Image credit Ibrahim Boran
In 2025, the Central and Eastern European startup and VC ecosystem stands at a pivotal crossroads, where resilience meets innovation. As sustainability initiatives reshape industries and AI evolves from buzzword to business backbone, the region is poised to unlock groundbreaking opportunities in green tech, defense, and deep tech. Yet, challenges loom, as venture capital funding in CEE experienced a general decline in 2024, according to multiple reports. The economic pressures demand a shift from growth-at-all-costs to profitability-first strategies, while late-stage funding bottlenecks test even the most promising ventures.
Will the CEE region rise to the occasion and redefine its place on the global startup map? AIN talked to experienced regional VC partners and experts to uncover the major trends, shifts, challenges, and opportunities shaping the future of one of the world’s most dynamic innovation hubs in the world.
Our experts were:
-
Tomasz Czaplińsk, Managing Partner at SpeedUp Venture Capital Group;
-
Reima Linnanvirta, Partner at Trind VC;
-
Lucie Bresova, Partner at Presto Ventures;
-
Tülin Tokatli, CEO & Founder of Pitch Me First, who leverages her European Investment Fund experience to collaborate with VC funds on Limited Partner acquisition.
Key trends to expect from CEE startup and VC ecosystem in 2025
-
Larger focus on Sustainability and green tech
The CEE region’s green tech sector, driven by EU Green Deal funding and sustainability initiatives, is emerging as a key focus for many investors, with opportunities in renewable energy, carbon capture, sustainable logistics, and AI-powered climate solutions, despite many regulatory challenges and the need for compliance pathways.
-
Continued interest in Defense and Dual-Use technologies
The unfortunate global geopolitical situation, caused by russia's war against Ukraine and acts of aggression against other European countries, determines the defense tech sector to only gain traction.
The geopolitical tensions will also sustain interest in dual-use solutions, particularly in areas like drone technology, autonomous defense tools, and AI-driven surveillance systems. Startups offering solutions applicable to both military and civilian markets are well-positioned to benefit from both public and private funding.
AIN is actively working on our Defense Tech guidebook where you can find everything about the Ukrainian Defense Tech sector.
-
Dominance of AI with bigger focus on niche solutions
The Artificial Intelligence sector will undoubtedly continue to grow and attract substantial financing. However, many experts predict a shift of focus towards these solutions.
As the commonly available solutions from industry leaders like OpenAI, Google, Meta, or Mistral AI are getting better and better, new AI startups need to move from generic solutions into specific niches with clear competitive edge.
-
Shift towards unit economics, profitability, and challenges in late-stage funding
More and more, investors are prioritizing startups with strong financial metrics (e.g., CAC, LTV) and clear paths to profitability over rapid scaling. This trend will continue in 2025.
“Investors will focus more on startups with strong unit economics, predictable revenue streams, and long-term sustainability. The current lack of available capital necessitates prioritizing profitability over rapid scaling, avoiding dependence on frequent fundraising,” Tomasz Czapliński said.
The late-stage funding will become more selective with stricter terms and heightened scrutiny of key performance metrics such as ARR and customer acquisition cost. This will likely cause these deals to remain scarce, especially from foreign VCs, pushing founders to focus on early-stage funding and alternative sources like venture debt.
“Later-stage investments in CEE are impacted by the reduced investment activity of foreign venture capital funds. CEE is an edge market from the US point of view, and the edge markets are the first ones to suffer when the capital becomes more bearish,” Reima Linnanvirta stated.
-
Cross-Border collaboration and nearshoring
The region's cost efficiency and strategic location will continue to position it as a nearshoring (outsourcing from nearby countries) hub, particularly in logistics and supply chain management.
“Cross-border collaborations are expected to gain momentum as startups in the region capitalize on their cost-effectiveness and technical expertise to establish partnerships across the EU and expand into global markets,” Tülin Tokatli stated.
-
Market recovery fueled by potential unicorn exit
The current dip in funding is seen as a temporary reset after the market overheated during previous years, with expectations of recovery in the second half of 2025 as IPOs and exits gain momentum.
“This is likely a temporary setback. With new funds emerging and public FoF initiatives (like those from EIF and the Polish Development Fund) expected to roll out, accessing financing in 2025 should become easier, particularly for startups with proven potential,” Tomasz Czapliński stated.
Reima Linnanvirta made an interesting supposition regarding the future market recovery, attributing it to a potential unicorn exit in the region:
“One event that could make a huge impact for the CEE ecosystem in 2025, would be to see a notable unicorn exit, or two, in the region, bringing in both capital as well as drawing the attention of the international investors.”
What major advantages or challenges will the CEE founders face in 2025 compared to other markets?
Advantages:
-
Cost efficiency and access to top tech talent and a knack for frugal innovation.
-
Availability of EU non-dilutive funding.
-
Nearshoring opportunities stemming from global supply chain reconfiguration.
Challenges:
-
Retaining top talent, as the rise of global remote work continues to intensify competition for skilled professionals.
-
Limited access to late-stage capital.
-
Increasing regulatory fragmentation within the European market, which will make it harder to break free from the EU bureaucracy
How can startup founders grow their businesses? — advice from investors
So how can the troubled startup founders grow their businesses in spite of these challenges? Experts advise to focus on the essentials: what does the customer really need, and what are they willing to carve out money for in their budget?
-
Focus heavily on capital efficiency, profitability, and sustainable growth.
-
Optimize customer acquisition costs (CAC) and lifetime value (LTV) to demonstrate financial stability.
-
Consider diversifying revenue streams by monetizing existing products or entering adjacent markets.
-
Start diversifying your funding sources — look into venture debt or non-dilutive grants to reduce dependence on traditional VC funding.
-
Don’t overlook the power of global talent and partnerships. Expanding beyond CEE markets can open doors to new opportunities and help scale your business effectively.
Above all, prioritize cash flow — “cash is the king” in times of uncertainty.
Greatest lessons from 2024 and boldest prediction for 2025
Tomasz Czapliński
Lesson: In 2024, over $1.3 billion was invested in CEE tech startups, heavily directed toward AI and HealthTech. However, a key lesson is the importance of transitioning from theoretical models to practical, revenue-generating applications that solve real problems. Investors will now expect startups to demonstrate clear market impact and profitability.
Prediction: CEE will emerge as the epicenter for AI regulation-compliance technologies, driven by the EU’s strict AI Act enforcement. While this will position the region as a leader in compliance tech, it could stifle broader innovation as startups grapple with the cost and complexity of adhering to stringent regulations.
Lucie Bresova
Lesson: Everyone learned that slapping ‘AI’ on their pitch deck isn’t going to cut it; we need AI that actually creates or saves money. This 2024 wake-up call means more serious, specialized bets in 2025.
Prediction: Our crystal ball says that a CEE-based deeptech startup will crack the code on hyper-automation – collapsing entire supply chain cycles from weeks to days – and become the region’s next unicorn practically overnight.