1、ASIAN DEVELOPMENT BANKGEORGIAS EMERGING ECOSYSTEM FOR TECHNOLOGY STARTUPSMARCH 2023Nino Nanitashvili and Paul VandenbergASIAN DEVELOPMENT BANKCountry Report No.6 Ecosystems for Technology Startups in Asia and the PacificGEORGIAS EMERGING ECOSYSTEM FOR TECHNOLOGY STARTUPSMARCH 2023Nino Nanitashvili a

2、nd Paul VandenbergCreative Commons Attribution 3.0 IGO license(CC BY 3.0 IGO)2023 Asian Development Bank6 ADB Avenue,Mandaluyong City,1550 Metro Manila,PhilippinesTel+63 2 8632 4444;Fax+63 2 8636 2444www.adb.orgSome rights reserved.Published in 2023.ISBN 978-92-9270-036-2(print);978-92-9270-037-9(el

3、ectronic);978-92-9270-038-6(ebook)Publication Stock No.TCS230045-2DOI:http:/dx.doi.org/10.22617/TCS230045-2The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies ofthe Asian Development Bank(ADB)or its Board of Governors or the governme

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7、ms of use at https:/www.adb.org/terms-use#openaccess.This CC license does not apply to non-ADB copyright materials in this publication.If the material is attributed toanother source,please contact the copyright owner or publisher of that source for permission to reproduce it.ADB cannot be held liabl

8、e for any claims that arise as a result of your use of the material.Please contact pubsmarketingadb.org if you have questions or comments with respect to content,or if you wish toobtain copyright permission for your intended use that does not fall within these terms,or for permission to use theADB l

9、ogo.Corrigenda to ADB publications may be found at http:/www.adb.org/publications/corrigenda.Note:In this publication,“$”refers to United States dollars.All photos are owned by ADB unless otherwise stated.Cover design by Joe Mark Ganaban.Printed on recycled paperiiiContentsTables and Figure.ivForewo

10、rd.vAcknowledgments .viAbbreviations.viiExecutive Summary .viii1.Introduction.1Methodology.22.Overview of Georgias TechnologyEcosystem.3Digital Infrastructure.4Government Policies.5Finance.9Market Characteristics.22Stimulating Spaces,Incubators,andAccelerators.31Human Capital.363.Recommendations.45S

11、tage of Development.45Finance.46Sectors and Markets.46Women.47Innovation.47Talent.48Appendixes.491 List of Stakeholders Interviewed.492 List of Startups Interviewed.503 Government Financing Options for Technology Startups.524 List of Venture Capital Funds and Angel Investor Networks for Startups in

12、Georgia.545 Supportive Spaces and Community Initiatives for Startups in Georgia.576 Selection of Information Technology and Engineering Training Courses at Georgian Educational Institutions and Training Centers .60References.62ivTables and FigureTables1 Funding Programs by Georgias Innovation and Te

13、chnology Agency,20152022.102 Startups Funded by GITAs Grant Programs,20152021.113 Startup Incubator and Accelerator Programs in Georgia.34FigureStartup Ecosystem Map.3vForewordBusiness models continue to evolve rapidly,spurred by new digital technologies and their deployment in providing goods and s

14、ervices in innovative ways.We can now order food,hail a taxi,move money,arrange travel,watch entertainment,shop for just about anything,and even take courses or consult a doctor using digital methods.At a deeper and often less visible level,technology is affecting production processes in the form of

15、 Industry 4.0.Technology-based startup enterprisesor tech startups,for shortare an important part of the evolving business-to-business and business-to-consumer landscape in Asia and the Pacific as well as globally.Startups develop in an ecosystem that can supportor hindertheir development.That ecosy

16、stem involves many national elements,but regional and international factors also are important,especially in increasingly open and globalized economies.Finance,often from venture capital,and skilled personnel,including both tech experts and entrepreneurs,are important parts of the ecosystem.Good dig

17、ital infrastructure and supportive government policy are also critical.Startups develop best when the markets for their goods and services are large and active.This report analyzes Georgias ecosystem and assesses the extent to which it is supportive of the growing number of startups.The report focus

18、es on startups in four areas:agritech,edtech,healthtech,and greentech(also known as cleantech).These four areas not only contribute to economic activity but can have a deeper impact on socioeconomic development.Edtech and healthtech contribute to human capital formation while agritech improves produ

19、ctivity and raises incomes in the rural sector where many of the poor work.Greentech advances environmental sustainability and climate change mitigation.This analysis of the startup ecosystem provides recommendations for policy makers in Georgia,the Caucasus,and other regions.My hope is that improve

20、d ecosystems can better support startups throughout the Asia and Pacific region.Albert Park Chief Economist Asian Development Bank viThis report was written by Nino Nanitashvili,a consultant,and Paul Vandenberg of the Asian Development Bank(ADB).Aimee Hampel-Milagrosa provided guidance on study desi

21、gn,reviewed several drafts of the report,and provided invaluable comments.Rana Hasan and LeiLei Song offered management support.ADBs Georgia Resident Mission reviewed the report and helped solicit comments from the Government of Georgia.The authors would like to thank key experts from government,inc

22、ubators,accelerators,development partners,investors,academic institutions,and startups who provided invaluable insights to the researcher that were used in the preparation of this study.The draft report was reviewed by Georgias Innovation and Technology Agency.Tuesday Soriano copyedited the report,J

23、oe Mark Ganaban provided layout services,and Amanda Isabel Mamon provided administrative support,contracting,and manuscript management.Acknowledgments viiAbbreviationsADB Asian Development BankAI artificial intelligenceB2B business to businessEBRD European Bank for Reconstruction and DevelopmentEFSE

24、 European Fund for Southeast EuropeEU European UnionFTA free trade agreementGDP gross domestic productGENIE Georgia National Innovation Ecosystem projectGITA Georgias Innovation and Technology AgencyGVCA Georgian Venture Capital AssociationHCI Human Capital IndexICT information and communication tec

25、hnologyIT information technologyPRC Peoples Republic of ChinaR&D research and developmentSaaS Software as a ServiceSMEs small and medium-sized enterprisesSPV special purpose vehicleSTEM science,technology,engineering,and mathematicsUNDP United Nations Development ProgrammeUS United StatesUSAID Unite

26、d States Agency for International DevelopmentVAT value-added taxVC venture capitalviiiExecutive Summary Technology-based startups are an important form of business organization around the world.They are driven by innovation and entrepreneurship,and many develop into large high-tech firms that can do

27、minate the economy.Fostering more successful startups will help expand and modernize the economy of Georgia.A startup can be defined as a business that develops new technologies or utilizes existing technologies to produce innovative products and services that target a market need or problem,can gen

28、erate profits,and develop a business model that is scalable.Startups are emerging in sectors that promote development,such as education,health,agriculture,and the green economy.However,e-commerce,fintech,artificial intelligence,and digital platforms remain the most common tech startup sectors in Geo

29、rgia.Agritech startups can help farmers,including those who are poor,increase efficiency and yields and improve market linkages.Cleantech startups that use green technology solutions can help reduce environmental damage,support climate change adaptation,and decrease energy consumption.Edtech startup

30、s use technology to improve teaching and learning.Healthtech encompasses innovations in medical products,digital solutions for managing healthcare systems,and solutions for improving patient diagnosis and treatment.These four sectors are the focus of this report.The views of stakeholders and startup

31、s are important for ideas on how to improve the ecosystem.The study draws on interviews with a range of ecosystem stakeholders and startup entrepreneurs.Stakeholders included government officials,managers of incubators and accelerators,and experts at financial institutions.TheGeorgian startups selec

32、ted for consultation were operating in one of the four sectors and provided valuable insights into the key obstacles they face.Executive Summary ixRankingGeorgia is ranked 80th out of 100 countries in the Global Startup Ecosystem Index.The ranking is based on the quantity and quality of startups and

33、 the business environment.Among the cited drawbacks of the countrys ecosystem are a lack of experienced entrepreneurs,limited private investment capital,and a small market(population 3.7 million).Georgia ranks seventh among 190 countries in the Ease of Doing Business Index.The country also ranks 12t

34、h globally and seventh in Europe on the Index of Economic Freedom.With an overall score above regional and global averages,the country outperforms its peers in both trade and business freedom,according to the Heritage Foundation.The overall business climate in Georgia is attractive to entrepreneurs,

35、asbusiness registration can be completed in less than 30 minutes,and startup founders noted the ease of streamlined tax procedures through the Revenue Service Agencys digitized platform.Senior managers in Georgia spend significantly less time on regulatory compliance than in other countries in Europ

36、e and Central Asia or in upper middle-income countries.Innovation,Research,and Market AnalysisLocal businesses need to focus more on innovation.Weaknesses that hinder the success of a more vibrant startup community include limited innovation capacity,a lack of entrepreneurial culture,low growth of i

37、nnovative companies,and limited availability of venture capital.Research and development are limited.Gross expenditure on research has increased in recent years,but remains far below the European Union(EU)target of 3%of gross domestic product(GDP).Companies invest little in innovation,collaboration

38、between scientists and industry is limited,and research institutions need improvement.Universities can apply for research grants through the governments Shota Rustaveli National Science Foundation,but the amount of funding is limited and conditional.The Knowledge Transfer and Innovation Center at Iv

39、ane Javakhishvili Tbilisi State University has been working on the commercialization of science,but no significant results have been achieved.In Georgia,it is not common to conduct thorough market research to determine demand for a product.Startups generally use national statistics or data on what i

40、s happening outside Georgia in certain sectors and often lack a good understanding of the local market.The availability of detailed,industry-specific reports and data on Georgia was cited as a challenge by startups.Where reports and data do exist,startups lack expertise in how to find them(including

41、 for the international market).Executive Summary xDigital uptake is high in Georgia compared with neighboring countries and those at the same income level.This increases the market for startups because their products and services have digital elements.However,there is still a noteworthy digital divi

42、de between urban and rural areas,as well as socioeconomic differences.The potential of digitalization is not fully utilized by businesses,especially small and medium-sized enterprises(SMEs)outside Tbilisi.There is also a significant gap in digital skills among the population,with lower skills in per

43、ipheral areas.TalentHuman capital is at the heart of the startup ecosystem.Tech talent and entrepreneurs who are competent,courageous,and have a business mindset are key assets to this system.Creating a startup requires a combination of skill,passion,and risk-taking.Georgia has a relatively short hi

44、story of free markets and a shallow entrepreneurship culture.Georgia has recently made tremendous improvements in education participation and learning outcomes.Nearly a decade ago,the country introduced comprehensive reforms at all levels of education with the goal of creating a credible education s

45、ystem that would enable learning according to international standards.Substantial funding from international donors has been allocated to ongoing education reforms.Public spending on education has been increased to 3.9%of GDP in 2020,slightly below the EU average of 4.6%in 2018.Government SupportGov

46、ernment support for startups is focused on three areas.These are digital training,technology parks and innovation centers(i.e.,infrastructure),and grants for early-stage startups.This support is provided to all startups and businesses,so there are no specific policies,programs,or incentives for star

47、tups in agritech,cleantech,edtech,and healthtech.Startups are looking for tax incentives.The startups interviewed indicated that there are no specific tax exemptions or incentives for startups.Startups are not registered as a different legal entity than other small,medium-sized,or large enterprises.

48、Rather,all registered startups are considered limited liability companies and must comply with standard tax requirements.Most taxes relevant to businesses are 20%personal income tax,4%pension contribution,15%corporate tax(profit),and 18%value-added tax(VAT).Startups can benefit from a reduction of t

49、hese tax rates.Executive Summary xiHigher thresholds for import tax(tariff)exemptions would help startups,especially manufacturers.The rates for imported goods are 0%,5%,and 12%,depending on the type of project.Import taxes are relevant for hardware-based technology startups that depend on component

50、 and material imports from abroad.Imported products worth more than$90(GEL300)are subject to import tax.Removing or raising the threshold on prototype components would benefit early-stage hardware-based startups.The virtual economic zone for information technology services companies is not well know

51、n.Enterprises joining this zone do not pay VAT or profit tax.Over 10 years,more than 1,000 companies have registered for zone status,but none of the startups interviewed knew about it or the tax benefits.FinanceThe grant program of Georgias Innovation and Technology Agency(GITA)is a major stimulator

52、 for startups in the creation and post-prototyping stages.The program targets first-time entrepreneurs who are not required to have a registered legal entity.The grants help entrepreneurs avoid risk(since they are not loans or equity),while providing cash flow that can be used to attract tech talent

53、 or pay for marketing costs.In addition to finance,GITA provides mentoring,training,access to Silicon Valley experts and a panel of judges,and networking with other local startups.The best-performing startups funded by GITA are introduced to potential partners and investors,including through trips t

54、o the United States.Some entrepreneurs view grants as an end in themselves rather than a means.Their focus on obtaining grants diverts their attention from validating the product and business model in the marketplace with consumers(and not just the grant competition judges).The judges may be less cr

55、itical than investors seeking a return on investment.Startups that focus only on winning grants become serial grant applicants that fail to gain traction with consumers and investors to become sustainable.Bank loans are not a common source of capital for technology startups.Banks view startups as ri

56、sky and uncertain ventures.It is difficult for startups to service loans regularly(i.e.,monthly or quarterly)because they have little or no revenue in the early stages.Collateral is difficult to provide given the intangibility of technology products.Lending supports SMEsbut not specifically tech sta

57、rtups.Georgias banking and microcredit sector has special lending programs tailored to small businesses and startups,however,the latter are often defined as any new business.Executive Summary xiiForexample,TBC Bank has launched Startuperi,which is available to all SMEs and offers credit as well as t

58、raining,business networking meetings,and workshops.Thebank provides startup loans with the need to pledge collateral.This approach of considering every new business as a startup is also followed by other financial institutions in the country.They treat startups the same as other SMEs and do not have

59、 specific programs for enterprises developing software,hardware,or other tech-related solutions.The Female Start Upper program is also not focused on technology.One exception is InnovFin,an initiative of the European Investment Bank and the European Commission,which supports projects that are riskie

60、r and difficult to assess,and therefore often have difficulty accessing funding.Few credit programs target startups in agritech,cleantech,edtech,and healthtech.However,startups in these sectors can apply and gain access.Access is more likely at the growth stage when there is already a product or ser

61、vice on the market.From the interviews,it appears that most startups have little knowledge or understanding of funding options from financial institutions.The venture capital market in Georgia is at an early stage of development.However,several groups have emerged recently to promote venture capital

62、 and build a network of angel investors.Investment has been supported by the Law on Promotion and Guarantees of Investment Activity(2006)and the Law on Investment of Funds(2020)(Legislative Herald of Georgia 2020).The laws provide the regulatory framework for globally integrated portfolio investment

63、s,i.e.,capital markets that can provide Georgian businesses with diversified sources of capital from home and abroad.This will promote Georgias economic growth in two ways:it will make it easier for Georgian investors to trade in foreign markets,and it will give Georgian businesses access to interna

64、tional capital to expand their businesses.Angel investors have also emerged as a source of funding for startups.Some are organized into networks.For example,Axel is a network of angel investors that brings together investors from Georgia and the Baltic countries.It organizes meetings where selected

65、startups can pitch and share ideas.Few investments have yet to be made.Investment funds and special purpose vehicles(SPVs)are emerging as investment tools.Both are a means of pooling investor funds.While an SPV invests in a single company,a fund invests in multiple companies.In Georgia,SPVs do not h

66、ave a specific or special legal form.According to the Law on Investment of Funds,a fund may be established as a joint stock company.A closed-end registered investment company may also be registered as a limited liability company or a limited partnership.Under this law,a registered investment fund ma

67、y have no more than 20 retail investors,while an authorized investment fund may have more than 20.Executive Summary xiiiNone of the investor groups has a specific focus on agritech,edtech,cleantech,or healthtech.However,startups in all four areas may pursue funding options with these stakeholders.No

68、ne of the startups interviewed for this study has approached a domestic investment fund or angel investor.Investments by existing venture capital firms in clean energy,agriculture,or healthcare tend to go to large businesses,rather than to startups.However,large venture capital firms view supporting

69、 education and the environment as part of their corporate social responsibilitya characteristic that startups seeking funds could use to their advantage.This development could lead to impact investing,which is not yet practiced in Georgia.Incubators and AcceleratorsIncubators and accelerator program

70、s are still relatively new in Georgia.Of the startups interviewed,only a few had participated in them.Those that had participated emphasized that they had a significant impact on product and customer development and contact with potential partners and investors.They helped founders improve their und

71、erstanding of how to run a startup,including aspects of fundraising.This sentiment was also expressed for programs that did not provide grants or equity investments,but helped founders tap into investor networks through demo days and other means.The sample size of these interviews is too small to dr

72、aw generalized conclusions,but they do suggest a pattern:startups that received structured and longer training and mentoring made significant progress in product development and market validation.Many incubators are one-off projects that are not sustained.A major reason for these ad hoc projects is

73、the lack of access to stable and sustainable funding and a reliance on donor funding for initiatives of short duration.For each iteration,they must go through a fundraising process and convince stakeholders,which takes time and effort and can curb enthusiasm.Incubator and accelerator managers strugg

74、le to find a profitable business model to operate.None of the programs charge participation fees and providing a share of equity to the program is rarely a requirement for a participating startup.Even if an incubator asks a startup to give up some equity in exchange for incubation services(e.g.,Redb

75、erry Startup Studio),that equity cannot be easily liquidated and used to cover the incubators operating costs.For incubator or accelerator programs to become self-sustaining,they should consider revenue-generating mechanisms such as charging fees.11IntroductionGeorgias technology startup scene has s

76、hown promising growth since 2015.The enthusiasm of young entrepreneurs,coupled with supportive government programs,local and nonprofit initiatives,and international donor funding,is creating momentum for technology-based startup enterprises(tech startups)to flourish.The most common sectors in which

77、startups have emerged in Georgia are e-commerce,fintech,artificial intelligence(AI),and digital information-based service platforms.The emergence of startups in development-oriented sectors,such as education,health,agriculture,and the green economy,is happening but at a slower pace.This report analy

78、zes the startup ecosystem in Georgia by defining the pillars and players of the ecosystem,as well as the current support mechanisms,and identifying opportunities for its further development.The analysis focuses on the existing conditions and prospects for startups to thrive in four specific areas:ag

79、ritech,cleantech,edtech,and healthtech.These four sectors hold considerable promise for social and environmental progress and economic growth.Agritech startups help farmers,including those who are poor,to increase efficiency and yields,improve market linkages,and engage in sustainable farming.Startu

80、ps that use green technology solutionsin other words,cleantechreduce environmental damage,support climate change adaptation,and decrease energy consumption.Education technology startups use technology to improve teaching and learning processes and outcomes,both inside and outside the classroom.Healt

81、htech encompasses technological innovation by developing innovative medical products,providing digital solutions to manage healthcare systems,and improving patient diagnosis andtreatment.Digitalization is becoming a key competitive advantage and growth driver both within economies and globally.Deman

82、d for technological solutions that benefit society and the economy is increasing as people become more tech-savvy and more processes rely on technology.Startups that take advantage of this opportunity and offer efficient solutions for sustainable development are receiving significant attention.Accor

83、dingly,this report analyzes the prospects for Georgia in these four areas(agritech,cleantech,edtech,and healthtech)and the ecosystem that supports them.Georgias Emerging Ecosystem for Technology Startups2MethodologyTo gain meaningful insights,interviews were conducted with 14 ecosystem stakeholders(

84、Appendix 1)and 23 tech startup founders(Appendix 2),all from Georgia.Stakeholders included government officials,managers of incubators and accelerators,and staff of financial institutions and educational institutions.Startups were selected based on their presence in the four sectors through word of

85、mouth and referrals from stakeholders.The interviews and other research were mostly conducted in 2021 and early 2022.The startups sector changes rapidly and any new developments may not be captured in the report.Therefore,the report is based on qualitative analysis(from interviews and documents)and

86、not a quantitative survey of startups.The latter would not have been practical or reliable given the small number of actual bona fide startups in the four selected sectors.Although there are different definitions of a startup depending on the country,culture,and environment,this report defines a sta

87、rtup as a business that develops new technologies or utilizes existing technologies to produce innovative products and services that address a market need or problem,can generate profits,and are scalable.This report also incorporates information,insights,and observations from other existing reports

88、and studies.Data were obtained from statistical sources and referenced.The report has three main sections.The first is this introduction.The second section examines the characteristics of Georgias ecosystem and its stakeholders,and explores the challenges and opportunities faced by the startups,in p

89、art through interviews with enterprises from the four target sectors.The third section provides recommendations to foster the development of Georgias startup ecosystem.32Overview of Georgias TechnologyEcosystemStartups emerge and perform well under certain conditions.Like living organisms,they need

90、a suitable environment to grow and develop.The ecosystem for startups is composed of many actors,institutions,and relationships(seefigure).The more interconnected and complementary the ecosystem,the greater the chances that the startup community will thrive.An ecosystem includes digital infrastructu

91、re,government policies,access to funding,human capital,workspaces,organizations such as incubators and accelerators,and a culture that encourages entrepreneurship and innovation.Startup Ecosystem MapSource:Authors.GovernmentPolicyDigitalInfrastructureFinanceHumanCapitalIncubators andAcceleratorsOthe

92、rSupportingOrganizationsGeorgiasTech StartupEcosystemGeorgias Emerging Ecosystem for Technology Startups4With an emerging information and communication technology(ICT)sector,Georgia is working hard to establish itself as a growing hub for information and communication technology.Since the creation o

93、f Georgias Innovation and Technology Agency in 2014,significant efforts have been made to develop the digital ecosystem in Georgia,from improving physical infrastructure,including broadband connectivity,tech parks,and innovation centers,to providing grants to startups and offering skills training op

94、portunities in technology fields.In addition,there are private sector efforts to support startups,including support from large banks such as TBC Bank and Bank of Georgia,new venture capital(VC)funds and angel investor networks,and,most importantly,community and nonprofit organizations such as Startu

95、p Bro or Impact Hub Tbilisi that are advocating for this cause.Additionally,there are a growing number of incubator and accelerator programs for early-stage startups,such as the 500 Georgia program.All these are explained in more detail in the following subsections.Although several successful startu

96、ps have emerged in Georgia,including a first international exit from Pulsar,an AI-based automotive software startup,the overall maturity of local startups is still low,and the ecosystem is still in the early stage of development.Startup Genome describes four phases in the development of a startup ec

97、osystem,from activation to globalization and then to attraction and integration.Each phase has its own characteristics,challenges,and goals.As the collective startup experience grows and available resources increase,an ecosystem progresses through these phases(Startup Genome 2019).According to this

98、classification,Georgia is currently in the first phase(activation)with limited startup know-how,scarce funding,and a small number of startups(Startup Genome 2020).StartupBlink(2022)ranked Georgia 73rd out of 100 countries in its Global Startup Ecosystem Index.The ranking is based on the quantity and

99、 quality of startups in the country and the overall business environment.Among the cited drawbacks of Georgias ecosystem are a lack of experienced entrepreneurs and limited private investment capital,as well as a small consumer market.1 Digital InfrastructureIn Georgia,access to digital infrastructu

100、re is increasing.The internet,with the mobile phone,has gradually replaced the fixed-line telephone as the primary form of communication.More than 80%of households have a fixed broadband connection,1 Compared with the neighboring countries,the most advanced startup ecosystem is found in the Russian

101、Federation(17th),followed by Ukraine(34th),Trkiye(44th),and Armenia(65th).The only country behind Georgia(80th place)is Azerbaijan(89th place).Overview of Georgias TechnologyEcosystem5and more than 90%of companies with hired staff have access to the internet at work(GEOSTAT 2020).The country adopted

102、 the National Broadband Strategy in 2020,and efforts are under way to ensure high-quality 5G services.In addition to internet infrastructure,Georgia has actively worked to promote innovation and technological development by setting up technology parks(tech parks),fabrication laboratories(fablabs),an

103、d innovation centers with support from international donors.Despite the relatively high level of digital uptake in Georgia compared with neighboring countries and other countries with the same income levels,there remains noteworthy digital access divide based on urbanrural and socioeconomic differen

104、ces(UNECE 2020).There is also a significant gap in digital skills among the population,with lower skills in peripheral areas(USAID Georgia 2017).Along with household users,digitalization is not fully deployed by businesses,especially small and medium-sized enterprises(SMEs)outside Tbilisi.For the co

105、untry to harness the potential of the knowledge economy and support tech startups,infrastructure investments in ICT and digital inclusion programs are crucial.Development partners can and do play a vital role in this area.TheEuropean Union(EU)and the World Bank are making efforts through their respe

106、ctive programs,EU4Digital and Log-In Georgia.EU4Digital is an 11 million program to help Eastern Partnership states develop digital economies and societies by lowering roaming tariffs,developing high-speed broadband,expanding e-services,harmonizing digital frameworks from logistics to healthcare,bui

107、lding cybersecurity,developing skills,and creating jobs in digital industries.2 Log-In Georgia is a World Bank project that provides broadband connectivity to over 1,000 communities and promotes digital literacy and inclusion.Government PoliciesGeneral Business ClimateThe government plays an importa

108、nt role in creating a suitable environment for entrepreneurship and startups.Favorable regulation,business licensing,and tax policies are fundamental pillars of a favorable business environment.Georgia experienced a turbulent economic transformation after regaining independence from the Soviet Union

109、 in 1991.The economy has been strengthened by economic reforms in recent decades that have strengthened the rule of law,improved governance,and increased foreign investment.2 The Eastern Partnership is an initiative of the EU,its member states,and Armenia,Azerbaijan,Belarus,Georgia,the Republic of M

110、oldova,and Ukraine.Georgias Emerging Ecosystem for Technology Startups6Georgia is the least corrupt country in the Black Sea region,according to the rankings of Transparency International(2020),outperforming EU countries.Georgia ranks seventh among 190 countries in the 2020 Ease of Doing Business In

111、dex(World Bank 2020a).The 2021 Index of Economic Freedom ranks Georgia 12th in the world and 7th in Europe.With an overall score above the regional and global average,the country outperforms its peers in both trade and business freedom(Heritage Foundation 2021).The overall business climate in Georgi

112、a is attractive to entrepreneurs,as business registration can be completed in less than 30minutes,and startup founders noted the ease of streamlined tax procedures that can be completed through digitized platforms provided by the governments Revenue Service Agency.Senior managers in Georgia spend si

113、gnificantly less time on regulatory compliance than in other European and Central Asian or upper middle-income countries(World Bank 2020a,as above).In addition,managers of Georgian companies have to meet with tax officials only half as often as in other countries(World Bank 2019).The low level of co

114、rruption and minimal incidents of bribery are also reasons for the hassle-free working environment for businesses.While it is easy to start a business in Georgia,the performance of local businesses in creating and adopting innovations is lagging.Georgia has a low score in resolving insolvencies,whic

115、h can be a critical aspect for risk-taking and innovation(WorldBank 2020a).The Global Competitiveness Index ranks Georgia 74th out of 141 countries,behind most in Europe and neighboring countries in the Caucasus(WEF 2019).According to the Global Competitiveness Index,weaknesses that may currently hi

116、nder startups include innovation capability(ranked 91),a lack of entrepreneurial culture(93),low growth of innovative companies(108),and limited availability of venture capital(119).Overall,political instability and access to finance remain pressing obstacles for businesses in Georgia,far more so th

117、an in European and Central Asian countries and in upper middle-income countries,according to the World Banks Enterprise Survey(World Bank 2019).Policies and Programs for Startups and InnovationIn 2014,the government established Georgias Innovation and Technology Agency(GITA),under the Ministry of Ec

118、onomy and Sustainable Development.This action indicates that advancing the technology ecosystem is a government priority.This was followed by the adoption of the Law on Innovation in 2016 and the efforts of the National Intellectual Property Center of Georgia Sakpatenti to promote intellectual prope

119、rty protection and awareness among innovative entrepreneurs.Government support for the tech startup ecosystem has primarily focused on providing digital training,technology parks and innovation centers,and grants to early-stage startups.GITA treats all sectors equally including agritech,cleantech,Ov

120、erview of Georgias TechnologyEcosystem7edtech,and healthtech.There are some specific initiatives such as GITAs collaboration with the United States Agency for International Development(USAID)on agri-bio-foodtech acceleration.Many of the startups interviewed indicated that there are no specific tax e

121、xemptions or incentives for startups.Startups are not registered as a different legal entity than other small,medium-sized,or large enterprises.In fact,all registered startups are considered limited liability companies and must meet the standard tax requirements.Most taxes relevant to businesses are

122、 20%personal income tax,4%pension contribution,15%corporate(profit)tax,and 18%value-added tax(VAT).General rates on imported goods are0%,5%,and 12%depending on the type of project.Import tax is relevant for hardware-based technology startups that depend on component and material imports from foreign

123、 manufacturers,such as the Peoples Republic of China(PRC)and other countries.Any imported product worth more than$90(GEL300)is subject to import tax.Ramaz Javakhishvili,cofounder of Farco,an agritech startup that manufactures remote greenhouse control systems,suggested that removing or increasing th

124、e value cap on prototype components would benefit early-stage hardware-based startups.There are several public or private petitions to raise the taxable product value from GEL300 to GEL700,but the government has not yet made any changes.“When you are building hardware,you need multiple components an

125、d might need to import different options,until you find the right match and combination of materials for your purposes.At these preliminary stages,before there is a working prototype or a proof of concept,most of the founders rely on their personal money,and any savings or incentives could help us m

126、ove faster.”(Ramaz Javakhishvili,cofounder of Farco)Most companies begin paying VAT(18%)when their cumulative sales(over one or more years)reach about$30,000(GEL100,000).In recent years,there have been discussions about raising this cap for tech companies,but no legislation has yet been submitted to

127、 Parliament.In 2010,Georgia introduced a virtual economic zone for companies developing information technology(IT)services in the country.These companies do not pay VAT or taxes on their profits.Over the course of 10 years,more than 1,000companies have registered for virtual economic zone status(Bus

128、iness Media Georgia 2021).The virtual economic zone is not actively promoted by the government,and it is hardly known in the technology community.None of the startups interviewed knew about the tax benefits of the virtual economic zone.Georgias Emerging Ecosystem for Technology Startups8In 2020,the

129、government introduced the international company status,which grants reduced tax rates to eligible companies in the IT sector that serve international customers(at least 90%of revenues come from outside Georgia)(Government of Georgia 2020).The broad list of eligible activities includes software devel

130、opment,computer programming,creation and provision of digital services,and other activities(hardware production is not included).To qualify for international company status,the company must have been providing relevant services in Georgia for more than 2 years,either itself or through a subsidiary o

131、f an international company.Businesses with international company status pay 5%corporate income tax(instead of 15%),their employees pay 5%income tax(instead of 20%),there is no withholding tax on dividends(instead of 20%),and the business is exempt from property tax(other than land).3 There are no re

132、strictions or limits on the volume of business activity or duration for the incentives.International company status was introduced to encourage foreign direct investment in the technology sector and to create a supportive environment for outsourcing companies that hire local talent while serving glo

133、bal markets.As a result,there is already growing interest from international companies to expand to Georgia or move their operations there altogether.Examples include IT outsourcing companies EPAM Systems,Inc.,and Exadel,Inc.,which have entered the market and become the largest employers in the coun

134、trys technology sector,employing hundreds of people.While these tax incentives may be attractive to international companies,they do not serve local IT companies or tech startups that are in still in the product development phase and do not(yet)serve international customers.In addition,Rakuten Group,

135、Inc.,which uses international company status,is in the process of opening an office in Tbilisi to develop mobile applications for its popular messaging product,Viber(Agenda.GE 2022).Irakli Kashibadze,cofounder of GoandGrow,said that“startups need more support as they do not go through standard proce

136、sses,but are in pilot mode with constant changes.This is not a business.Startups become businesses only when they find product-market fit;before that,its more like“research-mode.”“For tech startups most of the costs are associated with salaries especially at early stages when you are developing a pr

137、oduct.Financial resources at that time are typically scarce.Having decreased personal income tax alone could help startups to reinvest,hire additional staff,and grow faster.”(VatoVeliashvili,CEO of Lingwing)3 Property tax(other than land)exempt if the property is used only for activities allowed und

138、er the status(instead of the regular percentage,which is up to 1%depending on the type of property,and the exemption does not include property tax on land).Overview of Georgias TechnologyEcosystem9FinanceAccess to adequate funding is essential for a proactive entrepreneurial ecosystem.Globally,tech

139、startups often cite limited access to capital as one of their biggest challenges,and Georgia is no exception.This report goes beneath the tip of the iceberg to identify specific funding opportunities at different stages of the startup life cycle.The four sectors of interest(agritech,cleantech,edtech

140、,and healthtech)are discussed in detail.Government ProgramsThe government is a main provider of capital to early-stage tech startups.GITA offers startups grants of up to GEL650,000.The grants are distributed through the governments budget,as well as the World Banks Georgia National Innovation Ecosys

141、tem(GENIE)program,which was launched in 2016 and runs through 2023 with a total cost of$23.4 million.GENIE is designed to strengthen and develop the innovation ecosystem through the provision of innovation infrastructure and services,ecosystem support,and funding.Table 1(page 10)illustrates the type

142、 and amount of funding provided by GITA to local startups since 2015.The maximum level of grant and program requirements has changed over the years to adapt to the needs of the local ecosystem and to grantee feedback.In addition to startup support,GITAs small grants programs have funded initiatives

143、such as tech and entrepreneurship events and conferences in Georgia or travel support for Georgian tech talent or startups to attend international conferences,trade shows,etc.over the years(20152019).Startup matching grants require the grantee to provide 10%cofinancing of the total project amount.Th

144、e innovation matching grants are designed to attract private investment,as grants are matched one on one with the amount secured by the private investment(up to GEL650,000).All grant proposals are completed based on templates provided by GITA,and narrative proposals and budget allocations must serve

145、 a specific purpose for startup growth and expansion.GITA grantees must follow financial reporting procedures and approve any budget changes in advance.Georgias Emerging Ecosystem for Technology Startups10By mid-2021,more than 280 startups had received GITA grants totaling GEL21.9million.Avtandil Ka

146、sradze,chairman of GITA,noted that the quantity and quality of Georgian startups has increased over the years,both in terms of applicants and successful grantees.4 Startups interested in receiving funding from GITA complete an online application and,if successful in the first stage,are invited to pr

147、esent their idea to a panel of judges.For the startup matching grants,shortlisted startups go through several training sessions before presenting to an international panel in English.The pitching process and award ceremony are streamed live to the public through YouTube and Facebook.The startups are

148、 assessed based on six key criteria:(i)team competence,(ii)market size/potential,(iii)value proposition,(iv)business model,(v)market entry strategy,and(vi)competitive advantage.GITAs startup matching grants are available to“initiative groups”(i.e.,nonestablished entities or groups of individuals or

149、budding entrepreneurs)or registered limited liability companies that have been in operation for less than 2 years and have not yet generated annual revenues in excess of GEL500,000.Additionally,the duration of the proposed activities should not exceed 9 months.Agritech,cleantech,edtech,and healthtec

150、h startups account for about 20%of GITAs successful proposals.The distribution of these startups is shown in Table 2(page11).Due to the small size of the data,no trends(e.g.,distribution by sector)can be detected over time.To date,only healthtech startups,among the four sectors,have received larger

151、amounts of startup matching grants and innovation matching grants.4 Interview with the authors.Table 1:Funding Programs by Georgias Innovation and Technology Agency,20152022Grant ProgramsNumber of Funded Projects/Startups over the YearsTotal200182019 2020 2021 2022Small grants program(up

152、to GEL5,000)47826298124413Prototyping grants program(up to GEL15,000)27311674Pilot program for regional development(uptoGEL30,000 or GEL100,000 grants for business ideas and startups in specific regions,outside Tbilisi)4848Startup matching grants(up to GEL100,000)Startup matching grants(u

153、p to GEL150,000)2020Innovation matching grants(up to GEL650,000)4101024Total Number of Projects/Startups Funded714Source:Data provided by Georgias Innovation and Technology Agency.Overview of Georgias TechnologyEcosystem11The GITA grant is described by both startups and ecosystem players as a stimul

154、ator for the creation of new tech startups or the development of those that move beyond the prototype phase.The program is aimed at first-time entrepreneurs,and applicants do not have to be official legal entities.The grants help entrepreneurs avoid risks(as they are not loans or equity)while provid

155、ing cash flow to attract tech talent or pay for marketing costs.In addition to financial support,GITA provides startups with mentoring,training,access to Silicon Valley experts and a panel of judges,and networking with other startups in the local ecosystem.Some of the best-performing GITA-funded sta

156、rtups are given the opportunity to showcase themselves to potential partners and investors by taking business trips to the United States(US)or attending local and international conferences.In addition to the positive aspects of GITA programs,the startups and stakeholders interviewed also highlighted

157、 the drawbacks.Some argue that GITAs grants are not flexible enough to adapt to the nature of startups,which are subject to constant change.The proposal submitted for the grant program may need to be modified after implementation begins.Changes to the budget and priorities are possible but require a

158、pproval by the program.Unexpended budget items cannot be reallocated to other activities without approval.Grant recipients may overspend on a budget item by 15%(with the exception of salaries),but additional changes require written justification and may be rejected by GITA.In extreme cases,GITA may

159、terminate the grant if the startup cannot meet its milestones.In this case,the grantee may be required to return the grant amount,possibly including partial or full repayment of funds already spent.With respect to the four sectors which are the focus of this report,GITAs prototyping and startup matc

160、hing grants may not provide sufficient funding for cleantech,healthtech,and agritech startups to cover research and development(R&D)and other early-stage costs.However,once such startups mature,they can apply for innovation matching grants,which can be up to GEL650,000,with an equal amount of coinve

161、stment from the private sector.Table 2:Startups Funded by GITAs Grant Programs,20152021Grant ProgramTotal Startups FundedCleantechEdtechHealthtechPrototype grants(max.GEL15,000)1566(3.8%)7(4.5%)10(6.4%)Startup matching grants(max.GEL100,000)1115(4.5%)4(3.6%)5(4.5%)Innovation matching grants(max.GEL6

162、50,000)15003(20%)Total Funded282111118GITA=Georgias Innovation and Technology Agency,max.=maximum.Note:Figures in parentheses represent the share of that sector in total grants for each program.Source:ADB estimates using data provided to the authors by GITA in 2021.Georgias Emerging Ecosystem for Te

163、chnology Startups12While GITAs grants have inspired many first-time entrepreneurs to establish startups,some ecosystem players note that founders view these grants as ends in themselves rather than as means to an end.Their focus on obtaining grants diverts their attention from validating the product

164、 and business model in the marketplace with consumers(and not just with the grant competition judges).The judges may be less critical than investors seeking a return on investment.Startups with a narrow grant-winning focus often struggle to develop and gain traction with consumers and investors when

165、 the grant money runs out.“We,as a government,took a leap of faith in Georgias technology ecosystem and decided to fund technology startups as it was a nascent field,and there was skepticism from the private sector.After 2026,we aim to stop direct financing and will use the period between now and th

166、en to encourage more private sector investment.”(Avtandil Kasradze,chairman of GITA)While GITA is the main government institution providing grants,the table in Appendix3 shows other funding opportunities for startups through the Enterprise Georgia agency and Startup Georgia program.None of the 23 st

167、artups interviewed considered or applied for government funding programs other than GITA.Despite the drawbacks mentioned previously,GITA grants are popular because they are tailored to technology startups and provide a grant(i.e.,not an equity stake).Some grants require the startup to provide or sec

168、ure a matching investment which can be small(10%)or larger(50%)depending on the program.5In summary,government grant programs enable early-stage or first-time entrepreneurs to get started with their business ideas.From the interviews,itappears that this has helped make a career as a startup founder

169、attractive to young talent,and it has created momentum for early-stage startups.GITA estimates that of the more than 280 startups funded through the grant programs(GEL20million),these startups have received additional investment of$95 million from private investors,both domestic and foreign.6 5 In a

170、ddition,the European Bank for Reconstruction and Development(EBRD)initiated the Star Venture Program in 2022 that provides an 18-month program of training,guidance,and networking.The program also offers cost-recovery grants to pay for consulting services and travel to international conferences and c

171、ompetitions.The program covers 30 countries,and two Georgian startups were accepted in late 2022.EBRDStar Venture Programme.Start-ups.6 Information provided to authors by a GITA representative.Overview of Georgias TechnologyEcosystem13LoansBank loans are not a common source of capital for technology

172、 startups.Banks view startups as risky and uncertain ventures.It is difficult for startups to service loans on a regular basis(i.e.,monthly or quarterly)because they have little or no revenue in the early stages.Collateral is hard to provide given the intangibility of technologyproducts.However,Geor

173、gias banking and microcredit sector has special loan programs tailored to small businesses and startups.For example,TBC Bank launched Startuperi in 2017 to support SMEs.By 2021,some 55,000 SMEs had been registered for the programs various activities,which include training,business networking meeting

174、s,and workshops,in addition to loans and leases.The bank provides startup loans of up to GEL15,000 without collateral or cofinancing and up to GEL100,000 for innovative startups with a maturity of up to 7 years.The program had 493 active loans totaling GEL196.9 million at the end of 2021(TBC2021).Th

175、e company positions itself as a supporter of young entrepreneurs and creativity.It is important to note that not all of them are technology-based,as TBC Bank considers any type of new business to be a startup,whether or not it uses digital or other innovative technology.This approach is generally fo

176、llowed by other financial institutions in the country(e.g.,Bank of Georgia,Credo,Crystal).They treat startups the same as other SMEs and have no specific programs for enterprises developing software,hardware,or other tech solutions.The Bank of Georgia,in partnership with the European Bank for Recons

177、truction and Development(EBRD),has introduced a similar program,Female Start Upper program,but it is not focused on technology.The program offers women founders loans ranging from GEL10,000 to GEL100,000 with a maturity up to 5 years.No cofinancing or coinvestment by the founder is required.One of t

178、he programs worth noting is InnovFin,an initiative of the European Investment Bank and Horizon 2020,a research and innovation program of the European Commission.InnovFin supports projects that are riskier and more difficult to assess than traditional investments and therefore often have difficulty a

179、ccessing funding.Funding is provided to support research and innovation by small tech startups as well as larger companies,large research facilities,andcircular economycompanies.In Georgia,the program is implemented by ProCreditBank,which provides investment and working capital loans.A credit guaran

180、tee is provided,which allows a company to provide 50%less collateral than they normally would.Loan amounts vary from 25,000 to 7.5 million.Georgias Emerging Ecosystem for Technology Startups14In addition,the EBRD offers loans through theGreen Economy Financing Facility,which is provided through ProC

181、redit Bank,TBC Bank,and Basis Bank.The funds are provided to SMEs and large companies for investments in energy-efficient,renewable energy,and green initiatives.The Green Economy Financing Facility funding allows companies to purchase technology from Technology Selectors green technology platform,7

182、or implement multicomponent green projects and receive a free technical assessment and funding.The funding program supports investments in energy-efficient machinery,energy-efficiency improvements of existing buildings,investments to save at least 20%water or sustainable land management,and investme

183、nts in renewable energy technologies.Loans of up to$300,000 are available for small and well-defined projects,and up to$1 million or$5 million for large-scale energy efficiency and renewable energy projects.Another line of credit is provided to domestic banks by EU4Business,an EU initiative.The loan

184、s from the banks will be used to finance fixed assets for enterprises with fewer than 250 employees.A grant of 15%of the loan amount is also provided(EU4Business 2020).About 16 million was triggered in the form of structured funds and more than 10 million in the form of grants.In the agriculture sec

185、tor,Enterprise Georgia partners with banks in providing working capital and financing fixed asset investments as part of the preferential agro credit program to improve primary agricultural production,processing,storage,and sales.Loan amounts can range from GEL7,000 to GEL15 million.The governments

186、Rural Development Agency provides a form of cofinancing by shouldering interest payments for up to 12.5 years at an annual interest rate of 8%to 18%.The above finance programs do not specifically target startups in the agritech,cleantech,edtech,and healthtech sectors,but startups in these sectors ca

187、n apply and gain access.Access is more likely at the growth stage when there is already a product or service on the market.From interviews,it appears that most startups have little knowledge or understanding of the funding options available from financial institutions.Financing is also important to

188、startups customers.For example,if a cleantech startup develops an environmentally friendly business-to-business(B2B)solution,its customers may need access to credit to purchase the technology from the startup.7 A global shopping-style platform that connects vendors of the green technologies with for

189、ward-thinking businesses and homeowners.See Green Technology Selector.Overview of Georgias TechnologyEcosystem15In summary,there are several loan programs that startups are eligible for,but according to the interviews,this financing model is not preferred by startups,especially in the early stages w

190、hen the risks are high,there is not yet a product or even a prototype,and the entrepreneurs are still running their startup as a side business.Even though many financial institutions give small businesses a grace period of 1 year,entrepreneurs are not sure if they would be generating revenue even af

191、ter a year,especially if they have to do technical product development and testing first.Vato Veliashvili,CEO of Lingwing,a language learning tool,said that his startup has never considered a loan.“If we needed additional capital to expand to a new country,a loan would be the least favorable option,

192、”he said.“Banks are typically more oriented on taking lower risks and expect stable payments from the debtor,which cant be guaranteed with startups.”(Irakli Kashibadze,founder of GoandGrow)Additionally,the ratio of household debt to gross domestic product(GDP)is high in Georgia.8 People who want to

193、start their own business may already have financial obligations to banks(e.g.,mortgages,consumer loans).Due to this local characteristic,entrepreneurs who already have loan obligations may refrain from taking on new commitments by relying on personal income or family property to provide collateral f

194、or a startup loan.Or the founder may not have additional property to put up as collateral.In summary,Georgias early-stage startups currently have more flexible and less onerous opportunities provided by grants,which do not require repayment or interest charges.This has reduced their interest in taki

195、ng out bank loans.Venture Capital and Angel InvestingThe venture capital market in Georgia is at an early stage of development.Recently,several groups have emerged to promote venture capital and develop a network of angel investors.Georgias Law on Promotion and Guarantees of Investment Activity was

196、enacted in 2006(Legislative Herald of Georgia 2006).This law establishes the legal basis for and protection of foreign and local investments in Georgia.In 2020,thegovernment passed the Law on Investment of Funds(Legislative Herald of Georgia 2020).Theaim of this law is to develop the market for inve

197、stment funds,ensure competition in the market,and protect the interests of investors.Itgoverns venture capital.These laws provide the regulatory framework for globally integrated portfolio investments,i.e.,capital markets that can provide Georgian businesses 8 National Bank of Georgia.Statistics Dat

198、a.Georgias Emerging Ecosystem for Technology Startups16with diversified sources of capital from home or abroad.This will promote Georgias economic growth in two ways:it will make it easier for Georgian investors to trade in foreign markets,and it will give Georgian businesses access to international

199、 capital to expand their businesses.Investment companies and individual investors in and outside Georgia are showing increasing interest in technology startups.Some of these examples are listed below(Appendix 4 has more detailed information).For example,one of the largest investment funds in the cou

200、ntry,Georgia Capital,provided$3.2 million to Redberry Startup Studio to offer incubator programs and equity investments for tech startups(CBW 2019).In addition,GITA signed a memorandum with TECH Friends of Georgia,aninvestment fund that connects US investors with Georgia startups.GITA will help iden

201、tify local startups with global potential that can receive connections to California-based startups and up to$500,000 in equity funding.The initiative is still in its early stages,and no deals have been made yet.Currently in the development stage,Catapult Ventures,a California-based company that inv

202、ests in technology ventures,is launching a fund to investin innovative startups in Georgia.Called Catapult Georgia I,LP,the fund aims to raise$50 million.Itwill work with the US Market Access Center and Startup Grind Tbilisi to provide both capital and mentorship to approximately 50 Georgian startup

203、s over the next decade(Investor.ge 2021a).The fund is currently in the fundraising phase and has not yet made any investments.In the academic sector,the Business and Technology University has recently established a Global Startup Foundation with GeorgianIsraeli angel investors who occasionally inter

204、act with Georgian startups through pitching events.There is no data on how many actual investments or partnerships have come from this.Another new initiative is Axel,a network of angel investors founded by Startup Bro and Kedari Ventures,which brings together investors from Georgia and the European

205、countries.For paying members who are experienced or wealthy investors,Axel organizes closed monthly meetings where selected startups pitch,share information about their ongoing investment round,and respond to questions from participants.The network has heard pitches from 58 startups and,as of Octobe

206、r 2022,had invested in seven of them,including Theneo,a Software-as-a-Service(SaaS)solution that helps developers create efficient technical documentation.9 The investment was made through a special purpose vehicle(SPV).9 Theneo was founded by software engineers who acquired their education and work

207、 experience in the US.The startup obtained a grant from GITA for GEL100,000 and up to$1 million in total funding.It has also been accepted to Y Combinator,a renowned accelerator program that provides equity funding and training.Overview of Georgias TechnologyEcosystem17SPVs typically pool the money

208、of a group of investors to invest in a single company.The main difference between an SPV and a fund is that an SPV makes a single investment in only one company,while a fund invests in multiple companies.InGeorgia,SPVs do not have a specific or special legal form.Axels SPVs(onefor each investment)ar

209、e established as standard limited liability companies.According to the Law on Investment of Funds(Legislative Herald of Georgia 2020),a fund may be established as a joint stock company.A closed-end registered investment company may also be registered as a limited liability company or a limited partn

210、ership under the Law on Entrepreneurs.Under this law,a registered investment fund may not have more than 20 retail investors,while an authorized investment fund may have more than 20.Another SPV that invested in Theneo was established by Cartooli,an initiative led by a Georgian-American duo that hel

211、ps first-time investors or experienced angels invest in Georgian startups.Cartooli handles deal execution and due diligence and has a more open structure than Axel(no membership fees,any interested party can obtain information and join the SPV).Individuals can invest from as little as$1,000,dependin

212、g on the terms of each startup.In the case of Cartooli,the process is streamlined through Assure,a software platform,and no legal entities are established in Georgia.Assure is a software platform for creating and managing SPVs and investments.Wealth on Wings is another initiative supported locally b

213、y the World Bank to help women in technology and business learn about angel investing and become investors.It offers training on investing,insights into local startups,and tips on conducting due diligence.Other entities supporting private investment in startups include Georgian Venture Capital Assoc

214、iation(GVCA)and the Angel Investor Club Georgiaboth of which are in their early stages.Founded in 2017,GVCA works with its up to 10 members and partners to develop the venture capital and private equity industry to stimulate innovation and growth.GVCA provides a collective voice to various governmen

215、t agencies,regulatory bodies,and other stakeholders.10 The Angel Investor Club Georgia collectively invests between$30,000 and$200,000 in a startup,fromthe idea stage through to Series A funding rounds.Depending on the stage of the startup,angels participate in equity funding or provide either reven

216、ue-based funding or convertible debt.There is no public data on how many deals they have already closed.1110 Georgian Venture Capital Association.11 Angel Investor Club Georgia.Georgias Emerging Ecosystem for Technology Startups18Currently,none of the initiatives or institutions listed have a specif

217、ic focus on agritech,edtech,cleantech,and healthtech,but startups in all four areas may pursue funding options with these stakeholders.None of the startups interviewed have approached a domestic investment fund or angel investor.Investments by existing venture capital firms in the clean energy,agric

218、ulture,or healthcare sectors tend to go to large businesses in those sectors,rather than startups.However,large venture capital firms consider supporting education and the environment as part of their corporate social responsibilitya characteristic that startups seeking funds could use to their adva

219、ntage.This development could lead to impact investing,which is not yet practiced in Georgia.Several independent angels and investment companies have invested in early-stage startups in Georgia.Pulsar had its first international exit when it was purchased by US-based SpinCar,now known as Impel.Some o

220、f the angel investors saw the benefit of reaping their investments and earning higher returns.However,the venture capital scene is still very young,and its activities and transaction flows are limited.All of the VC funds and angel networks mentioned above are nascent and have yet to become properly

221、institutionalized.Interactions are largely based on personal contacts,and most startups do not know how to approach VCs or angels.Given the premature state,information about how to secure or provide venture and angel investment is still limited on both sides.Thefounders and teams of startups lack kn

222、owledge about investments and financial literacy.Stakeholders mention that the so-called investment readiness among local startups is low,as most of them are at an early stage and it is not clear whether they are ready and equipped to receive investment and take the next steps.At the same time,tradi

223、tional investors are not fully aware of the characteristics of tech startups and expect quick investment returns,higher equity,and low risk.Many of the startups indicated that what is lacking in Georgia is not access to funding,but access to“smart money.”This means meaning that an investor,whether V

224、C or an individual angel,has a solid understanding of the type of startups or the specific industry and is able to help a startup grow through mentoring and access to networks and markets.Additionally,there are currently no tax incentives for individual investors to fund tech startups.Hayk Asriyants

225、,cofounder of Axel,said that in order to promote and develop angel investing,the country can follow best practices and introduce incentives.“For instance,Norway has introduced tax relief as an incentive for angel investors who make investments in early-stage startups.”(Hayk Asriyants,cofounder of St

226、artup Bro and Axel)Overview of Georgias TechnologyEcosystem19Most of the startups interviewed have not currently announced active fundraising rounds,nor are they proactively approaching investors.Large companies are investing in their subsidiaries or in other startups that have experience and social

227、 capital in the ecosystem.BioChimPharm,for example,is a natural phage producer established by its parent company(which itself was originally a public research center that was privatized as a company).It is currently establishing subcompanies to develop innovative products.In healthtech,the main star

228、tups are focused on telemedicineRedMed and Ekimowhich were founded by established large corporations in Georgia,TBC Insurance and Georgian Healthcare Group,respectively.SpaceFarms was also cofounded by the Adjara Group.EduPay,apayment system for educational institutions,secured its initial capital t

229、hrough personal connections from an individual investor,and Agronavti,a platform that connects local farmers with knowledge and markets,received small equity funding from the Bank of Georgia under the 500 Startups Accelerator program.It is important to understand that Georgian startups are not limit

230、ed to raising capital locally,but also have access to foreign VC funds or individual foreign investors.There are a handful of such cases,though none in the four startup sectors covered in this report.In the interviews,cleantech startups seemed most interested in approaching international investors,e

231、specially in Europe and the US.However,they indicated that they do not have sufficient contacts or networks to approach investors and conduct negotiations.In addition,many foreign investment funds are not particularly interested in or focused on Georgian startups.Since the startup scene as a whole i

232、s still young and there are only a few successful examples,foreign VC firms and investors lack confidence in the quality and reliability of Georgian startups.Some local startups have found a way around this challenge by establishing a legal entity in the US(C Corporation)or a virtual enterprise in E

233、stonia,i.e.,inthe EU,under the countrys e-resident program.However,this practice,is used by a very few companies in Georgia,and most startup teams lack information and know-how about these procedures.Prize Money and Donor GrantsIn Georgia,participating in hackathons and grant competitions is a commo

234、n way for startups to gain access to initial small amounts of funds with which to begin building a prototype.International donors that are operating in Georgia,such as the United Nations Development Programme(UNDP),the United States Agency for International Development(USAID),the EBRD,the European F

235、und for Southeast Europe(EFSE),the EU,and others are increasingly supporting and organizing competitions and training programs that help young Georgians establish startups that serve social and environmental goals.Given the impact startups could have in our four targeted sectors,the potential for fu

236、nding from international donors is promising.Georgias Emerging Ecosystem for Technology Startups20Forexample,Zrda is a USAID program that supports agricultural innovation by funding technology initiatives such as the app Agronavti.Startup Bro organizes the annual Future Agro Challenge for agri-food

237、startups.The initiative is supported and funded by publicprivate partners such as GITA,USAID,and Liberty Bank.Large banks in Georgia often organize competitions,such as Bank of Georgias fintech hackathons and TBC Banks B2B Solutions Challenge.Universities hold business idea competitions and hackatho

238、ns for students.In 2021,for example,Ilia State University organized a hackathon to promote the creation of tools or games for digital education.The hackathon was associated with DigiEduHack,aEurope-wide initiative supported by the EU and other institutions.International groups such as Startup Wise G

239、uys,SeedStars,and TechStars have also organized hackathons and pitching competitions in the country,mostly as one-off events.In addition,prize money in the form of grants or equity investments is provided by some incubators and accelerators,including the Business and Technology University accelerato

240、r and 500 Startups Georgia.Social entrepreneurship is also gaining attention as more development organizations and companies offer support.The Europe Fund has a special program to support the establishment of social enterprises.The Bank of Georgias Tree of Life program offers grants up to GEL50,000

241、to start a social enterprise.However,the grants are mostly given to traditional businesses or to minority or rural communities that lack the technological skills to create startups.The Impact Hub Tbilisi Social Impact Award,a program that is part of a global movement,offers incubation and pitching c

242、ompetitions for early-stage social enterprises and is supported by several private and nonprofit institutions in Georgia.Although some applicants have used technology for social good,most ideas are based on traditional business models.Social entrepreneurship based on technological solutions need mor

243、e support.Thiscould further encourage the emergence of startups in agritech,cleantech,edtech,and healthtech.Georgia relies heavily on international donors to fund social initiatives,with grants mostly directed to nonprofit organizations and funding specific activities and beneficiaries(e.g.,skills d

244、evelopment,womens empowerment,traditional SMEs,etc.).However,some startups in the edtech and agritech sectors(e.g.,Nebula,Agronavti)have been able to find an overlap between their business goals and the objectives of these grant programs and thus secure funding.However,such cases are the exception r

245、ather than the rule.Donors usually refrain from investing equity in startups because it may be against their guidelines or require more resources than they have.In addition,direct social impact is often difficult to measure in technology startups,especially in a short time frame as required by the g

246、rant program.The risk and novelty of startups also contribute to international donors reluctance to fund startups directly.Overview of Georgias TechnologyEcosystem21Crowdfunding and Peer-to-Peer LendingPeer-to-peer lending and crowdfunding are still very new to Georgias entrepreneurial scene.Orbelia

247、ni,a local nonprofit organization,offers social and entrepreneurial initiatives the means to raise money through its online platform.Orbeliani not only provides a digital platform where all amounts donated by individuals are visible,but also matches the funds and becomes an investor itself.Fundraise

248、r.ge is another new crowdfunding platform.Despite some examples and transactions in recent years,these methods are not yet widespread,scalable,or sustainable.Most crowdfunding projects are for social community initiatives rather than for-profit tech startups.None of the founders interviewed had used

249、 crowdfunding before,and many lack even an understanding of the technical and legal details involved,especially when it involves equity crowdfunding.International crowdfunding platforms such as Kickstarter,Indiegogo,or GoFundMe do not allow account registration from Georgia.Georgia lacks a clear tax

250、 and legal framework to determine what crowdfunding is and how intermediary online platforms or organizations managing peer-to-peer lending and crowdfunding should be treated,although some legislative changes are in the works.Furthermore,stakeholders attribute the low adoption of such practices to a

251、 lack of trust,awareness,and interest in them.In Georgia,most crowdfunding processes are empathy-driven,and there is not much interest in equity investment in private businesses.Even when crowdfunding is used,the funds generated are too small to develop prototypes,especially for resource-and innovat

252、ion-intensive initiatives such as cleantech.There is a clear lack of legal framework and awareness of crowdfunding and peer-to-peer lending in Georgia,and it can be difficult to integrate and use international platforms locally.Personal Savings,Friends,and FamilyBootstrappingusing ones own financial

253、(and human)resources to develop a minimum viable productis very rare among the startups interviewed(BioDiesel and SchoolBook are exceptions).The savings habit is not very strong in Georgia,as 84%of people do not typically set aside money from their salary each month.Low income discourages 70%of the

254、population from saving(ACT Research 2011).As a result,it is not common to ask family and friends for money.Nevertheless,employees in the technology sector earn high salaries compared with the national average.In addition,people who work in outsourcing receive a competitive international salary that

255、allows them to save money.Founders in Georgia may not invest a large portion of their personal funds in startups,but they Georgias Emerging Ecosystem for Technology Startups22pay for startup costs from the salary they earn at their current jobs.While this approach sounds convenient,it hinders the fo

256、unders ability to fully commit to the startup as they are simultaneously working a regular job.GITA grants,for example,are not generous enough to invest in software and customer development while paying the founders salary.Market CharacteristicsOverall ReviewStartups primarily focus on developing in

257、novative solutions that fill a gap in an existing market or create a new market.Georgia is often described as a small consumer market due to its population(3.7 million people)and GDP per capita of around$4,000.12 For technology startups,small local customer segments further filtered by limited digit

258、al adoption levels and weak purchasing power lead to a small potential market.StartupBlink,the global startup ecosystem mapping and research center,places Georgia in the bottom 30 of 100 countries based on ecosystem quantity,startup quality,and business environment.Among other limitations,StartupBli

259、nk considers the small market size as a challenge for local startups(StartupBlink 2022).However,globalization and the emergence of digital systems that span national borders provide opportunities for startups to expand their market.The world is open for business,and startups are not limited to their

260、 domestic market.Most successful startups were designed with a scalable business model in mind.This opens new opportunities for startups from small countries like Georgia.Stakeholders mention that Georgia could be a convenient launching ground for both domestic and international startup founders loo

261、king to serve global markets.The general business climate is comfortable.There are significant tax benefits for technology companies serving markets outside Georgia,and tech labor is more affordable than in Europe.Georgias strategic location at the crossroads of Europe,Asia,and the Middle East is al

262、so an important opportunity to exploit.In this regard,some of the local startups(mainly in fintech)have already expanded to Central Asia(e.g.,Uzbekistan)and Eastern Europe(e.g.,Ukraine,Estonia).Lingwing is simultaneously operating in Georgia,Armenia,and Bangladesh,with plans to expand to the US and

263、the United Kingdom.BioChimPharm already sells in eight countries of the Commonwealth of Independent States,including Armenia,Azerbaijan,Kazakhstan,Moldova,and the Russian Federation.12 World Bank.World Development Indicators.GDP per capita(current US$)Georgia.Overview of Georgias TechnologyEcosystem

264、23Georgia joined a number of free trade agreements(FTAs),including theDeep and Comprehensive Free Trade Agreement with the EU in 2014,which opened unprecedented access to markets and led to reforms in areas such as standardization,accreditation,technical regulations,and dispute settlement.In 2018,a

265、bilateral FTA was signed with the Peoples Republic of China(PRC).Georgia achieved a trade intensity of 122%of GDP in 2018,well above neighboring Trkiye(60%)and the Russian Federation(52%)(UNECE 2020).While FTAs are becoming more common for Georgia,they still tend to focus on traditional industries.A

266、ccording to the interviews,global expansion is not an integral part of the strategy of Georgian startups in the four sectors studied.The reasons for this are a general lack of product maturityproducts based on local aspects of the Georgian market need to be heavily modified to capture the characteri

267、stics of other markets(e.g.,language,institutional differences in education and healthcare systems)and a lack of confidence,know-how,and international connections among founders.Understanding the dynamics of foreign markets is critical.Founders planning to expand outside Georgia may have a general i

268、dea of where the potential demand might be,but may lack in-depth understanding of the market,so they are unable to develop an appropriate strategy for market penetration.Startups thinking about scaling up tend to have one of two geographic orientations:(i)toward countries with similar socioeconomic

269、contexts,such as nearby former Soviet Union states like Armenia,Uzbekistan,Kazakhstan,and the Baltic states;or(ii)toward the US.Expanding the operations of a startup that produces hardware or other tangible products requires more resources than digital startups.This is especially critical for agrite

270、ch and cleantech startups(e.g.,SpaceFarms,Enovus,BioDiesel).There is also a general feeling that“Made in Georgia”products do not represent quality or trust among consumers and businesses in Europe and the US.To grow,we need to produce the product somewhere else,for example,partner with a commercial

271、lab in the US that could do it.(Murman Pataraia,cofounder and CEO of BioDiesel)Georgian startups have the opportunity to expand and integrate into neighboring or global markets,but they need support from the government as well as private investors,consulting firms,and the Georgian diaspora.Support c

272、an take the form of lowering barriers to entry and empowering local startups with market research,strategies for global expansion,and access to relevant professional networks andmentors.Georgias Emerging Ecosystem for Technology Startups24There was a case where GITA organized a trip to Silicon Valle

273、y for selected technology startups and significantly impacted the growth of at least one participant.AI startup Pulsar recruited a US-based cofounder who helped the company identify an important gap in the automobile sales industry,based on which Pulsar developed new software.The startup was later a

274、cquired by Spincar,a major player in the US automobile industry.It was the first international exit of a Georgia-born startup(Investor.ge 2021b).GITA has also organized study visits to Israel,Italy,and Poland in collaboration with diplomatic and technology partners in those countries.An interesting

275、new player in the ecosystem is Globalize,a private company operating since March 2022.It promotes Georgian products and services in global markets and helps startups to enter new markets.Globalize initially brought together Georgian professionals in 12 countries13 to share their knowledge and experi

276、ence with startups and exporters.This brings together more than 6,000 Georgian startup supporters outside the country.Currently,the country associations and their Georgian diaspora provide startups with various services such as market research,legal services,local partner search,investor outreach,gl

277、obal marketing and branding,market entry strategies,etc.In addition,Globalize has partner communication agencies in more than 50 countries that can help startups with marketing and communication in new markets.Another important activity of Globalize is organizing conferences and workshops for startu

278、ps in different countries,where they can make new contacts with representatives of the diaspora and present their startup to local investors.One conference is planned per quarter.Globalize cooperates with the private sector in Georgia(Bank of Georgia,Business and Technology University,Nexia TA)and t

279、he government(GITA)in the implementation of its activities.Moreover,Globalize funds its activities through annual membership fees for startups and exporters using its services.“Many interesting projects and startup ideas appear in the market;however,we have a lot of work to do in terms of developing

280、 a global vision so that ideas are properly integrated into international markets and startups are able to expand and adjust to new customer segments.There are many factors to consider,such as a lack of reliable partners and connections,legal issues and bureaucracy,lack of resources on the ground,la

281、nguage and cultural barriers,ethnocentrism,etc.Globalize was created to overcome these obstacles and promote Georgian business to enter global markets,which will combine many necessary resources in one space to achieve success on the mentioned path.”(Salome Kukava,CEO of Globalize)13 The US,the Unit

282、ed Kingdom,Israel,Kazakhstan,Uzbekistan,Switzerland,France,Germany,Spain,Poland,Italy,and the United Arab Emirates.Overview of Georgias TechnologyEcosystem25Agritech,cleantech,edtech,and healthtech are growing industries worldwide,and Georgia could secure a position in them if its startups are prope

283、rly supported.Although there are not yet many startups in these four areas,Georgias technology scene is growing and various Software-as-a-Service(SaaS),AI,and fintech solutions are becoming available.Georgian startups could leverage existing expertise and adapt it to market needs,for example by usin

284、g AI in agriculture or fintech in education(e.g.,to pay tuition).The following sections discuss the local market characteristics of the four industries and their readiness for tech startups.AgritechAgriculture has traditionally been considered one of the cornerstones of the Georgian economy.About 40

285、%of the population lives in rural areas,and 39%of the countrys total workforce is engaged in agriculture(GEOSTAT 2014).However,the share of commercial farms in agricultural production remains low,as most farmers practice subsistence farming,sometimes with a small surplus for sale,and nearly 94%of ag

286、ricultural households own less than 2 hectares of land.Although a large part of the population is engaged in agriculture,it contributes only 8%to GDP.The government supports the sector significantly through various programs and funding.Government programs are mainly social in nature and do not aim t

287、o increase economic efficiency.In 20132019,the government spent GEL1.5 billion on agricultural development.During the same period,agricultural production grew by 1.5%annually,which was one-third of the growth rate of the overall economy(Transparency International Georgia 2020).Agriculture also enjoy

288、s the attention and support of international donors(such as USAID,the EU,and UNDP),which provide grants to nonprofit organizations and government partnerships.The sector is characterized by low labor productivity and efficiency.Some of the conditions contributing to this situation are the lack of kn

289、owledge and experience,the lack of an entrepreneurial mindset among farmers,the lack of innovation,and the gaps in value chains.Tamta Mamulaidze,CEO of Agronavti,said her company has started developing its product to address the evident needs in the agriculture sector by supporting farmers with an a

290、pp that can combine information and data with access to markets.However,there is resistance to adopting new technology,and digital literacy among the rural population is low.Client(farmer)skepticism is particularly difficult to overcome,as startups cannot yet show proof of concept in the early stage

291、s.Mamulaidze mentions that building a revenue model around an agritech product could also be a challenge,as potential customers are used to receiving services for free through grants or with government subsidies.Because farmers lack a commercial orientation,they are not interested in adopting new te

292、chnologies.Georgias Emerging Ecosystem for Technology Startups26In terms of agricultural enterprises,startups working on hardware solutions(e.g.,Farco)compete with large international players whose products are tested and proven,offer complementary services,and can be directly imported by these farm

293、ers and entrepreneurs,even if the price is higher.In this regard,Georgian agritech startups lack competitive advantages and product innovation.There is a need to rejuvenate the industry and attract young people.Vocational training in agriculture is gradually developing with the support of publicpriv

294、ate partnerships and international donors.For example,the Agricultural University of Georgia(whichwas renovated in 2012)is trying to provide the sector with a skilled workforce.However,there is still room for including technological education and know-how in the curriculum.Tamta Mamulaidze of Agrona

295、vti said that“a marriage of agricultural and technical knowledge is critical.”“Regardless of how well you work with tech and how entrepreneurial your mindset is,you need to have industry expertise and agronomic grounding to base business decisions on.”(Tamta Mamulaidze,CEO of Agronavti)While there a

296、re donor-funded programs and competitions to encourage young people to develop innovative solutions for agriculture,there are no venues for agritech enthusiasts to try and test new approaches,share knowledge,and develop prototypes.Furthermore,one-off projects and competitions do not support the deve

297、lopment of startups,as they are short-term,mostly student-focused activities that do not provide significant financial or technical support for startups.Efforts need to be scaled-up and diversified to address different needs at different startup stages beyond ideation,including providing funding and

298、 capacity building.Finally,the meaning of the word“agriculture”in Georgian may reduce young peoples interest in the sector.The word means“village work”or“village production.”This meaning limits understanding of what agriculture or agritech might be and where it is practiced.While many startup founde

299、rs and other industry advocates use the words“agro”or“agro-production”as alternatives,the original meaning is commonly used(even in the name of the Ministry of Agriculture).Tusia Gharibashvili,cofounder of SpaceFarms and founder of Spots modular farming,an automated vertical urban farm,believes that

300、 such subtle details shape societys understanding of the industry and create a misconception,especially among the younger generation,that agricultural activities take place only in villages,where there is a traditional lack of innovation or technological development.Overall,there is significant pote

301、ntial to modernize the sector through the introduction of new technologies,while creating opportunities for startups to experiment with and introduce new approaches to farming.In other countries,Overview of Georgias TechnologyEcosystem27innovative approaches such as automated farming systems,vertica

302、l farming,and aeroponics are important innovations that Georgian startups could introduce or develop.Currently,there is a lack of support for agritech(e.g.,lack of tailored programs and funding for startups or incentives for farmers to adopt technologies offered by startups).However,there are positi

303、ve developments as more initiatives are being introduced to get young people interested in agritech through ideation competitions and hackathons run by local organizations such as the Georgian Farmers Association,Impact Hub Tbilisi,and Startup Bro,which are supported mainly by international donors,i

304、ncluding UNDP and USAID.While these programs are increasing interest and awareness in the agritech sector as a whole,it is too early to tell how sustainable or effective these small and unique initiatives will be and whether they could actually help agritech startups emerge and grow.EdtechThere is a

305、 growing demand for new and engaging ways to deliver education,including gamification,AI components,and multimedia programs for self-learning.More and more children are growing up as digital citizens,and with their parents,are looking for useful and safe online activities.Nationwide,there are more t

306、han 2,300 accredited general education schools(grades 112),91%of which are government-run.The number of students in these grades is about 624,500.14 The number of government-owned universities is 101,and there are also 58 private universities.The number of university students in various programs and

307、 degrees is 76,000 at public universities and 21,000 at private universities.15 The governments educational management information system oversees the use of digital tools by government schools in teaching.Although administrators and educators at public schools and universities have the option of us

308、ing additional tools,they do not have control over their institutions digital infrastructure and base software,which is determined by the Ministry of Education and Science.Private institutions,on the other hand,determine their own digital infrastructure and use of tools.Since the government is a maj

309、or provider and developer of technology solutions,itposes a challenge to edtech startups offering products for school administrators,teachers,or students.The government usually approves and supplies international brands(e.g.,Microsoft,Zoom,Moodle)or provides custom solutions developed internally at

310、the educational management information system.The startups 14 National Statistics Office of Georgia(GEOSTAT).General Education Statistics.15 GEOSTAT.Higher Education Statistics.Georgias Emerging Ecosystem for Technology Startups28interviewed mentioned that even when tenders are announced,they are no

311、t designed to support startups,but are mostly tailored to typical software development companies that view this as a one-time software development order that does not result in the creation of a stand-alone project for wide market sale.SchoolBook,for example,was the first learning management system

312、for general education schools in Georgia when it was established in 2013.It currently serves about 100 private schools.It also served more than 20 public schools(with an increasing trend)but had to terminate partnerships as the government decided to offer schools its own platform developed by anothe

313、r company.According to Irakli Kashibadze,founder of edtech startup GoandGrow and former head of GITA,the education market for digital solutions should be democratized and open tostartups.“Similar to the way the banking sector has given space to fintech startups to emerge and use existing resources,t

314、he education sector should also be welcoming to startups.”(Irakli Kashibadze,founder of GoandGrow)Most edtech platforms in Georgia are tailored to the domestic education system.It is sometimes difficult for startups to adapt because education reforms are frequent and unpredictable,making their valid

315、ated products or business models outdated.Furthermore,most startups are designed for Georgian-speaking users,and translating products into other languages for use outside the country requires significant investment and adaptation.Platforms designed for schoolchildren must be based on the purchasing

316、power and willingness of parents to sign up for them.In Georgia,parents are not accustomed to paying for digital education services.For example,they are more willing to pay for a personal tutor than an AI-powered digital learning assistant.Despite the challenges described above,the coronavirus disea

317、se(COVID-19)pandemic has accelerated the adoption of digital tools by educators,educational institutions,students,and parents in Georgia.Private schools and universities in Georgia have been more likely to adopt new technologies and are not constrained by government procurement or other guidelines.C

318、ompared with public schools,which are free to students,tuition-based institutions have a greater incentive to improve learning by offering students a quality learning experience.The government could be a key player in encouraging the adoption of edtech products,as it operates most of the schools in

319、the country.In addition,Georgian startups do not have to limit themselves to the domestic market but can target foreign markets.Edtech startups can cover a wide range of teaching,learning,and administrative functions.EduPay,for example,is a Georgian fintech platform for Overview of Georgias Technolo

320、gyEcosystem29educational and other institutions that helps both administrators and students(ortheir parents)pay,receive,and manage tuition.The company was launched in 2021 and currently serves a dozen institutions,including private schools and sportsclubs.CleantechMany of the worlds most successful

321、startups are in the software business.Such startups often use software to replace labor and thereby generate cost savings for their clients.In contrast,cleantech companies develop solutions that initially come at a high cost to their clients(because the solutions help clients adhere to environmental

322、 regulations).Cleantech startups are not typical garage-based initiatives and require far more industry expertise,time,and patient capital than digital-based startups.According to a recent report by Startup Genome(2022),cleantech startups may face significant barriers in global markets,compete with

323、large companies,and deal with complicated legal and environmental regulations.Over the years,venture capitalists or large corporations have invested heavily in cleantech,and the field continues to gain traction as environmental awareness increases worldwide.The biggest challenge for cleantech startu

324、ps is scale-up.Globally,cleantech companies take the most time to move through stages of funding,with the average company taking 3.8 years to reach Series A and 5.5 years to reach Series B fundingalmost 8 months and 11 months longer,respectively,than the average tech startup(Startup Genome 2022).In

325、Georgia,the cleantech sector is the least developed of the four sectors.Environmental issues are not a high priority for the country,and there is no targeted support for cleantech startups.Available support is focused on large infrastructure projects and large,established companies.Globally,there is

326、 growing interest in the transition to green and clean energy.However,in Georgia,there is a lack of overall cleantech awareness and expertise.Consumer behavior and preferences are generally not focused on clean energy and environmental solutions.Some cleantech experts point out that demand-side poli

327、cies are needed to promote the industry.Additionally,venture capitalists,governments,and development foundations should join forces to provide larger and more patient capital options for cleantech startups.Global expertise could be matched with potential Georgian founders in the cleantech sector(Sta

328、rtup Genome 2022).One of the most advanced cleantech companies in the country is BIOCURE.Its patented technology is used to isolate indigenous,oil-oxidizing bacterial cultures from spill sites.The companys technology is based on scientific research and experimentation that began in the 1990s.Only si

329、nce 2017 has the company taken steps to advance its commercial growth.Similar to cleantech startups in other Georgias Emerging Ecosystem for Technology Startups30countries,BIOCUREs challenge is scaling up.Its operations must be tailored to the characteristics of each spill site and requires a large

330、amount of labor.Its team is constantly looking for operational processes that can be replicated in other countries and a partnership model to expand operations globally.BioDiesel is a startup that produces environmentally friendly fuel from new and used cooking oil.Its biodiesel plant has processed

331、nearly 1 million liters of used cooking oil and produced more than 500 tons of clean biodiesel that is in demand in Europe.CEO Murman Pertaia said the company was able to sell 99%of its output to EU countries during the pandemic.“We have strong partners in the Netherlands,Bulgaria,and Portugal,”he s

332、aid.Other startups such as Eco-Taxi(online platform to order pickup of recyclable materials from homes or offices)and Enovus(installation of clean energy solutions for residential or corporate buildings),are working with individual and corporate customers to change behavior toward recycling and gree

333、n energy.However,none of these companies has developed a unique product that could be scaled up globally.HealthtechThe global market for healthtech is growing and is expected to reach$660billion by 2025(Statista 2022).The pandemic and consequent restrictions for physical interaction have led more healthcare providers and patients to shift to telemedicine,which is the use of technology to deliver c