Development of start-up companies in the region and the EU
By Tijana Milacic, SAJIC
In Bosnia & Herzegovina, startup companies are experiencing a business boom, but despite innovative ideas, a market that is quite sceptical to every new phenomenon still plays a significant role in their development.
If we start from the very beginning, the procedure of establishment of start-up companies is quite simplified, compared to the establishment of other companies. Despite the ideas of their founders having a high level of innovation and potential, and the commitment to implement them, there is the question of what then hinders the development of start-ups.
One of the most significant issues of every new start-up company is the source of financing of new business, and access to funds is at the same time one of the most common constraints they encounter.
Unlike the European market that quickly recognises the potential in start-ups, the market in Bosnia & Herzegovina, even at the very beginning of a start-up, requires a sustainable business model, which is very diffcult to achieve at that phase. Consequently, it negatively affects the founders of start-ups, hindering the implementation of their ideas. In Bosnia & Herzegovina, a large number of investors are not yet ready to make a breakthrough in their business (i.e. to take on the investment risk when the project is still in the phase of an idea), and this has a negative impact on the economy, businessmen, as well as the overall market development, thus leading to nine out of ten start-ups facing failure even in the idea phase.
Investors usually demand that the companies they invest in perform their business under the law they are familiar with, and it almost became a standard for it being USA or UK (that these were American or British).
The advantage for EU countries reflects in special funds granted by the European Union, but they often only include the member states. However, this mobility enabled by EU members is an advantage, since it can make it easier to spend time in some countries with a betterdeveloped start-up ecosystem, with more opportunities to find proper funds. The European Union funds are provided through several EU programmes, and most often support projects oriented to technology and development.
One of the financing ways that should be further developed is funding by state authorities, because it is a method of attracting other investors, then it improves the state economy, indirectly affects unemployment, and for those reasons is of exceptional importance.
In Bosnia & Herzegovina, many domestic investors still lack awareness of how start-ups work and that a startup business plan cannot be developed and prepared just in a detailed Excel table, but rather it must be the pitch that attracts a start-up investor.
Most of the start-up companies in Bosnia & Herzegovina are mainly in the information technology and marketing sectors, but investors need to realise that there are opportunities in other sectors that include ambition, innovation, growth and finding stability in a business environment. Tendencies show that the trend towards startups in information technology will continue, but it is still expected that the surrounding countries will take a step further and develop startups in various economic areas.
In the last few years, the number of accelerators launched or funded by major world-renowned companies has increased in Europe and the United States.
Although the start-up scene in Bosnia & Herzegovina is still undeveloped, start-ups provide a very good opportunity for the economy. It is an area where slow administration or limited resources are not an inevitable obstacle, but still, there is an immense potential that can be achieved. However, much more work is needed to develop infrastructure and support instruments such as incubators, accelerators, investment funds, as well as build a start-up culture and raise interest in entrepreneurship through education, mentoring, organising as many start-up events as possible, and creating a start-up community.
Tijana MilacicSAJIC Law Firm Services, Banja Luka, Bosnia and Herzegovina
T: +387 51 227 620
Published: January 2019 l Photo: Leonid Andronov - stock.adobe.com