Central and Eastern Europe has gained 25 new digital champions in the last year, confirming the region's dynamic technological development. The valuation of the companies has also increased significantly, although it is still almost 20 per cent below the 2021 valuation peak. This year's Digital Champions CEE 2024 ranking of the 100 biggest tech companies shows that Poland has maintained its leadership position in terms of company value, with a share of more than 38% of total capitalisation. With the ongoing war in Ukraine, interest in security and cyber-security companies, as well as dual-use technologies, has increased significantly. Artificial intelligence is no longer just a fashionable buzzword and has become a key element of growth and transformation in many industries, creating new opportunities and challenges for digital champions in the region.
- Total value of phoenixes, dragons and wolves, the largest technology companies that are growing the CEE digital economy, has exceeded USD 106.95 billion. This is almost 5 per cent of CEE's GDP.
- In this year's edition of the Digital Champions CEE ranking, 25 companies debuted (3 phoenixes, 13 dragons, 7 wolves). Most new champions are Fintech (10) and SaaS (6).
- Poland remains the region's leader in terms of the value of companies, with a total capitalisation of USD 40.67 billion, representing 38.03% of the ranking. The highest valued champions are UiPath, Wise, Allegro, Inpost and Nord Security.
- Lithuania saw the largest increase in the number of champions in this year's ranking (up 60%).
The Digital Poland Foundation has prepared the Digital Champions CEE ranking for the third time. Its goal is to promote this part of Europe, create a platform for the exchange of experience between individual countries and encourage investment in technology companies in the CEE region. The ranking was created on the basis of transparent and up-to-date data and strict financial criteria.
The experts evaluated the value of the companies, taking into account current public market listings, market benchmarks, EBITDA ratios, as well as revenues. The champions included companies whose main source of profit is digital products and services or sales through digital customer outreach channels.
The ranking presents three categories of digital champions according to their value:
- Digital Phoenixes - 31 companies with valuations in excess of US$1bn
- Digital Dragons - 47 companies with a valuation of $250 million - $1 billion
- Digital Wolves - 22 companies with valuations between $100-250 million
The data and valuations on which the ranking is based are as at 31 December 2023.
Champion capitalisation and key categories
The combined capitalisation of the region's biggest technology companies has increased by as much as 40.78% in the last year. This is a significant leap that shows that the technology sector in Central and Eastern Europe is growing rapidly. Despite this large increase, the value of the companies is still 19.83% below the record valuations reached in 2021. This is due to a decline in the value of some companies, such as Romania's UiPath, whose valuation has decreased by almost USD 14 billion.
Polish e-commerce giants such as Allegro and InPost, and technology companies such as CD Projekt and Bolt were also heavily impacted by the reduction in valuations. In addition, Czech Avast, which was valued at more than USD 6 billion, was removed from the ranking after being acquired by another company.
– The digital economy in Central and Eastern Europe is now on a solid growth trajectory. This stabilisation has allowed digital leaders to reassert their positions and facilitated the emergence of several new champions. The valuation of the top 100 digital leaders in CEE has risen from USD 75.97 billion to USD 106.95 billion, demonstrating the strength of the private equity sector and the growing venture capital industry – states Karim Taga, Managing Partner, Head of Global Functional Practice, Arthur D. Little.
The ranking of the most valuable categories is dominated by e-commerce and SaaS companies, which together account for 62.80% of the total value of the top 100 technology companies in the CEE region. Companies operating in the SaaS model are as many as 28 in this year's ranking. Companies in the e-commerce and marketplace categories are also numerous, with 27. The largest growth of new companies was recorded in the cyber-security category. Their number increased by 25% to 5. This shows how important digital security is becoming in today's increasingly automated world.
Digital Champions CEE 2024
Poland maintains its leading position
Polish companies significantly increased their share in the total capitalisation of technology companies from 29.81% to 38.03%, which allowed Poland to once again take the first place in the ranking in terms of total company capitalisation. This achievement is a result of the dynamic development of the technology sector and the growing interest of global investors in Polish companies.
– I am thrilled to see that Poland is ranked first in terms of total capitalization of companies listed as Digital Champions. Poland has become a key player in the CEE fintech scene, and domestic companies have emerged as European leaders in their respective categories. This will surely help strengthen the perception of our country as a thriving innovation hub with an extraordinary talent pool. The valuation of fintech companies managed to outperform the record-high 2021 levels by nearly 23%. As finance management and investment topics have become mainstream, fintech companies are poised for growth in 2024 and beyond. We experience this also at XTB as our new products aimed at long-term investors coupled with educational activities bring exceptional results in terms of financial and operational performance – states Filip Kaczmarzyk, Head of Trading, XTB Board Member.
The leading positions in the Digital Champions CEE 2024 list are held by Estonia, Romania and the Czech Republic. The Baltic countries (Lithuania, Latvia, Estonia) have reduced their share of the ranking from 30.78% to 25.86%, due to Estonia's declining share (from 22.01% to 16.75%). The V4 region comprising the Czech Republic, Hungary, Poland and Slovakia accounts for as much as 52.74% of the total capitalisation. Poland (38.03%) and the Czech Republic (10.21%) have the largest share here. Slovakia has a marginal impact, accounting for just 1.3% of total capitalisation.
– One of the key long-term success factors is market liberalisation, structural reforms and growing domestic consumption. In addition, accession to the European Union has significantly strengthened the attractiveness of CEE markets to foreign investors, providing a stable legal framework and financial support in the form of funds, which has influenced regional development and improved infrastructure, creating a more favourable business environment. However, investors must carefully manage challenges such as political and geographical instability, regulatory complexities and, to some extent, infrastructure gaps. By understanding and addressing these factors, investors can take advantage of the promising prospects offered by CEE countries in terms of investment opportunities – comments Fabian Bohdziul, Head of M&A, mInvestment Banking, part of the mBank Group.
Champions intensity in countries
Although Estonia's share of the ranking is declining, the country consistently leads the list of countries with the highest intensity of champions per population. Despite its small population (1.35 million people), Estonia outperforms other countries in the region, thanks to favourable legislation, digitalisation and the government's positive attitude towards innovation. This results in many companies from the region registering their businesses in the country to seek funding there.
– Estonia is an excellent example of how a strategic approach to digitalisation and innovation can bring significant benefits. Thanks to its friendly regulatory environment and pro-innovation policies, the country has become a magnet for technology startups and investors. It is this approach that we should be implementing across the region to attract investment and support the development of digital champions - adds Piotr Mieczkowski, Managing Director, Digital Poland Foundation.
Decline in VC investment in startups
From 2015 to 2022, VC investment in startups in the CEE region increased more than 13 times. In 2023, however, there was a significant drop in fund activity, with the scale of investment falling by as much as 54%. At the same time, Europe was down 45% and North America 29%. Many investors are optimistically anticipating an increase in funding in 2024.
– We are seeing a shift among entrepreneurs who were previously employees of established technology companies and now want to build their own ventures. We believe that all of these factors will result in the emergence of a significant number of new technology companies in the coming years, especially in the later stages of development. This in turn will attract more international capital looking to boost the growth of these companies - we currently see a gap in funding for champions by international investors at the so-called growth stage, but this is largely due to an insufficient number of attractive technology companies being created locally. Overall, we are optimistic about the CEE technology space, and when we look back over the last decade, we see tremendous growth - we believe everything is in place to continue this growth trajectory – notes Michał Górecki, Senior Investment Partner, MCI Capital.
The strategic partner of this year's ranking is Arthur D. Little and XTB. MCI Capital, mInvestment Banking and PFR Ventures are also partners of the report. The honorary patron of Digital Champions CEE 2024 is the EBRD. The report can be downloaded from the Digital Poland Foundation website.
