Startups on the move – to Georgia

Georgia is increasingly positioning itself as a hub for startups and digital businesses looking for a welcoming business environment and links to Western capital and markets.

Georgia’s open door policy means the citizens of almost 100 countries can come and play with no visa. Or work. Or found companies. And the country’s welcoming business environment and budding start-up ecosystem is encouraging them to do just that. Investor.ge talked to three such startups who plan to grow great companies from Georgia.

Extra Mile Technologies

As the world mobilizes to stop climate change, technologies to reduce greenhouse gas emissions are ever more valuable. VC investment in climate tech exceeded $40 billion in 2021, with Q4 tripling the investment year over year, Climate Tech VC reports.

Georgia has not shown leadership in this climate innovation but is now playing host to one technology which is a key step in that direction. Azerbaijani scientist Elmar Asgarzade discovered a breakthrough in oil chemistry which reduces friction in engines by over 30%. His startup, ThermoNorth, has relocated from Baku to Tbilisi, rebranding as Extra Mile Technologies (EMT). His vision is not just to commercialize one breakthrough technology but to work toward a research center for green technologies.

Extra Mile Technologies’ breakthrough is using ionic molecular forces to reduce friction in engines. These forces can be thought of like magnets repelling each other. So rather than coating engine parts, their solution reduces friction with ionic repulsion. This can lower engine friction by 30%, which translates into 5% gains in fuel efficiency and less CO2 emissions. The additive can also extend engine life and reduce wear and tear, and could be applicable to other green fuels such as methanol and hydrogen.

While the technology is broadly applicable in transport, wind energy, and industrial uses, it is especially interesting for the maritime industry. “Long-distance shipping is very difficult to decarbonize”, founder Asgarzade told Investor.ge, “Electrifying long-distance shipping is not feasible and capital expenses are huge in transitioning to new fuels.”

This frictionless path to decarbonization is important because the maritime shipping industry is responsible for roughly 3% of global GHGs; that’s more than airplanes. The International Maritime Organization has come under global pressure in recent years to lower emissions in an industry where the task has proven frustratingly elusive.

Extra Mile Technologies could mean enormous GHG reductions for the industry, not to mention financial savings on fuel and maintenance. The company indicates its tech is outperforming everything else in the world “at a price point that’s a third or a quarter as much as competing products. If that holds up as we expect it to, that will be a really significant development”, Asgarzade told Investor.ge.

He lists the numerous reasons the company has decided to dock in Georgia: “There’s really a lot that has brought us here. The startup community is active and we were connected with Colin and his team. Georgia’s connections with US and Europe make it good to reach customers and funding there. The free trade agreement with Europe opens up good export potential there as we look at manufacturing”, he says, adding that the ease of setting up a business in Georgia has also been a great draw. “Here, you get your tax number and away you go. In Azerbaijan, there is a lot of paperwork, and it consumes a lot of time.”

The four-person team, which will include in its ranks AmCham board member and startup advisor Colin Donohue as acting CEO and two additional scientists. Immediately Donohue is focusing now on the Horizon Europe Accelerator grant – part of the EU’s $500 billion ‘Green Deal’. The Accelerator Program offers 2.5 million euros in equity-free grant funding plus investment of up to 15 million euros.

“Extra Mile was accepted to the Maritime Climate Accelerator run under the European Institute for Innovation and Technology and is now eligible for a ‘fast track’ into Horizon Europe.

We are one of 20 companies granted special status to skip the first stage of application and apply directly into phase two.” EMT would not be eligible for this European grant competition in Azerbaijan so moving to Georgia has already opened doors.

Elmar’s company already has experienced recognition and comes to Georgia having won international competitions and over $100,000 worth or equity-free prizes.

The company won the status Deep Tech Pioneer by Hello Tomorrow, and Elmar even was brought to the US, to be accelerated in Houston, as a winner of the Global Innovation in Science and Technology competition supported by US Department of State and major US startup and technology players.

EMT’s move to Georgia may also serve as an interesting test case for whether Georgia can serve as a hub for IP commercialization, Donohue says.

“Countries of the post-Soviet space generally do not have strong IP commercialization systems, which means there’s a lot of research that’s out there that has never seen the light of the market. So if we can demonstrate – here’s a brilliant piece of technology that just needs some support, we can help spur the development of an environment that would facilitate the entry of local research into global markets, and Georgia stands to be a bridge between these somewhat isolated markets and Western capital market systems”, Donohue comments.

Theneo

Theneo is a fairly young startup that has already made a big splash both at home and abroad. And it started from a pain point that not many have had or will have even heard of: bad API documentation. Simply put, APIs (application programming interfaces) are a set of instructions used by developers and computers alike to bridge systems built on different platforms. More simply put – a dictionary for apps ‘speaking’ different languages.

“Some people find this API stuff boring, but we’re obsessed with it”, founder Ana Robkadize says. And there’s good reason to be: APIs are important because they’re not just read by developers. They’re read by sales teams, CEOs, and other individuals who need to know what an app or system can do, and to see if it’s integrable into other systems.

“That’s why it’s so important for API documentation to be written not only for developers, but for everyone. And at Theneo, that’s what we’re trying to do: create beautiful, interactive and accessible APIs for companies that likely don’t have the unlimited resources available to tech giants”, Robakidze says.

The concept behind Theneo arose out of necessity, Robakidze says, who has worked on more than 200 APIs. She and co-founder Maria Doliashvili, a Ph.D. student in computer science who has left her job as a machine learning engineer at Microsoft to work full time on Theneo, said they both had found it very frustrating to work with low-quality API documentation tools.

“We thought – how much time and energy could we save if there was a platform that could help us quickly generate high-quality API documentation while also allowing us to maintain it efficiently? And that’s how Theneo was born.”

The duo first built the platform as a side project. Friends then asked them to make it available as an online platform. They realized then that Theneo had a lot of promise, and released a beta version in August of 2021. Within two months, Theneo had more than 1,000 companies and developers.

At this point, Robakidze says, she hadn’t done any market research – she simply happened to land straight on what turned out to be an enormous pain point.

API documentation is tricky because what computer engineers bring to the table with their computer-whispering skills, they often lack with people:

“Engineers, we’re awful writers. We sometimes don’t even know how to write about the things we created ourselves. And it’s expensive to hire teams to do so. So that’s the gap that Theneo wants to fill.”

Theneo’s product not only suggests documentation for a given platform – it recommends changes as your system evolves.

Financial backing and product recognition for the project has come in quickly: first a prize from GITA, then as the winners of the 2021 Apps Challenges and then finalists in the TBC annual Business Award 2021 in the category of the year’s most innovative startup.

Theneo also raised considerable resources in pre-seed funding, including from investors in Georgia. Despite the fact that the managerial team will be based out of the US, Theneo’s leaders want to retain its current developer presence in Georgia, and perhaps expand it.

“We definitely want to have developers here as much as possible. This is important to us because I remember when I was living in Georgia, I wished there were more opportunities for me. Much of the raw talent unfortunately moves either to Europe or the US. I feel like if we can give tech workers the great work experience and a lifestyle similar to what they could expect working in a foreign company, the likelihood increases that talented individuals will be more amenable to working in a Georgian company, living here, and contributing to society”, Robakidze says.

iCorn

Among those considering expanding into Georgia is Ukrainian startup iCORN.

iCORN, a grain trading and logistics platform, aims to eliminate inefficiencies in grain markets by “cutting out the middleman and revolutionizing the way farmers and buyers do business”, company CEO Stan Kuflik says.

The platform will incorporate digital solutions to the entire supply chain process of grain trading, including online auctions that unify quality standards; smart contracts that guarantee payments and penalize contract breaches; a logistics system that locates service companies, and; an electronic document management system that adapts to any state system.

In the words of its CTO Viktor Nesterenko, iCORN is “about more than just logistics or agriculture. It is really a whole new financial tool that aims to decrease risks for buyers and farmers, lower the cost and time of delivering grains, and guarantee higher quality standards.”

Nesterenko, who is currently based in Poland, plans to move part of the company’s operations to Tbilisi in the spring of 2022.

As the chief technical officer of the company, he says Georgia’s talent pool is a big draw for him: “It is getting very expensive to hire developers in Ukraine because of how developed the tech sector has become. In Georgia, the cost of hiring developers is much more attractive. But more important than money is attitude. You cannot buy an attitude. In Georgia, the developers I’ve met are willing to work hard and are hungry to achieve something.”

In addition to a workforce that Nesterenko sees as more “employable,” iCORN’s CTO says that Tbilisi offers just the right balance of opportunity and innovation for tech startups.

“When looking for a place to develop, you want an environment where things are not perfect but where you see a lot of growth happening. For instance, in Georgia, you have a government that is very supportive of business. You have great tax incentives. An emerging tech scene. All of these factors make it an attractive place to move to.”

Open doors for all? Startup economies depend on foreign founders

While many startups are making the move to Georgia successfully, some are leaving with a sour taste in the mouth. Startups and tech companies coming to Georgia from Iran, Pakistan and other locations have faced challenges. A recent example of a team from Lebanon has attracted attention.

“I was visited by a very dynamic founder from Lebanon. He had an app that was very fast growing in user base, a solid technical team and a vision for growing his company very large. I encouraged him to move the team to Georgia as a place to grow his company in a safe and calm environment instead of Beirut”, Donohue recounts.

Having secured venture capital from a British VC firm and other investors, the team was on its way to Georgia to grow the company.

“But soon after, the CEO contacted me and said they were moving away to Istanbul. Their cofounder had gone to a business meeting in Istanbul, and was denied entry back to Georgia. He cannot even get back in to terminate the lease on his apartment and collect his things.”

This example illustrates why it is so important for Georgia to be committed to a consistent and clear policy when it comes to startups and the country’s business environment, Donohue says. “It’s great to have a visa-free regime but it is not creating the clarity businesses need. It’s better to have a startup visa where founders are screened before-hand and then can come and go freely without surprises”.

Startup economies depend on founders for the influx of new ideas and experience. While people think of America as the land of startup ‘unicorns’ [ed. billion-dollar private companies], it’s more of a melting pot of global founders and technical talent. Nearly half of all “unicorn” companies [ed. 44%] are founded by immigrants, such as Space X by South African Elon Musk, or Google co-founded by Russian-born Sergey Brin. Many of these iconic companies in the US exist because talented founders moved there from other places.

Even American-born founders like Steve Jobs and Jeff Bezos were children of immigrants (Syrian and Cuban), so a majority of founders are first or second generation immigrants.

“It is widely understood that attracting top talent from around the world is a key to being a top tech ecosystem. Indeed Silicon Valley had little going for it until it became ‘the place’ for brilliant technologists and entrepreneurs. Hopefully”, Donohue says, “Georgia can follow suit and make sure the doors remain open to all.”

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