Central and Eastern Europe (CEE) has emerged as a dynamic startup ecosystem, valued at €243 billion and growing at a faster rate than Western Europe. However, a persistent challenge remains: nearly half of the most promising CEE startups move their headquarters abroad, primarily to the US (56%) and the UK (24%).
This “great migration” has resulted in approximately €50 billion in enterprise value leaving the region, as companies like UiPath, Infobip, and Payhawk become technically foreign entities while maintaining significant operations within the area.
Tech Funding News looked deeper into the issue – here’s what we found out.
The relocation phenomenon: how CEE startups scale and scope
Many CEE founders pursue a “virtual relocation” strategy, registering their companies in investor-friendly jurisdictions while maintaining R&D and engineering teams in their home countries. This approach provides access to global capital and clients while leveraging local talent and cost advantages.
As Delia Necula, Venture Partner at Agista and Board Member at Fort, points out, the distinction between legal headquarters and operational footprint is crucial: companies often retain their core operations in CEE, benefiting from cost competitiveness, talent availability, and favourable tax environments.
International VCs frequently require startups to move their headquarters to familiar jurisdictions for legal and operational convenience. Artem Potekhin, CEO of Serbia-based Azivot, notes that relocation is often a technical necessity rather than a strategic choice: “Startups follow the money — either because investors ask them to set up in their jurisdiction, or because tax conditions are simply more favourable elsewhere. In many cases, it’s a mix of both.”
Relocation can also intensify the region’s “brain drain,” drawing top talent, especially in leadership and sales, away from CEE. Limited career prospects and professional development opportunities further push talent to relocate. Bobby Voicu, CEO of MixRift, highlights: “Economic volatility is pushing VCs toward later-stage companies for perceived safety, though ironically these established businesses face greater supply chain risks.”
This can create a “barbell effect” in funding, Voicu says: “The most vulnerable segment will be Series A and B companies caught in the middle, leading to a likely ‘barbell effect’ in funding — where capital pools at the earliest and latest stages, with significant consolidation in between.”
Funding gaps: the main push factor
Access to funding is the primary reason behind relocation. CEE startups face chronic underfunding, particularly at later stages, which hampers their ability to scale. The region remains heavily reliant on public capital and lacks sufficient private investment infrastructure for growth-stage companies.
In 2024, CEE companies raised €2.3 billion in venture capital, with €442 million in Q1 2025 — 78% of the amount raised in Q1 2024. Notably, 74% of CEE’s venture capital investment between 2020 and 2024 went to breakout and late-stage funding, yet these rounds accounted for only about 4% of all VC deals in the region, compared to 7% in Europe. This scarcity of late-stage funding opportunities creates a “Series A cliff,” where promising companies struggle to secure the capital needed to scale globally.
Sergiu Negut, Co-founder and Chief Strategy Officer of FintechOS, notes: “The concentration of VC investments in scaling and late-stage companies reflects market maturity. This pattern is likely to continue as successful companies in the CEE graduate to pre-IPO stages, where specific funds pay the large valuations that influence these statistics.”
Yet, Negut emphasises that this doesn’t tell the full story: “We are also seeing a more robust early-stage funding ecosystem develop across the CEE, with better granularity and a higher volume of investment opportunities. In the coming years, we should expect more specialised early-stage investors to emerge, particularly as successful exits create new angel investors with regional expertise and global funds pay more attention to the region.”
Anastasija Plotnikova, CEO and co-founder at Fideum, highlights a growing imbalance: “Vestbee tracked how 74% of VC capital in 2024 flowed into Series B–C and beyond, and it confirms what we see every day at Fideum: investors crave growth-ready businesses.
Over the next three to four years, I’m confident that shares will exceed 80% as more CEE startups hit the metrics that global growth funds demand. That said, we can’t overlook the risk of a ‘Series A cliff.’ If we don’t funnel more capital and hands-on expertise into seed and early-stage vehicles, we’ll starve the pipeline of tomorrow’s unicorns.”
The challenge of “mature bets” vs. early-stage support
Investors tend to favour “mature bets,” leaving early-stage founders undersupported. This creates a barbell effect, with capital pools concentrated at the earliest and latest stages, and significant consolidation in between. The heavy concentration of capital in late-stage funding disrupts the natural rhythm of the startup lifecycle, potentially leading to long-term stagnation if early-stage ventures remain underfunded.
Adam Ďurica, Investment manager at Zero One Hundred, notes a paradox: “We may see more early-stage innovation, but late-stage funding will continue to dominate in terms of investment volume. Over the next few years, the trend will likely persist with a growing gap between the low cost of starting up and the high capital needed to scale globally.”
Petr Šmíd, General Partner at Rockaway Ventures, underscores the need for stronger CEE-based VC funds for Series A and beyond: “It’s typical for the majority of funding to concentrate in later-stage rounds. That’s precisely why it’s crucial to enhance the capacity of CEE-based VC funds to participate meaningfully in Series A and beyond. When there’s a rebound in IPO activity, this may redirect some capital to earlier stages as liquidity increases across the ecosystem, LPs regain both money and trust to invest in earlier-stage funds.”
Dorin Boerescu, CEO of 2Performant, views late-stage dominance as a symptom of caution: “CEE has the talent and the capital, but early-stage money is still hiding behind ‘mature bets.’ That’s short-sighted, but I think countries like Poland, the Czech Republic, and the Baltic states will lead the way in investing in earlier-stage startups, and the rest will follow. Truth is, we don’t need more capital — we need braver capital.”
Laurențiu-Victor Bălașa, CEO and Co-Founder of TheBibleChat, adds: “We’re seeing too much capital funnelled into later-stage ventures at the expense of early-stage startups—a pattern that, in my opinion, can stunt long-term ecosystem growth. To have a healthy pipeline of breakout and late-stage successes down the road, you need a vibrant pool of seed and early-stage companies today. If those early-stage founders struggle to secure investment, we risk losing promising ideas that could evolve into the next high-impact or unicorn ventures.”
Attila Kecsmar, CEO and co-founder at Antavo, warns that the heavy concentration of capital in late-stage funding is breaking the natural rhythm and lifecycle of the CEE startups: “This heavy concentration on late-stage funding breaks the natural rhythm of the startup lifecycle. Of course, there will be a shortage of late-stage companies to invest in if capital for early-stage ventures continues to dry up. It’s a short-term focus that risks long-term stagnation. Innovation doesn’t flourish in environments where everyone is chasing safe bets. Capital is needed to test, fail, and carry the risk of bold, unproven ideas.”
Resilience of CEE startups and sector strengths
Despite these challenges, CEE startups demonstrate remarkable resilience. Many scaleups in the region grow faster and reach $1 billion valuations through bootstrapping, highlighting strong financial discipline and capital efficiency. The region has produced 57 unicorns in five years, with 80% receiving venture capital (VC) or growth equity backing at some point.
Roman Eloshvili, Founder and CEO of Estonia-based XData Group, observes: “We are seeing growing investor appetites in sectors with high potential, like fintech and AI. The number of unicorn companies in the region continues to rise. At the same time, there are more high-quality startups that reach later stages of growth — and, naturally, draw in larger funding rounds and more sustained investment.”
Investor appetite is growing in sectors with high potential, such as fintech and AI. Transportation, fintech, and energy have been the most funded sectors, but there is a clear shift toward AI, cybersecurity, and defence tech. Investments in defence tech, in particular, are expected to triple in 2025 as the region prioritises technological sovereignty.
Jan Hicl, Chief Product Officer and co-founder of Delta Green, notes, “A significant share of VC funding has indeed been flowing into breakout and late-stage startups — partly because investors are seeking safer bets in a more cautious macro environment. That said, we believe early-stage innovation — especially in energy and climate tech — is more critical than ever.”
Petr Šíma, Partner at DEPO Ventures, views AI and defence tech as clear new priorities for investors, with industrial tech investment also experiencing growth. He highlights that “AI requires larger round sizes, so that shift will be visible. The move towards defence is already clear and is being followed by growing investment in industrial tech.”
Despite the relocation trend, the ecosystem is maturing. Some companies, such as Estonia’s Bolt and Poland’s Booksy, are scaling up without expanding abroad, focusing on profitability and sustainable growth. Tomáš Kabeláč from Soulmates Ventures, highlights: “We will see a representation of both early-stage and late-stage funding in the next few years. VC firms are launching new funds focusing on early-stage, including our €50M newly launched cohort, which is ready to support companies in the seed and Series A stage.”
Will the CEE region eventually become a hub for innovation in Europe?
The relocation trend is both a challenge and an opportunity. While it limits immediate local economic benefits, it also creates global networks and expertise that can eventually strengthen the region.
Necula concludes with – CEE as an “innovation lab of Europe,” where global ambition is forged from limited resources: “By 2030, I expect Poland, Romania, and the Czech Republic to continue leading in volume, while smaller, agile ecosystems like Lithuania or Bulgaria gain more visibility. The most promising sectors to apply AI include legal tech, industrial operations, HR, cybersecurity (especially B2G), climate tech, and digital health. My vision is that by 2030, CEE will not only be known for great technical talent but for world-class IP and global brands built from the region.”
