Characteristics of the Albanian Start-up Ecosystem
The Albanian Start-up Ecosystem is in an early stage and it is made up of around 168 start-ups that belong mainly to the discovery and validation stage. Only some of them could be considered as part of the efficiency / refine stage. It is noticed that there are no scale / grow stage start-ups or there might be few attempts to catch this stage. There are 124 players operating in the Albanian Start-up Ecosystem, where as the most significant ones are identified universities, accelerators, incubators, co-working spaces, foreign grant programs and small training schools for young people. Some concrete organizations that are playing a very active role are: ICT Awards, EU for Innovation, Yunus Social Business (Albania) Balkans, Innovation Management Academy, Uplift, Startup Grind, Protik ICT Resource Center, Coolab, Municipality of Tirana, Swiss EP, Growpreneur, Business Mag, Ofiçina, Garazh, Innospace Tirana, Destil, Junior Achievement of Albania, Partners Albania for Change and Development (for social entrepreneurship). On the other hand, there are some important players that are missing from the ecosystem. Having a functional and variable investing structure made by angel investors, local investors, VC funds, etc. is a big need for the ecosystem. In general, it is noticed a lack of strategic collaboration and coordination among the organizations of the ecosystem. Even the collaboration level among start-ups is below the average. Only 35.2% of them have collaborators. They usually tend to create short-term collaborations for common project implementation or events’ organization. Universities, incubators and accelerators, media, NGOs and co-working spaces are those who collaborate the most with one another. In the last 4-5 years, there has been increased collaboration with regional partners and international organizations that operate in Albania, such as the Embassy of Sweden in Albania and GIZ.
Albanian start-ups are mainly operating in the industries of e-commerce, ICT, communication and marketing, education and tourism. They mostly tend to provide solutions for local communities and national market. Some of them have penetrated in regional markets and there are few attempts for internationalization as well. ICT start-ups are those who are performing better and with the highest potential for growth and internationalization. The majority of founders are young people and males. The average age of founders is 29.1 years old. They are concentrated in the urban area of the capital city of Albania (Tirana) and in most of the cases live with their root families or friends. Almost all founders have a university education, mainly Master’s level in the fields of: economics, finance and business; computer sciences and ICT; engineering; marketing. A majority of founders are not totally dedicated to their start-ups, but they are doing another job apart from it. They have an average of 8 years of working experience in the fields of: management, finance, marketing, sales, project management, business analytics, web design and software development. Albanian start-ups are usually registered formally in the National Business Center after their establishment. However, around 10% of the already established start-ups are still working in informality. The officially registered start-ups, participated in the study, have an average number of 9.4 employees and have contributed to the employment of a total of 545 people.
The main intentions that have motivated Albanian entrepreneurs for the start-up creation journey are: market opportunities and gaps, positive impact and values’ creation, passion for working on things they like, gaining more money than a fixed salary offers, independence and freedom. Despite these motives, it is noticed a lack of business culture and overall entrepreneurship education. In plenty of cases start-up entrepreneurs depend the success and development of their start-ups only at grants. The innovation level is low and this becomes a main reason for the small potential of growth for Albanian start-ups. Overall business environment, lack of governmental support and focus, the significant phenomena of brain drain of young people are contributing to the creation of preventive terrain for growth of start-ups in Albania. Around 1/3rd of Albanian start-ups have been part of an incubation or acceleration program in Albania and 18.7% of them have participated in an international incubation or acceleration program. Regarding the mentorship programs, 37.4% of start-ups have had the chance to work with a mentor. Participation in start-up competitions and championships is higher, made by 57.1% of start-ups. In conferences, summits and international event have participated 39.6% of start-ups. Start-up entrepreneurs participate in start-up meetings less than often. Participation in projects is relatively high with 46.2% of start-ups. Grant beneficiaries are lower, made by only 28.6% of start-ups, whereas the lowest number of start-ups or 13.2% of them have had an investor.
Challenges of the Albanian Start-up Ecosystem
Albanian start-ups face different challenges that are similar with challenges that regional and even international start-ups are facing. They are related to ideas and innovation, visibility, human resources, business culture, knowledge and mentality, finance, ecosystem support, legal issues and informality. Idea stage start-ups are starving most from the lack of financial support, lack of support from the organizations of the ecosystem, qualified human resources, business environment, lack of visibility and limited time entrepreneurs dedicate to their start-ups. Established start-ups that are operating from zero to three years have problems with non-supportive organizations of the ecosystem, specific business issues, qualified human resources, high competition, visibility and lack of resources. Whereas, start-ups that have been operating from three to five years face difficulties with qualified human resources, market’s education and awareness raise, non-supportive organizations of the ecosystem, small potential from national market, lack of financial support, illegal competition, legislation for specific industries and lack of resources.
Role and importance of the Albanian Start-up Ecosystem players
Incubator and accelerator programs, universities, media and investors are considered as players of the ecosystem with a crucial and high importance. Incubators and accelerators’ role mainly remain on training and education, students’ idea generation, incubation and co-working space offering, connection of start-ups with partners, start-ups’ assistance and start-up events’ hosting. Universities offer practical teaching and activities for students, connections with industry and policymakers, entrepreneurship education and incubation programs in collaboration with incubators. Media is responsible for promotion and content creation, entrepreneurship education, connections’ creation. Meetups contribute to start-ups’ promotion, creation of pitching culture and networking with global start-ups. Investors and investing associations are responsible for knowledge and experience sharing with similar international partners, connection of investors, start-ups and consultants, as well as for start-ups training and support for international funds’ application. Corporates from the private sector might have different roles depending on their field of expertise. They might provide small grants for start-ups, customized products for start-ups, collaboration and promotion of start-ups. Nonprofit organizations usually provide grants, educational programs and research for start-ups that are operating in the field of their focus.
Regarding the Albanian Government, its role has been almost nonexistent in the ecosystem till 2022. The legal framework, definition of terms, dedicated policies, grants, strategies and incentives have been missing for start-ups. The recent LSDS-25 is recognized as a delayed but positive initiative of the government, even though it needs further improvements. Experts suggest that the role of the Government of Albania in the ecosystem should remain regulative, supporter and facilitator. While, start-up entrepreneurs have a very low level of trust for the support they could get from the government. It is seen as helpless or very helpless by the majority of entrepreneurs.
Around 74.7% of Albanian start-up entrepreneurs are informed and have knowledge about the role and function of the organizations of the Albanian Start-up Ecosystem. Promotional work is done to make entrepreneurs more aware about the existence of the organizations of the ecosystem and their role, but still more is needed to be done. Incubators and accelerators, events and meetups, co-working spaces, academies and education programs, universities are the most popular organizations that are known better for their role by more than half of the entrepreneurs. The general level of belief of start-up entrepreneurs for all organizations of the ecosystem is very low. They are evaluated as helpless by the majority of founders. Entrepreneurs show a significantly higher belief to international organizations that are seen as moderately helpful and with tendencies to believe more in their help and support.
Solutions for helping better overcome the current challenges
There are several concrete solutions that are addressed to the organizations of the Albanian Start-up Ecosystem and to the Government of Albania. They are advised to carefully consider these suggestions proposed by the experts of the field and from the start-up entrepreneurs that are really feeling the need.
Suggestions for organizations of the Albanian Start-up Ecosystem: Organizations of the ecosystem are advised to have better oriented services and transparent procedures for fulfilling the needs of start-ups. This could be achieved through better oriented programs, professional incubation programs, industry connections, professional advisory and mentoring, technical assistance, legal and financial assistance, customized training, creation of connection with investors, business development in Albanian and EU markets, organization of serious events, coordinated programs and joint efforts. They need to increase the awareness level among start-up entrepreneurs about the existence and role of the ecosystem, legal related framework, Albanian economy, national and international market potentials and entrepreneurial, financial and technological education. The existence of local investors and financial support mechanisms is also a big need that should be covered. Entrepreneurs need the promotion of their start-ups and products to be oriented to the circle of national and international investors, as well as to have exchange opportunities, know-how sharing and support from international organizations through the help and connection of organizations of the Albanian Start-up Ecosystem. Mentors and other experts that work in the organizations of the ecosystem have to be professional and serious and more activities and events have to be organized in all parts of Albania, not only in Tirana.
Suggestions for the Government of Albania: The Government of Albania should have a clear strategy about entrepreneurship, innovation, youth and specific priority sectors of the Albanian economy. This strategy should be backed up by concrete coordinated laws, policies and incentives. What start-ups really need to have include: better laws and policies, financial support, scholarships for related programs, fiscal regulations, e-commerce support, international trade regulations, reduction of fees and functional agreements, crime property confiscation and usage for start-ups, promotion and business support. State agencies have to be more efficient and professional in opportunities creation, promotion and transparency. The government could also provide indirect help to start-ups through support and empowerment of organizations of the ecosystem. It could provide lower taxes for innovation, R&D, investors, etc. Helping with orientation to strategic priorities and skills for the future is crucial, too. The Government of Albania could also help or initiate the establishment of Innovation Parks, Technological Parks, online platforms, conferences, fairs, summits and other activities that have in focus entrepreneurial education, promotion and strengthening.