History, Economy, Startups and Bitcoins in Croatia

Croatia rarely grabs World's media headlines but it doesn't mean that there's nothing of significance to say about this unique Eastern European country. Croatia was first mentioned in history as the distinct political union far back in 8th century, when Duchy of Croatia had been born on the former Roman province Dalmatia territory. Today it makes Croatia the one of the oldest European countries.

In 1102 Hrvatska formed a long-lasting union with Hungary, which, in the first halve of 16th century, was swallowed by the Habsburg Monarchy. In 1918, after the World War had caused the collapse of Austria-Hungarian Empire, Croatia became part of the newly formed state of Yugoslavia. Later, in 1930th, Croatia re-appeared on the world's stage as the semi-independent state named Banovina of Croatia. However, after the Second World War it was again re-incorporated as a single-party socialist federal unit into the Tito's realm. Croatia had stayed with Yugoslavia until June 1991, when, after the disintegration of the Warsaw Block, it gained back its independence.

In socialist times Croatia's major industries were agriculture and tourism. For example, Zlatni Rat beach on the Adriatic Sea became one of the most popular destinations for tourists arriving from Eastern Europe and USSR. However, the local roads and hotels' infrastructure were seriously impeded by the Croatian War for Independence in 1990th. After many years of the hard work and dedication Croatia had managed to slowly recover some of its positions on the Eastern European tourism market, only to be beaten badly by the 2008 financial crisis.

Croatia is the democratic, multi-party state with its Parliament - unicameral, 151-members Sabor - largely dominated by pro-government, pro-European, conservative Hrvatska Demokratska Zajednica. However, a notable lack of the structural reforms has made Croatian governmental institutions highly inefficient. Most of those government's bodies had been inherited from the country's socialist past and today they pose significant barriers to Croatia's economic growth. Additionally, multiple revelations of corruptions and of nepotism existing among Croatian elite are the frequent themes in local medias.

With more than 70% of Croatian population having an Internet access this country presents plenty of niche opportunities for startup founders. However, relatively small size of the local market (4.2 million people), high administrative barriers as well as shortage of seed and VC capitals have led many perspective high-tech entrepreneurs to leave Croatia and to take their chances in the Central Europe.

Most recently Croatian government tries to address this situation by financially supporting the local startup ecosystem. However, with home economy still recovering from 2008 financial crisis (GDP growth rate not exceeding 3%) and jobless rate staying over 10% it's hard to expect the fast short-term increase of startup retention rate in Croatia.

According to some estimates (for example look here) Croatian crypto-community has reached twenty five thousands users at the beginning of 2018, which constitutes more than 0.6% of country's four million inhabitants. At the same time, some sources indicate that there are now about twenty five million block-chain wallets users globally, which is less than 0.3% of world's population.

With Croatia doubling world's crypto-users average Croatian National Bank (CNB) takes a relatively relax, thoughtful stance on (how CNB calls it) "E-money", which contrasts sharply with sometimes frantically hostile approach to this issue demonstrated by many Eastern European financial watchdogs. Still, Croatian Kuna (HRV), which has been devalued against UDS for about 50% since 2008, is the only legal tender in the country. Being technically legal, Bitcoin and other crypto have remained largely outside of the Croatian regulation framework and are now defined as "virtual currency scheme", similar to Linden dollars used in the Second Life' avatars commercial interactions.

Business Notes for Startups Founders:

political climate: moderately friendly;
economic climate: not friendly;
regions to focus: EU;
industries to focus: e-commerce, FinTech, entertainment, marketplace, tourism;
major limitations: difficult regulatory environment, small size of internal market;
opportunities: educated workforce, relatively high for Eastern EU country per-capita (almost $12.5 thousands).
Cryptocurrencies and ICOs (outlook): legal (positive).

The author: Svyatoslav (Svet) Sedov
Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.

Twitter: https://twitter.com/SvjatoslavSedof