亚开行-格鲁吉亚新兴科技创业生态系统（英）

GEORGIA’SEMERGING

ECOSYSTEMFOR

TECHNOLOGYSTARTUPS

NinoNanitashviliandPaulVandenberg

MARCH2023

ASIANDEVELOPMENTBANK

GEORGIA’SEMERGING

ECOSYSTEMFOR

TECHNOLOGYSTARTUPS

NinoNanitashviliandPaulVandenberg

MARCH2023

CountryReportNo.6

EcosystemsforTechnologyStartupsinAsiaandthePacific

ASIANDEVELOPMENTBANK

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Contents

TablesandFigure iv

Foreword v

Acknowledgments vi

Abbreviations vii

ExecutiveSummary viii

1.

Introduction 1

Methodology 2

2.

OverviewofGeorgia’sTechnologyEcosystem 3

DigitalInfrastructure 4

GovernmentPolicies 5

Finance 9

MarketCharacteristics 22

StimulatingSpaces,Incubators,andAccelerators 31

HumanCapital 36

3.

Recommendations 45

StageofDevelopment 45

Finance 46

SectorsandMarkets 46

Women 47

Innovation 47

Talent 48

Appendixes

49

1ListofStakeholdersInterviewed 49

2ListofStartupsInterviewed 50

3GovernmentFinancingOptionsforTechnologyStartups 52

4ListofVentureCapitalFundsandAngelInvestorNetworksforStartupsinGeorgia 54

5SupportiveSpacesandCommunityInitiativesforStartupsinGeorgia 57

6SelectionofInformationTechnologyandEngineeringTrainingCoursesatGeorgian

EducationalInstitutionsandTrainingCenters 60

References 62

iii

TablesandFigure

Tables

1FundingProgramsbyGeorgia’sInnovationandTechnologyAgency,2015–2022 10

2StartupsFundedbyGITA’sGrantPrograms,2015–2021 11

3StartupIncubatorandAcceleratorProgramsinGeorgia 34

Figure

StartupEcosystemMap3

iv

Foreword

B

usinessmodelscontinuetoevolverapidly,spurredbynewdigitaltechnologiesandtheirdeploymentinprovidinggoodsandservicesininnovativeways.Wecannoworderfood,hailataxi,movemoney,arrangetravel,watchentertainment,shopforjustaboutanything,andeventakecoursesorconsultadoctorusingdigitalmethods.Atadeeperandoftenlessvisiblelevel,technologyisaffectingproductionprocessesintheformofIndustry4.0.Technology-basedstartupenterprises—ortechstartups,forshort—areanimportantpartoftheevolvingbusiness-to-businessandbusiness-to-consumerlandscapeinAsiaandthePacificaswellasglobally.

Startupsdevelopinanecosystemthatcansupport—orhinder—theirdevelopment.Thatecosysteminvolvesmanynationalelements,butregionalandinternationalfactorsalsoareimportant,especiallyinincreasinglyopenandglobalizedeconomies.Finance,oftenfromventurecapital,andskilledpersonnel,includingbothtechexpertsandentrepreneurs,areimportantpartsoftheecosystem.Gooddigitalinfrastructureandsupportivegovernmentpolicyarealsocritical.Startupsdevelopbestwhenthemarketsfortheirgoodsandservicesarelargeandactive.

ThisreportanalyzesGeorgia’secosystemandassessestheextenttowhichitissupportiveofthegrowingnumberofstartups.Thereportfocusesonstartupsinfourareas:agritech,edtech,healthtech,andgreentech(alsoknownascleantech).Thesefourareasnotonlycontributetoeconomicactivitybutcanhaveadeeperimpactonsocioeconomicdevelopment.Edtechandhealthtechcontributetohumancapitalformationwhileagritechimprovesproductivityandraisesincomesintheruralsectorwheremanyofthepoorwork.Greentechadvancesenvironmentalsustainabilityandclimatechangemitigation.

ThisanalysisofthestartupecosystemprovidesrecommendationsforpolicymakersinGeorgia,theCaucasus,andotherregions.MyhopeisthatimprovedecosystemscanbettersupportstartupsthroughouttheAsiaandPacificregion.

AlbertPark

ChiefEconomist

AsianDevelopmentBank

v

Acknowledgments

T

hisreportwaswrittenbyNinoNanitashvili,aconsultant,andPaulVandenbergoftheAsianDevelopmentBank(ADB).AimeeHampel-Milagrosaprovidedguidanceonstudydesign,reviewedseveraldraftsofthereport,andprovidedinvaluablecomments.RanaHasanandLeiLeiSongofferedmanagementsupport.

ADB’sGeorgiaResidentMissionreviewedthereportandhelpedsolicitcommentsfromtheGovernmentofGeorgia.Theauthorswouldliketothankkeyexpertsfromgovernment,incubators,accelerators,developmentpartners,investors,academicinstitutions,andstartupswhoprovidedinvaluableinsightstotheresearcherthatwereusedinthepreparationofthisstudy.ThedraftreportwasreviewedbyGeorgia’sInnovationandTechnologyAgency.

TuesdaySorianocopyeditedthereport,JoeMarkGanabanprovidedlayoutservices,andAmandaIsabelMamonprovidedadministrativesupport,contracting,andmanuscriptmanagement.

vi

SPV

specialpurposevehicle

STEM

science,technology,engineering,andmathematics

UNDP

UnitedNationsDevelopmentProgramme

US

UnitedStates

USAID

UnitedStatesAgencyforInternationalDevelopment

VAT

value-addedtax

VC

venturecapital

vii

Abbreviations

ADB

AsianDevelopmentBank

AI

artificialintelligence

B2B

businesstobusiness

EBRD

EuropeanBankforReconstructionandDevelopment

EFSE

EuropeanFundforSoutheastEurope

EU

EuropeanUnion

FTA

freetradeagreement

GDP

grossdomesticproduct

GENIE

GeorgiaNationalInnovationEcosystemproject

GITA

Georgia’sInnovationandTechnologyAgency

GVCA

GeorgianVentureCapitalAssociation

HCI

HumanCapitalIndex

ICT

informationandcommunicationtechnology

IT

informationtechnology

PRC

People’sRepublicofChina

R&D

researchanddevelopment

SaaS

SoftwareasaService

SMEs

smallandmedium-sizedenterprises

ExecutiveSummary

T

echnology-basedstartupsareanimportantformofbusinessorganizationaroundtheworld.Theyaredrivenbyinnovationandentrepreneurship,andmanydevelopintolargehigh-techfirmsthatcandominatetheeconomy.FosteringmoresuccessfulstartupswillhelpexpandandmodernizetheeconomyofGeorgia.Astartupcanbedefinedasabusinessthatdevelopsnewtechnologiesorutilizesexistingtechnologiestoproduceinnovativeproductsandservicesthattargetamarketneedorproblem,cangenerateprofits,anddevelopabusinessmodelthatisscalable.

Startupsareemerginginsectorsthatpromotedevelopment,suchas

education,health,agriculture,andthegreeneconomy.However,e-commerce,

fintech,artificialintelligence,anddigitalplatformsremainthemostcommontech

startupsectorsinGeorgia.Agritechstartupscanhelpfarmers,includingthosewho

arepoor,increaseefficiencyandyieldsandimprovemarketlinkages.Cleantech

startupsthatusegreentechnologysolutionscanhelpreduceenvironmentaldamage,

supportclimatechangeadaptation,anddecreaseenergyconsumption.Edtech

startupsusetechnologytoimproveteachingandlearning.Healthtechencompasses

innovationsinmedicalproducts,digitalsolutionsformanaginghealthcaresystems,

andsolutionsforimprovingpatientdiagnosisandtreatment.Thesefoursectorsare

thefocusofthisreport.

Theviewsofstakeholdersandstartupsareimportantforideasonhowto

improvetheecosystem.Thestudydrawsoninterviewswitharangeofecosystem

stakeholdersandstartupentrepreneurs.Stakeholdersincludedgovernmentofficials,

managersofincubatorsandaccelerators,andexpertsatfinancialinstitutions.

TheGeorgianstartupsselectedforconsultationwereoperatinginoneofthefour

sectorsandprovidedvaluableinsightsintothekeyobstaclestheyface.

viii

ExecutiveSummary

Ranking

Georgiaisranked80thoutof100countriesintheGlobalStartupEcosystem

Index.Therankingisbasedonthequantityandqualityofstartupsandthebusiness

environment.Amongtheciteddrawbacksofthecountry’secosystemarealackof

experiencedentrepreneurs,limitedprivateinvestmentcapital,andasmallmarket

(population3.7million).

Georgiaranksseventhamong190countriesintheEaseofDoingBusiness

Index.Thecountryalsoranks12thgloballyandseventhinEuropeontheIndex

ofEconomicFreedom.Withanoverallscoreaboveregionalandglobalaverages,

thecountryoutperformsitspeersinbothtradeandbusinessfreedom,according

totheHeritageFoundation.TheoverallbusinessclimateinGeorgiaisattractiveto

entrepreneurs,asbusinessregistrationcanbecompletedinlessthan30minutes,and

startupfoundersnotedtheeaseofstreamlinedtaxproceduresthroughtheRevenue

ServiceAgency’sdigitizedplatform.SeniormanagersinGeorgiaspendsignificantly

lesstimeonregulatorycompliancethaninothercountriesinEuropeandCentral

Asiaorinuppermiddle-incomecountries.

Innovation,Research,andMarketAnalysis

Localbusinessesneedtofocusmoreoninnovation.Weaknessesthathinderthe

successofamorevibrantstartupcommunityincludelimitedinnovationcapacity,

alackofentrepreneurialculture,lowgrowthofinnovativecompanies,andlimited

availabilityofventurecapital.

Researchanddevelopmentarelimited.Grossexpenditureonresearchhas

increasedinrecentyears,butremainsfarbelowtheEuropeanUnion(EU)target

of3%ofgrossdomesticproduct(GDP).Companiesinvestlittleininnovation,

collaborationbetweenscientistsandindustryislimited,andresearchinstitutions

needimprovement.Universitiescanapplyforresearchgrantsthroughthe

government’sShotaRustaveliNationalScienceFoundation,buttheamountof

fundingislimitedandconditional.TheKnowledgeTransferandInnovationCenterat

IvaneJavakhishviliTbilisiStateUniversityhasbeenworkingonthecommercialization

ofscience,butnosignificantresultshavebeenachieved.

InGeorgia,itisnotcommontoconductthoroughmarketresearchtodetermine

demandforaproduct.Startupsgenerallyusenationalstatisticsordataonwhatis

happeningoutsideGeorgiaincertainsectorsandoftenlackagoodunderstanding

ofthelocalmarket.Theavailabilityofdetailed,industry-specificreportsanddata

onGeorgiawascitedasachallengebystartups.Wherereportsanddatadoexist,

startupslackexpertiseinhowtofindthem(includingfortheinternationalmarket).

ix

ExecutiveSummary

DigitaluptakeishighinGeorgiacomparedwithneighboringcountriesand

thoseatthesameincomelevel.Thisincreasesthemarketforstartupsbecause

theirproductsandserviceshavedigitalelements.However,thereisstillanoteworthy

digitaldividebetweenurbanandruralareas,aswellassocioeconomicdifferences.

Thepotentialofdigitalizationisnotfullyutilizedbybusinesses,especiallysmall

andmedium-sizedenterprises(SMEs)outsideTbilisi.Thereisalsoasignificant

gapindigitalskillsamongthepopulation,withlowerskillsinperipheralareas.

Talent

Humancapitalisattheheartofthestartupecosystem.Techtalentand

entrepreneurswhoarecompetent,courageous,andhaveabusinessmindsetare

keyassetstothissystem.Creatingastartuprequiresacombinationofskill,passion,

andrisk-taking.Georgiahasarelativelyshorthistoryoffreemarketsandashallow

entrepreneurshipculture.Georgiahasrecentlymadetremendousimprovements

ineducationparticipationandlearningoutcomes.Nearlyadecadeago,the

countryintroducedcomprehensivereformsatalllevelsofeducationwiththegoal

ofcreatingacredibleeducationsystemthatwouldenablelearningaccordingto

internationalstandards.Substantialfundingfrominternationaldonorshasbeen

allocatedtoongoingeducationreforms.Publicspendingoneducationhasbeen

increasedto3.9%ofGDPin2020,slightlybelowtheEUaverageof4.6%in2018.

GovernmentSupport

Governmentsupportforstartupsisfocusedonthreeareas.Thesearedigital

training,technologyparksandinnovationcenters(i.e.,infrastructure),andgrants

forearly-stagestartups.Thissupportisprovidedtoallstartupsandbusinesses,

sotherearenospecificpolicies,programs,orincentivesforstartupsinagritech,

cleantech,edtech,andhealthtech.

Startupsarelookingfortaxincentives.Thestartupsinterviewedindicated

thattherearenospecifictaxexemptionsorincentivesforstartups.Startupsare

notregisteredasadifferentlegalentitythanothersmall,medium-sized,orlarge

enterprises.Rather,allregisteredstartupsareconsideredlimitedliabilitycompanies

andmustcomplywithstandardtaxrequirements.Mosttaxesrelevanttobusinesses

are20%personalincometax,4%pensioncontribution,15%corporatetax(profit),

and18%value-addedtax(VAT).Startupscanbenefitfromareductionofthese

taxrates.

x

ExecutiveSummary

Higherthresholdsforimporttax(tariff)exemptionswouldhelpstartups,

especiallymanufacturers.Theratesforimportedgoodsare0%,5%,and12%,

dependingonthetypeofproject.Importtaxesarerelevantforhardware-based

technologystartupsthatdependoncomponentandmaterialimportsfrom

abroad.Importedproductsworthmorethan$90(GEL300)aresubjecttoimport

tax.Removingorraisingthethresholdonprototypecomponentswouldbenefit

early-stagehardware-basedstartups.

Thevirtualeconomiczoneforinformationtechnologyservicescompaniesis

notwellknown.EnterprisesjoiningthiszonedonotpayVATorprofittax.Over

10years,morethan1,000companieshaveregisteredforzonestatus,butnoneof

thestartupsinterviewedknewaboutitorthetaxbenefits.

Finance

ThegrantprogramofGeorgia’sInnovationandTechnologyAgency(GITA)is

amajorstimulatorforstartupsinthecreationandpost-prototypingstages.

Theprogramtargetsfirst-timeentrepreneurswhoarenotrequiredtohavea

registeredlegalentity.Thegrantshelpentrepreneursavoidrisk(sincetheyarenot

loansorequity),whileprovidingcashflowthatcanbeusedtoattracttechtalentor

payformarketingcosts.Inadditiontofinance,GITAprovidesmentoring,training,

accesstoSiliconValleyexpertsandapanelofjudges,andnetworkingwithother

localstartups.Thebest-performingstartupsfundedbyGITAareintroducedto

potentialpartnersandinvestors,includingthroughtripstotheUnitedStates.

Someentrepreneursviewgrantsasanendinthemselvesratherthana

means.Theirfocusonobtaininggrantsdivertstheirattentionfromvalidatingthe

productandbusinessmodelinthemarketplacewithconsumers(andnotjustthe

grantcompetitionjudges).Thejudgesmaybelesscriticalthaninvestorsseeking

areturnoninvestment.Startupsthatfocusonlyonwinninggrantsbecomeserial

grantapplicantsthatfailtogaintractionwithconsumersandinvestorstobecome

sustainable.

Bankloansarenotacommonsourceofcapitalfortechnologystartups.

Banksviewstartupsasriskyanduncertainventures.Itisdifficultforstartupsto

serviceloansregularly(i.e.,monthlyorquarterly)becausetheyhavelittleorno

revenueintheearlystages.Collateralisdifficulttoprovidegiventheintangibility

oftechnologyproducts.

LendingsupportsSMEs—butnotspecificallytechstartups.Georgia’s

bankingandmicrocreditsectorhasspeciallendingprogramstailoredtosmall

businessesandstartups,however,thelatterareoftendefinedasanynewbusiness.

xi

ExecutiveSummary

Forexample,TBCBankhaslaunchedStartuperi,whichisavailabletoallSMEsand

offerscreditaswellastraining,businessnetworkingmeetings,andworkshops.

Thebankprovidesstartuploanswiththeneedtopledgecollateral.Thisapproach

ofconsideringeverynewbusinessasastartupisalsofollowedbyotherfinancial

institutionsinthecountry.TheytreatstartupsthesameasotherSMEsanddo

nothavespecificprogramsforenterprisesdevelopingsoftware,hardware,orother

tech-relatedsolutions.TheFemaleStartUpperprogramisalsonotfocusedon

technology.OneexceptionisInnovFin,aninitiativeoftheEuropeanInvestment

BankandtheEuropeanCommission,whichsupportsprojectsthatareriskierand

difficulttoassess,andthereforeoftenhavedifficultyaccessingfunding.

Fewcreditprogramstargetstartupsinagritech,cleantech,edtech,and

healthtech.However,startupsinthesesectorscanapplyandgainaccess.Access

ismorelikelyatthegrowthstagewhenthereisalreadyaproductorserviceonthe

market.Fromtheinterviews,itappearsthatmoststartupshavelittleknowledgeor

understandingoffundingoptionsfromfinancialinstitutions.

TheventurecapitalmarketinGeorgiaisatanearlystageofdevelopment.

However,severalgroupshaveemergedrecentlytopromoteventurecapitaland

buildanetworkofangelinvestors.InvestmenthasbeensupportedbytheLaw

onPromotionandGuaranteesofInvestmentActivity(2006)andtheLawon

InvestmentofFunds(2020)(LegislativeHeraldofGeorgia2020).Thelawsprovide

theregulatoryframeworkforgloballyintegratedportfolioinvestments,i.e.,capital

marketsthatcanprovideGeorgianbusinesseswithdiversifiedsourcesofcapital

fromhomeandabroad.ThiswillpromoteGeorgia’seconomicgrowthintwoways:it

willmakeiteasierforGeorgianinvestorstotradeinforeignmarkets,anditwillgive

Georgianbusinessesaccesstointernationalcapitaltoexpandtheirbusinesses.

Angelinvestorshavealsoemergedasasourceoffundingforstartups.Some

areorganizedintonetworks.Forexample,Axelisanetworkofangelinvestors

thatbringstogetherinvestorsfromGeorgiaandtheBalticcountries.Itorganizes

meetingswhereselectedstartupscanpitchandshareideas.Fewinvestmentshave

yettobemade.

Investmentfundsandspecialpurposevehicles(SPVs)areemergingas

investmenttools.Bothareameansofpoolinginvestorfunds.WhileanSPV

investsinasinglecompany,afundinvestsinmultiplecompanies.InGeorgia,SPVs

donothaveaspecificorspeciallegalform.AccordingtotheLawonInvestmentof

Funds,afundmaybeestablishedasajointstockcompany.Aclosed-endregistered

investmentcompanymayalsoberegisteredasalimitedliabilitycompanyora

limitedpartnership.Underthislaw,aregisteredinvestmentfundmayhaveno

morethan20retailinvestors,whileanauthorizedinvestmentfundmayhavemore

than20.

xii

ExecutiveSummary

Noneoftheinvestorgroupshasaspecificfocusonagritech,edtech,

cleantech,orhealthtech.However,startupsinallfourareasmaypursuefunding

optionswiththesestakeholders.Noneofthestartupsinterviewedforthisstudy

hasapproachedadomesticinvestmentfundorangelinvestor.Investmentsby

existingventurecapitalfirmsincleanenergy,agriculture,orhealthcaretendtogo

tolargebusinesses,ratherthantostartups.However,largeventurecapitalfirms

viewsupportingeducationandtheenvironmentaspartoftheircorporatesocial

responsibility—acharacteristicthatstartupsseekingfundscouldusetotheir

advantage.Thisdevelopmentcouldleadtoimpactinvesting,whichisnotyet

practicedinGeorgia.

IncubatorsandAccelerators

IncubatorsandacceleratorprogramsarestillrelativelynewinGeorgia.

Ofthestartupsinterviewed,onlyafewhadparticipatedinthem.Thosethat

hadparticipatedemphasizedthattheyhadasignificantimpactonproductand

customerdevelopmentandcontactwithpotentialpartnersandinvestors.They

helpedfoundersimprovetheirunderstandingofhowtorunastartup,including

aspectsoffundraising.Thissentimentwasalsoexpressedforprogramsthatdid

notprovidegrantsorequityinvestments,buthelpedfounderstapintoinvestor

networksthroughdemodaysandothermeans.Thesamplesizeoftheseinterviews

istoosmalltodrawgeneralizedconclusions,buttheydosuggestapattern:startups

thatreceivedstructuredandlongertrainingandmentoringmadesignificant

progressinproductdevelopmentandmarketvalidation.

Manyincubatorsareone-offprojectsthatarenotsustained.Amajorreason

fortheseadhocprojectsisthelackofaccesstostableandsustainablefundingand

arelianceondonorfundingforinitiativesofshortduration.Foreachiteration,they

mustgothroughafundraisingprocessandconvincestakeholders,whichtakes

timeandeffortandcancurbenthusiasm.Incubatorandacceleratormanagers

struggletofindaprofitablebusinessmodeltooperate.Noneoftheprograms

chargeparticipationfeesandprovidingashareofequitytotheprogramisrarely

arequirementforaparticipatingstartup.Evenifanincubatorasksastartupto

giveupsomeequityinexchangeforincubationservices(e.g.,RedberryStartup

Studio),thatequitycannotbeeasilyliquidatedandusedtocovertheincubator’s

operatingcosts.Forincubatororacceleratorprogramstobecomeself-sustaining,

theyshouldconsiderrevenue-generatingmechanismssuchaschargingfees.

xiii

Introduction1

G

eorgia’stechnologystartupscenehasshownpromisinggrowthsince2015.Theenthusiasmofyoungentrepreneurs,coupledwithsupportivegovernmentprograms,localandnonprofitinitiatives,andinternationaldonorfunding,iscreatingmomentumfortechnology-basedstartupenterprises(techstartups)toflourish.ThemostcommonsectorsinwhichstartupshaveemergedinGeorgiaaree-commerce,fintech,artificialintelligence(AI),anddigitalinformation-basedserviceplatforms.Theemergenceofstartupsindevelopment-orientedsectors,suchaseducation,health,agriculture,andthegreeneconomy,ishappeningbutataslowerpace.

ThisreportanalyzesthestartupecosysteminGeorgiabydefiningthepillarsand

playersoftheecosystem,aswellasthecurrentsupportmechanisms,andidentifying

opportunitiesforitsfurtherdevelopment.Theanalysisfocusesontheexisting

conditionsandprospectsforstartupstothriveinfourspecificareas:agritech,

cleantech,edtech,andhealthtech.

Thesefoursectorsholdconsiderablepromiseforsocialandenvironmentalprogress

andeconomicgrowth.Agritechstartupshelpfarmers,includingthosewhoarepoor,

toincreaseefficiencyandyields,improvemarketlinkages,andengageinsustainable

farming.Startupsthatusegreentechnologysolutions—inotherwords,cleantech—

reduceenvironmentaldamage,supportclimatechangeadaptation,anddecrease

energyconsumption.Educationtechnologystartupsusetechnologytoimprove

teachingandlearningprocessesandoutcomes,bothinsideandoutsidetheclassroom.

Healthtechencompassestechnologicalinnovationbydevelopinginnovativemedical

products,providingdigitalsolutionstomanagehealthcaresystems,andimproving

patientdiagnosisandtreatment.

Digitalizationisbecomingakeycompetitiveadvantageandgrowthdriverbothwithin

economiesandglobally.Demandfortechnologicalsolutionsthatbenefitsocietyand

theeconomyisincreasingaspeoplebecomemoretech-savvyandmoreprocesses

relyontechnology.Startupsthattakeadvantageofthisopportunityandofferefficient

solutionsforsustainabledevelopmentarereceivingsignificantattention.Accordingly,

thisreportanalyzestheprospectsforGeorgiainthesefourareas(agritech,cleantech,

edtech,andhealthtech)andtheecosystemthatsupportsthem.

1

OverviewofGeorgia’s

TechnologyEcosystem

2

S

tartupsemergeandperformwellundercertainconditions.Likelivingorganisms,theyneedasuitableenvironmenttogrowanddevelop.Theecosystemforstartupsiscomposedofmanyactors,institutions,andrelationships(seefigure).Themoreinterconnectedandcomplementarytheecosyste