Uncovering new talent can take you to a range of fascinating places. Historic London has its burgeoning fintech scene, China is throwing its considerable weight behind Beijing as a high-tech startup centre and San Francisco is home to some of the most innovative web entrepreneurs in the world.
However, these three cities are not where I am parking my shopping trolley. For me, Kiev, St Petersburg, Tallinn, Krakow and Vilnius are the hidden gems of the tech world, full of untapped talent and the places where the next big breakthroughs in technology will come from. Venture capitalists are beginning to take notice. Venture capital investment in the region increased 245% between 2007 and 2012. It is a trend that is continuing, with 2014 seeing €431m ($483m) of investment, the highest on record. These are significant figures, but we are only at the beginning of the journey.
The region is on course to become a major force for innovation, and Europe is looking east for the next tech breakthrough. There is a simple reason behind this. Before the money really flows, every tech hub needs talent – and central and Eastern Europe (CEE) has it in spades.
Performance ratings on Topcoder, an online platform running international coding and data challenges, puts four eastern European universities in the top 10, more than China, Japan or the entire developed world. This dominance is even more obvious at the high-school level, with the most successful teen coder in the world coming from St Petersburg and the third most successful hailing from Zagreb. Indeed, Russia tops the platform’s global rankings, ahead of developed powerhouses like the US and Japan, while Poland, Ukraine and Belarus are all in the top-performing 10 countries worldwide. This trend continues throughout the Topcoder tables, with the Czech Republic, Kazakhstan, Bulgaria and Romania all beating France and Germany.
These young, agile, inquisitive minds are tuned into some of the most pressing problems of our data-driven age. How do you spot a computer virus you have never seen before? Or how can businesses make use of the reams of data they now have access to? The next generation are coming up with industry-changing solutions. At GoodData, for example, instead of analysing business data manually, their software engineers in Prague have created a machine learning algorithm that grows in sophistication the more it is used, spotting opportunities and risks before human analysts can. Intel Capital led a $25.7m financing round for the business at the end of last year.
For those of us who work in the region, this comes as no surprise, but it is set against a testing economic climate. In recent years, the region has suffered from economic sanctions, political instability, a crash in oil prices and protracted armed conflict. Nevertheless, while the GDP of Russia, Ukraine and Belarus have each plummeted, technology startups have flourished.
That is because tech, more than any other industry, is borderless. Intel Capital’s portfolio companies in the region do not sell to their neighbours – their innovations are shaping businesses from around the world and competing with the best and brightest of Silicon Valley. Take Parallels as another example. Created in Russia in 2000, its software allows more than 4 million users worldwide to access Windows software on their Mac devices, while more than 10 million businesses in 125 countries receive cloud services through their products. The software has become the lens through which millions of people access the latest IT, and their success is built on Russian engineering talent.
There remains a lot to be done, however. Despite the great strides in recent times, only 0.54% of venture capital activity occurs in CEE. Given the depth of genuine talent, this is a tragedy. It is not for a lack of money – according to law firm Olswang, European venture capitalists raised €3.8bn of capital worldwide in 2014, more than at any time since 2009. The problem lies with European investment in IT. Year on year, the proportion of technology-related investments fell from 19% in 2013 to 12% in 2014.