in Kosovo and Macedonia, Albanian startup’s are increasingly taking part in incubation/acceleration programs beyond their borders, utilising a larger Albanian market in the region based in cities such as Prishtina and Tetova.
During 2018, foreign missions funded and organised in combination with incubators, the highest number of support events for entrepreneurs. This trend looks to continue in the short term and increased participation will follow due to the international presence of mentor and renowned speaker.
According to SEE Report by ABC Accelerator and EIT Digital, Albanian startup scene has a lot of momentum. Most of the stakeholders work closely together and know each other personally. There seems to be a common understanding that although the numbers of the stakeholders in the ecosystem are increasing, their individual resources are limited, therefore we see more pooling together of resources in order to organise local and regional level events.
The key stakeholders of the Albanian startup ecosystem are:
• New York University, Epoka University, University Luarasi, Marin Barleti and UET
• AIDA, Ministry of Education, Tirana Municipality, Chamber of Commerce and Industry
• Swiss EP, Dutch Embassy, USAID and US Embassy, GIZ, Swedish Embassy, UK Embassy
• Yunus, IDEA, AIA,CEBE, Oficina. Protik, CEED Albania, AISEEC
• Telekom Albania, Vodafone, Raiffeisen Bank, ProCredit, NoA
Event Organisers and Media
• Startup Grind, Startup Weekend, Allweb, ICT awards, Tirana Innovation Festival, Ivanaj Foundation, PC World, Business Magazine, AITA, Innovation Space, Albanian Skills
• Open Labs Hackerspace, Harry Fultz Institute Lab, Tirana Business Lab, ICTS Lab
Co-working and Event space
• Dutch Hub, Tirana Business Park, Tirana co-working