Zagreb: "Zicer", where startups grow up

In 2017, "Zicer" was born in Zagreb, the Center for Innovation, a municipality space designed to develop and support innovative companies. Zicer is now home to about eighty companies and is the flagship of the city. We talked about it with director Frane Sesnic

Zicer is not what you expect to find in Zagreb. How come?

We have been around for five years, but many are still surprised when they come here. They tell us: “I didn't know this place existed!”. However, we are present in the media, the results are there and they can be seen (even abroad!). Perhaps, those who occupy the key positions, those who decide, do not yet see the great potential of this space. Still, the Zicer  model can expand nationally or even regionally. When we started, we had just a thousand square metres available, we hosted 5-10 start-ups, now there are almost a hundred. In five years, a hundred or so start-ups have gone through the Zicer. And our “Start-up Factory ”, our acceleration programme that creates businesses from the ideas of their founders, has seen the birth of 80 companies from scratch. A great result!

What is missing in Croatian society for other spaces like this to develop?

Croatia is going through a transition phase, which seems to have become a constant. One wonders from what and towards what we transit. First, the socialist legacy had an impact on entrepreneurship and our openness to world trends, then the privatisations of the 1990s had so many negative consequences on society – for example, they made entrepreneurship something unpleasant in the eyes of the people... It took ten years for doing business to become something normal, positive, for that approach to change. Here, at Zicer, we create a positive narrative, bring out positive stories, and give those with an innovative idea a chance for success and above all the ability to become sustainable. Obviously making Croatian companies competitive in the global market is not easy – this is a small country – but we do our share. Here come teams of a couple of people and they leave as companies with ten or more employees. Just a little while ago, a company with about thirty people came out.

You have been running Zicer for nine years now. What is the best story you have seen growing up in this incubator?

For me, all the companies we support are nice surprises. Every business, when it manages to stay alive, paying its salaries and maybe creating some jobs, is a nice surprise, a success, without necessarily having to be a unicorn (business worth a billion dollars, ed.). Being innovative, this is important. Hundreds of projects were born here, from healthcare to artificial intelligence, from electronics to the Internet of Things, from drones to software and sustainable shoes. Their markets range from Japan to the United States, in short, the whole world is the reference market for our start-ups. And as there are no easy-to-obtain funds in Croatia, these companies grow organically. This is the Croatian specificity, and for this reason the companies are solid, because they do not depend on non-repayable loans.

About financing. Here you help those who have an idea to found a business or support those who already have one. What funding can Croatian start-ups count on?

There are capital and non-repayable loans, which often need to be co-financed. In the last two or three years there have been more offers of funds that want to invest in start-ups, but the conditions they offer are often harsh, because there are still few funds in Croatia.

On the other hand, European funds are not suited to the needs of Croatian start-ups, which often do not meet the necessary requirements to access them. If you only have an idea and are looking for funds to start, it is impossible to get them. Usually the rule is that when a European call opens, you do not have the requisites to participate, if you have them then you need the liquidity to anticipate the expenditure, or a co-financing of 20-30% is required. The only option you have left is organic growth, but the risk is to run out of liquidity and have other problems, or there is crowdfunding, online fundraising, or even the search for direct lenders.

What about the banks? Do they understand the modus operandi of innovative start-ups?

My impression is that banks mainly present themselves for marketing, but in fact they are not ready to take risks. Even when they have guarantees, they remain very conservative, they are afraid of risks. I see that even outside Croatia, banks are not making major investments. But alternative means to banks are developing, also because rates and bank charges are often very high.

What financial instruments does Zicer offer?

First of all, Zicer accepts groups in different phases: some only have an idea, some already have a company, some have a company and a prototype... Depending on the case, we help find new markets, implement new technologies… the needs are different according to the phases. What we are famous for (and where we are strongest) is supporting the small ones, that is, those who have nothing but an idea and a vision. As far as financial instruments are concerned, we have set up a small fund of 1.5 million kuna (200,000 Euros) and we lend the necessary capital to start-ups that request it to move on to the next phase of their business. They are small sums, let's say around 200,000 kuna (27,000 Euros), but important for businesses. The interests are minimal and the access conditions are flexible. We are very proud of this tool because all participants have been able to repay the loan so far. We would like to develop it further, but we cannot do it alone.

How many people work at Zicer and how is it financed?

Zicer also controls Plavi ured  (an information point and resource centre for entrepreneurs, ed.) and we have a total of 27 employees. The budget is just over 10 million kuna per year, about half (6 million) is granted by the city of Zagreb, while the other half comes from projects and other activities. We participate in Interreg , Horizon  projects, and other national calls. The space in which Zicer is located today, as well as its workshops, were furnished five years ago thanks to European funds.

Do you cooperate with the Croatian government or with other hubs across the region?

It is difficult to propose things to the government. There is no continuity between one and another, each new government thinks it is better than the previous one. As for the collaborations with other hubs, yes, we collaborate with similar ones in Slovenia, in Austria, but also in India, in America. However, they are bilateral collaborations, then each centre works for itself. What is missing are strategic discussions, for example, on how to tackle a larger market together or on how to share technological innovations. At European level, there is the Digital green strategy but it is a vague concept, we should rather create ecosystems for creation... we do the best we can and with good results: everything that happens in Croatia, in terms of innovation, has some connection with Zicer, either because the mentors worked here, or because there was some kind of collaboration at some point.

What are your next goals? I know there was talk of an extension, but the project was then postponed.

Yes, the municipality has decided to postpone the expansion. There was a liquidity problem, with the pandemic, the earthquake... but we remain confident, the new administration is also looking positively at what we are doing here. Surviving the pandemic was not easy for us, nor for the start-ups. So in the short term our goal is to continue doing what we do, supporting businesses and connecting them with partners and investors. The companies that are born here will support the economy of tomorrow, and it is important that everyone finds their place on the market, in a sustainable way. There is no shortage of entry applications. This is a dynamic place and there is always a good turnover of companies coming and going.