Central and Eastern Europe (CEE) is emerging as a dominant player in the global IT sector by leveraging its existing strengths. This region has experienced rapid growth in its start-up environment with a 15.5x increase in total value since 2014, and has been able to surpass growth rates of Western Europe. However, despite this rapid growth, challenges remain due to the relocation of founders and the limited number of dedicated mentors available. IT entrepreneur Sergey Tokarev has provided his thoughts on the steps necessary for CEE to achieve its goal of becoming a global start-up hub.
Advantages of the Central and Eastern European ecosystem
CEE countries share a number of strengths that make them highly competitive:
- Global thinking. Since most founders of innovative companies are focused on international markets, they operate on a remote-first model and plan to enter the US and Western European markets from the outset.
- Pragmatic approach. The region’s startup ecosystem is focused on the rapid creation of a finished product that is well-received by investors and venture capital funds.
- Qualified specialists. There are many skilled professionals in the area, and international companies really value their experience.
- Cost-effectiveness. In general, you don’t have to pay as much for salaries in Central and Eastern Europe as you would in the US or Western Europe. So, startups can create good dev teams there without burning through all their cash.
Commonly Held, but Wrong, Ideas about CEE
Even with the CEE market’s fast growth, it seems like the rest of the world is still scratching its head about it. Sergey Tokarev clears up some of the confusion:
1. Political instability.
There are many types of risk; however, not all countries in the region carry the same level of risk. There is still investment into the start-up space in Ukraine despite the war. Poland and the Czech Republic both have stable regulatory frameworks, are European Union members, and are politically stable markets.
2. Lack of venture capital.
A number of new venture capital funds have appeared on the CEE market, and their number has effectively doubled between 2017 and 2023. As a result, private investors and funds are increasingly noting the advantage of available capital over the number of start-ups capable of attracting it.
3. Focusing exclusively on outsourcing.
A lot of people see Central and Eastern Europe as just a place to outsource work. Look at Ukraine – their IT exports reached something like $6.4 billion last year, which is huge. But there’s way more to it than that. Since 2014, the value of startups in CEE has grown six times quicker than in Western Europe. Notable examples of successful products include Grammarly and ElevenLabs.
What prevents scaling
Sergey Tokarev believes a big problem keeping Central and Eastern Europe from being more competitive is that not enough startup founders stick around. He mentioned that Ukraine’s AI and tech scene faces similar problems. To grow steadily, they need cash, skilled local people, and helpful rules. Sergey Tokarev thinks that if businesses, schools, and the government work together, it could really boost innovation there.
“Due to the war in Ukraine, more than 90% of the headquarters of various companies have been moved abroad. At the same time, an outflow of founders is observed even in stable CEE countries. According to Dealroom data for 2025, 54% of companies left Estonia, choosing other markets,” adds the IT entrepreneur.
To improve things, we need to make a good place for startups to grow. Also, it’s key to think about what founders get back – they can bring money, contacts, and what they’ve learned in the US and Europe.
“There are several areas that can influence the situation. For example, founders can manage teams remotely, maintain an operational presence, or otherwise stay connected to the CEE market. They can also create their own venture funds or even return to work as mentors,” emphasises Sergey Tokarev.
Capital alone cannot make the CEE startup ecosystem a full-fledged competitor. It is equally important to ensure the presence of strong and authoritative founders.
