PIRATE in Albania
PIRATE in Albania
A look at the Albanian startup ecosystem, how to grow it, and the PIRATE "Master Plan". 😉
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At a glance
Albania faces the challenges of brain drain, corruption, lack of capital, and entrepreneurial skills.
PIRATE still invested because there is ample opportunity and potential as well.
The PIRATE “Master Plan” from 2019 - the investment thesis if you will - was to build a profitable service business and then create product spin-offs with a global ambition.
BEEZ.games - Albania's first indie game studio - is the first division5 spin-off.
We are doubling down and want to invest in more entrepreneurs from Albania.
🏴☠️
🔥🔥 PIRATE Summit updates! 🔥🔥
Last week we started announcing our lineup of speakers around our theme #BurnToRelearn. Many more to come. Follow us on LinkedIn to find out more about each one.
📢 Walk-The-Plank applications are still open! The deadline to apply is next week.
Applications for the Female Founders Program and our Entrepreneurship Scholarship Program are still open as well.
Let’s make this the most female and international PIRATE Summit ever. 🚀
🏴☠️
I took a week off to travel with my kids through Belgium, the Netherlands, and Germany. The days were filled with adventure, surprises, lots of laughter, and spending some quality time with family. It went by in a flash, just as good times do!
The week before, I spent a few days in Albania, meeting colleagues and people from the local startup ecosystem. 🇦🇱
Every time I visit Albania, I learn something new about the country, its history and its people. I am most interested in the latter.
This visit was filled with polarities. A pendulum that swung between pessimism and hope.
In this edition, I share some thoughts and observations from that trip. I will also give some insight into why PIRATE invested in Albania, the “Master Plan”, and our next steps…
The Albanian Startup Ecosystem
At the second day of my Tirana visit, I organized a spontaneous PIRATE meetup to bring together some of the local startup ecosystem players.
Arlind - founder of co-working space Coolab and our host for the meetup - told me that there haven’t been many gatherings in the last months. So this was an excellent opportunity to bring people together again.
In the end, 25 people showed up. That’s not bad. After all, the Albanian startup ecosystem is pretty small.
There is plenty of tech talent and yet only very few startups with scalable products. At least not many that stay in the country.
Why is that?
The young and educated are leaving
Albania has one of the highest emigration rates in the world.
In the chart below, published by Global Economy in the human flight and brain drain index, Albania is ranked the first country in Europe suffering brain drain and the 8th country in the world. 😱
That’s not good. Unfortunately, it’s very much in line with what I gathered anecdotally during conversations with individuals in the last years.
Brain drain is a palpable issue that comes up repeatedly. And I find it pretty depressing, to be honest.
You can feel a sense of disillusionment and disengagement, particularly among young and educated people who feel that their prospects for a better future are limited. And it creates an infectious vicious cycle. As more people leave, others want to follow their example.
The main reasons why people leave seem to be better economic opportunities elsewhere, a lack of progress, and a lack of trust in the political system and its institutions.
Money over merit
One of the key factors driving Albania’s brain drain and hindering the country's economic development is corruption.
According to the Corruption Perceptions Index (CPI) 2022 by Transparency International, Albania scored 36 out of 100, which indicates a high level of perceived corruption in the country. This score has been relatively consistent over the past 10 years.
The European Commission's 2020 Report on Albania states the same. Corruption remains a serious issue, especially in public procurement, judiciary, and law enforcement.
It is a pervasive problem that affects people's daily lives. For instance, corruption can make it challenging to access public services, such as healthcare or education, without paying a bribe or - how the locals call it - “speed money”.
Individuals are forced to pay public officials to speed up bureaucratic procedures or receive favorable treatment. This can be anything from getting a driver's license to registering a business. I have been told that this is something deeply rooted in society and thus hard to change. People resort to bribery to solve problems. It’s just “how things are done”.
Corruption also affects the startup ecosystem by creating uncertainty and instability. It can make it harder for startups to get the necessary licenses, permits, or contracts they need to operate. Businesses that refuse to engage in corrupt practices may face retaliation from officials or competitors.
This doesn’t sound like an environment that attracts investments. And it doesn’t.
Lack of capital
There is no real venture capital in Albania. Also, there aren’t any active angel investors. At least I haven’t met them yet, and nobody could introduce me to any.
There seem to be a few businessmen from the Albanian diaspora willing to invest in (traditional) Albanian businesses. Most of them don’t have an angel investor or startup mindset, though.
The few business angels or VCs that might invest, wouldn’t do so directly in an Albanian legal entity. They make it compulsory to incorporate abroad e.g. in Estonia, the UK, or the US.
Consequently, most people with serious entrepreneurial ambitions leave.
Lack of entrepreneurial talent
I generally believe entrepreneurial talent is evenly distributed. However, the surroundings heavily influence whether it will emerge and blossom or not.
To push Albanian businesses - or startups - forward, plenty of economic development programs have been put forward in the last years. Many of them involve giving out grants to businesses or organizations.
While I understand the motive behind this kind of development work, it comes with side effects.
One of which is that people don’t become good at building businesses that earn money. Instead, they become good at getting grants. A friend calls them “grant hoppers”.
Consequently, once the grants are gone, many businesses fade away.
Ok, enough with the pessimism. There must be something good there. After all, PIRATE invested.
Let’s explore the opportunities. 💪
Why did PIRATE invest in Albania?
PIRATE invested in 2019. A lot has happened since. Especially, the pandemic has stirred things up.
Would I do the investment again? Yes, I would. Not only because I have found wonderful new colleagues and friends there, but - even though there is substantial risk - the investment is financially sound.
And there are quite a few things to be optimistic about. I still believe in the major trends and a huge midterm opportunity in Albania:
Tech talent: Tech talent will continue to flourish, as it has in the last years. Albeit the brain drain, the IT industry is growing. This trend will further accelerate as people will increasingly self-educate around tech and entrepreneurship. The rise of NoCode and AI assistants certainly helps.
Tax policies: The country offers favorable tax policies for IT companies. As long, as you navigate the administration well, that’s a plus.
High effectiveness: You still can have significant impact with small investments especially because of lower labor costs than many other European countries. However, the advantage is shrinking as salaries have been rising steadily in recent years (most notably in the IT sector).
Location: Albania is located in Southeast Europe in the Central European Time Zone with easy access to neighboring markets in the Balkans, the Mediterranean, and beyond.
Cultural similarities: Young people usually speak either English or Italian as a second language. Collaboration has always been very easy. Especially also as there aren’t any big cultural differences.
EU membership: If Albania manages to significantly reduce corruption, it might join the EU in the next decade.
All these were also considerations back in 2019. In the end, one factor stood out:
There is opportunity when nearly no-one else is paying attention. Especially if you
have a trusted partner (thanks Engjell 🙏) and
build a business with international customers.
The partner lets you navigate the administrative side better. International customers (esp. in combination with a digital business) reduce dependency on local politics. After all, you could leave the country with little effort.
That doesn’t make Albania such a bad place to invest in.
All that is missing for Albanian entrepreneurs to thrive are role models, a network, know-how, and capital. Something that PIRATE can bring in.
PIRATE Master Plan in Albania
If Elon can publish a master plan for Tesla, I can do the same for PIRATE in Albania. 😂
Here is the plan from 2019:
Step 1: Build a profitable service business in Albania that educates Albanian talent on building tech products. Provide enough salary to keep them in the country.
Step 2: Inspire some of those people to start their own products and establish an entrepreneurial mindset.
Step 3: Provide capital, know-how and network to those people and help them build a durable business.
This was set as a 10+ year plan. There is a high probability it will fail (what can a small organization like PIRATE do anyway!?). Chances are it will go sideways (meaning step 1 works but step 2 or 3 fail).
If it succeeds, then we may see a generation of entrepreneurs in Albania who will build their own companies. Many of which may inspire others to do the same.
That was the plan. Let’s do the reality check.
Division5 - IT developers as a service
With division5, we are providing our customers in the EU and the US with top IT talent to augment their engineering teams.
It’s a tried and proven business model that you can find in many emerging countries with tech talent. It has gotten a bad rep because of the many cold outreach messages that people send on platforms like LinkedIn.
The division5 pitch is simple and straightforward:
We recruit, train and coach top IT talent that work fully integrated with the customer in exchange for a fixed monthly retainer.
The key ingredients for successful value delivery are: Great tech talent + clear processes + quality control.
If you manage those well, then there will be a win-win-win setting. For customers, employees and the business.
COVID has changed the game as remote work has become more common and businesses get more used to remote hiring. However, for nimble, quality-driven offerings there still is a huge market. That’s the niche we will continue to fill.
If you are looking to extend your team, reach out to me and I’ll gladly do the intro. You will not only get top dev talent, but you may also enable the next generation of entrepreneurs in Albania.
Entrepreneurs that build companies like BEEZ games.
BEEZ games - Albania's first indie game studio
BEEZ games started as a spin-off last year by a dedicated team of division5 colleagues.
It’s the first gaming studio in Albania and build by a strong and passionate founding team with excellent know-how in building games and 3D environments.
It’s a tough market but the team is confident that they can pull it off. As am I.
The idea is to build classic game formats with a modern twist to unite players of every generation.
The first game is an evolution of the iconic arcade racer. A multiplayer desktop game called Seven Seas. A name that incidentally fits perfectly to the pirate theme. 🏴☠️
Seven Seas is a race and battle set in an underwater environment. A mix of Mario Kart and Pixar. Imagine if Finding Nemo was a Mad Max battle to the finish line.
Here is me trying out the demo.
I am not a serious gamer. But it was a fun and intuitive experience even for a noob like me.
The team has a playable demo with finished graphics and gameplay ready. Currently, they are doing test runs with selected people to fine-tune and eliminate bugs.
The goal is to have the Beta version this summer. The first release version will be available later this year.
Pretty exciting!
What’s next for PIRATE in Albania?
Even though Albania faces many challenges, we believe in the region and its potential.
In fact, we are doubling down. 💪
division5 is our nucleus to inspire entrepreneurs to take the leap and start a business. We support with know-how, our network, and of course capital.
Formally, we invest in companies, but we’re actually backing people. We aim to write the first check, in businesses founded by entrepreneurs located in Albania. With business ideas that serve international – preferably global – customers.
If you know of any Albanian entrepreneur - or are one yourself - that could see us as their partners, please reach out to me. Would love to chat.
🏴☠️
Be safe, be healthy, and be kind. 🙏🏽
Manuel