Waiting too long to engage with investors, focusing solely on building their product without establishing early relationships with potential investors, approaching fundraising with unrealistic expectations, and lack of a well-defined go-to-market strategy – these are only a few of the mistakes that startups across the Western Balkans, or in this case Serbia, make on a regular basis, insights from Belgrade-based tech community Garaža’s Why Investors Say “No” 2024 report show.
Surge in angel investor activity
In 2024, Serbian startups raised nearly twice the amount of venture capital funding compared to the previous year, despite the number of transactions remaining unchanged. While 2023 marked the lowest funding year, the overall trend was consistent with other countries in the region.
Notably, angel investor activity in Serbia has increased significantly, leading to a rise in angel and pre-seed funding rounds. This represents a positive signal for early-stage startups. Additionally, the decline in bridge rounds suggests that startups have secured sufficient capital to sustain operations until their next funding stage.
Although the total number of transactions remained the same, the increase in total funding indicates growth in average round sizes, while the median round size has remained relatively the same. It’s important to note that 2021 saw several outlier investments in Tenderly, Nostra Finance, and Connect the Dots, which should be considered when analyzing the data.
The startup funding landscape in Serbia did not change much between 2023 and 2024, with most funding sources showing only minor fluctuations. Self-funding continues to be a dominant funding source, while grants remain the second most common one. The most notable change was in venture capital funding, which saw an increase from 8.4% to 13.4%, suggesting better investment readiness of Serbian startups.
The Serbian startups noted three shifts between 2023 and 2024, while other challenges remained in a similar range. Customer acquisition concerns increased (34.5% to 39.3%), while employment-related challenges decreased to 28.4% and team development fell to 11.4%. These changes suggest a shift in focus from team building to market expansion, though financing remains the consistent top challenge at around 60%.
“The number of investments in Serbia remained stable, but the total capital doubled, indicating growth in later-stage funding. Startups are more focused on sales, and there’s increased activity from angel investors. However, common issues like limited market validation, a local focus, and lack of ambition persist,” Milena Milić, manager at Garaža, tells IT Logs.
Common mistakes that Serbian startups make
Sales struggles aren’t the biggest traction issue – chasing the wrong early customers (outside the ICP) leads to weak product development and prevents long-term PMF.
Over-indexing on local and regional markets in the early stages is very common among Serbian startups. Lacking awareness of their competition, founders tend to build copycat products and, even though they have the necessary skills, fail to create real innovation. By not analyzing broader markets, they limit their scalability and attractiveness to investors. To tackle big problems, they should stay aware of global trends and develop a deep understanding of their industry.
Founders often underestimate the power of their network. To grow and better utilize their social capital, they should focus on improving their storytelling and networking skills. Those who ask the right questions to the right people gain valuable insights and unlock new opportunities continuously. The more they engage with global customers, investors, and peers, the more support and momentum they can build, the report adds.
Lack of fully committed founders
In Serbia, founders often don’t commit fully to working on their startup until they raise initial funding. And if you are not full-time in your startup, your chances of raising an investment are drastically reduced.
Lack of founder commitment can lead to limited accountability and confusion in the team. In the earliest stages of building a company, it’s common for founders to work part-time. However, when preparing for fundraising, all founders should transition to working full-time in their startup. This transition should be prefaced by validating that there is a market need for the product, the report says.
Investors have noticed that Serbian founders lack business skills. Most focus on technical aspects of product development, and business-oriented founders often don’t have enough domain expertise. If your team has a dominant technical background, it is commonly too focused on product development and lacks a dedicated business founder.
Teams like this struggle with effective decision-making, strategic planning, and the overall progress of their startup. The business side demands concentrated attention, so at least one founder should entirely focus on it and prioritize this commitment. Working with a mentor or a coach and learning from more experienced founders is a great way to gain startup-specific knowledge.
Startups tend to focus more on building the product than validating the need. Investors are unlikely to invest in ideas that lack proof of market need, because startups should research the market and get feedback from potential customers for the idea first, before writing any code, findings show.
Serbian startups also face the challenge of selling their products. Sales traction is tangible evidence of startup potential and an essential metric investors look into and track over time. Many founders in Serbia struggle to sell their products due to a lack of sales knowledge and product-founder fit, the report notes.
Furthermore, understanding market needs and competition is essential to create something people buy and use. Completing the 1.0 version of the product happens through selling it. Startups should heavily prioritize sales efforts over product development, and the founder needs to be the first salesperson on the team to get feedback and establish the sales process, the report highlights.
“Startups need to prioritize market research and customer feedback before product development, especially for tech founders prone to jumping into building. A global focus is essential for VC-backed growth. AI transforms the market by demanding strong distribution strategies and enabling smaller teams to achieve more. Success now relies on solving deep industry problems and executing effective go-to-market strategies.” Milić concludes.
