When Milda Mitukte co-founded Vinted, a fashion resale marketplace, with Justas Janauskas in the Lithuanian capital, Vilnius, in 2008, the country’s startup scene was basically nonexistent.
“I call this Lithuania’s Wild Wild West,” Mitocute says. “There were like zero startups back then.”
Vinted was one of the first. In the beginning, it was run as a hobby project by Mitkute and Janauskas. The two had regular jobs and worked on Vinted on the side, with Janauskas doing all the web development on his own. Three years passed, during which the company launched sites in markets like Germany, but they still needed to hire their first developer. This position wasn’t easy to hire for, Mitkute says, as they felt embarrassed to admit they worked for a startup instead of a larger corporation.
Things are different now. Since becoming the first Lithuanian company to reach a $1 billion valuation in 2019, Vinted has embarked on an acquisition spree, launched in several countries, including Italy and Canada, and turned a profit. Mitocute, who stepped back from the company after giving birth to her first child a few years ago, is now an angel investor in Lithuania’s startup ecosystem, which she says is vibrant and attracts global venture capital firms looking for exciting opportunities.
In recent years, the Central and Eastern European region has emerged as a hotbed of fashion tech businesses, spawning a number of startups serving domestic and international markets. Vinted is a particularly successful example, but Lithuania has also produced Wanna, an augmented reality and virtual try-on provider that has worked with brands such as Gucci and was acquired by Farfetch in 2022.
Estonia has produced companies such as Alpha AR, which uses 3D modeling to create content for augmented reality and try-on experiences, and Fits.me, a virtual fitting company acquired by Japan’s Rakuten in 2015. Outside the Baltics and beyond, resale marketplace The Nold, which recently expanded to the UK, originated in Bulgaria, as did Remix, another reseller acquired by ThredUp in 2021. These are just a few examples.
Vinted, a resale marketplace that is expanding into major Western European fashion markets such as France, Italy and the UK, is headquartered in Vilnius, Lithuania. (Vinted)
“It’s growing rapidly,” says Krista Jegorova, who worked as a project manager at the Baltic Fashion Federation in Riga and the Latvian Investment Development Agency before moving to Spain last year. “Now, every second Latvian runs a startup.”
Many of these startups are fashion tech companies, buoyed by the massive tech boom that is reshaping the region. Central and Eastern Europe now has more information and communications technology companies per 1,000 people than Western Europe, according to a report published in April by PwC Poland and the CEE Digital Coalition. While the region’s economic productivity still lags behind Western countries, its tech talent far outweighs its size.
Though Eastern Europe’s fashion market is less developed than its Western counterparts, the region is very fashion-conscious, and people there place a lot of importance on appearance, says Borjana Uzunova, co-founder of The Nord.
This environment is facilitating the growth of fashion technology companies, with influence reaching beyond the domestic market.
“Technology-wise, we’re very happy and lucky to be where we are because we have all the power at our disposal to leverage,” said Anna Kremenlieva, one of The Nord’s co-founders along with Uzunova and the company’s chief technology officer, Theodor Savov.
The company raised 1 million euros ($1.1 million) in seed funding last year from a coalition of investors in her native Bulgaria and the Czech Republic. But it launched in Sofia in 2021 after Uzunova saw a need for a resale marketplace where customers could list their clothes. Though it initially struggled to convince investors to fund the project, finding developers was never an issue. Savov “quickly acquired a very talented team, and we started building our dream platform,” Kremenlieva said.
Cause and effect
The tech explosion in Central and Eastern Europe that benefited The Nord and other companies was driven by a variety of factors, according to Pawel Oleszczuk, senior advisory manager, and Julia Otwynowska, senior advisory associate, at PwC Poland. A strong macroeconomic environment, with GDP growth outpacing that of Western Europe, provided fertile ground for companies to thrive. The accession of several countries to the EU in 2004 contributed to economic growth, brought stability and opened the door for institutional reforms.
“The transition from a socialist to a capitalist economy in the 1990s was the starting point for the development of the ICT sector, but the real turning point was EU membership,” Otovinowska said, adding that EU membership boosted the region’s confidence and led to increased foreign investment.
Boriyana Uzunova, Ana Kremenlieva and Teodor Savov are the co-founders of The Nold, a fashion resale marketplace based in Sofia, Bulgaria. (The Nold)
Additionally, an education system with a strong emphasis on STEM (science, technology, engineering, and mathematics) subjects — a legacy of the Soviet era when Moscow controlled many of the region’s countries through its Eastern Bloc alliance — has provided a talent pool with the right skillset. The region has also built an excellent digital infrastructure, offering widespread access to high-speed internet. This, along with lower labor costs compared to Western Europe, has attracted foreign companies seeking IT services.
Tech growth isn’t evenly spread across the region — some countries are growing fast while others are slow to catch up — but these factors create the right conditions for the region to exert a major influence.
Estonia, for example, has a population of less than 2 million and is “relatively small,” Oleszczuk said. “But it’s a very large country.” [start-up] The country’s successful “unicorn” companies include mobility start-up Bolt, and Estonian developers were on the founding team of Skype.
The region’s two largest powers, Ukraine and Russia, are not EU members and have enjoyed similar advantages, albeit on slightly different paths, and both are feeling the effects of Russia’s aggression in Ukraine.
Sanctions against Russia have limited the country’s digital sector, causing tech talent from both countries to flee to other countries. Many Russians are heading to visa-free countries like Georgia and the United Arab Emirates. Ukrainians are heading to tech-heavy neighbors like Poland, which is also home to fashion-focused startups like Wearfits, which offers a virtual fitting service, and Fitly.ai, which uses AI to recommend fits.
Ukraine, in particular, had a strong fashion tech sector that produced the engineering staff of virtual try-on leader 3D Look, DressX founders Daria Shapovalova and Natalia Modenova, and many other companies. They have had to adapt to the war, the effects of which may be long-lasting. Ukraine also applied for EU membership in June 2022 after the Russian invasion, and formal negotiations are due to begin on Tuesday.
The Soviet legacy in Central and Eastern Europe may have influenced entrepreneurship in the region in another important way: under the USSR, freedoms were limited and opportunities were scarce. When countries gained independence, everything suddenly changed.
Vinted’s Mitocute said it created a sense of “enthusiasm and hunger”: “A hunger for new ideas, new things… I wasn’t making a good living so I felt a hunger to create something. [it] yourself.”
More to come
That hunger is evident across Eastern Europe, which has produced a host of world-renowned design talent, including Kiko Kostadinov (Bulgaria), Anna Oktober (Ukraine), Sandra Sandor (founder of Nanushka in Hungary), Nensi Dojaka (Albania) and Demna Gvasalia (Artistic Director of Balenciaga in Georgia), along with fashion tech entrepreneurs.
Mobile view of the homepage of fashion resale marketplace The Nold. (The Nold)
The blend of fashion and tech talent is likely to keep the fashion-tech sector thriving. And an explosion of tech ambitions across the region is drawing venture capital funding. According to research from Bain & Company, venture capital investment in Central and Eastern Europe is set to grow more than nine-fold between 2015 and 2021, faster than any other region in Europe. “CEE has put itself on the European venture capital map, and growth momentum is set to continue,” the firm said.
This trajectory is not guaranteed. PwC’s Oleschchuk noted that economic headwinds caused by unexpected geopolitical events such as the war in Ukraine, regulatory constraints and other changes such as rising labor costs could have an impact. For example, venture capital in the region fell in 2023 in line with investment declines across Europe.
But for now, the outlook is bright. Online resale markets, augmented reality companies and now artificial intelligence companies are gaining momentum. Yegorova, a former project manager at the Baltic Fashion Federation, said there is a strong sense of solidarity between businesses and they are helping each other. The government is also helping by providing grants and education to entrepreneurs. In her view, the region’s development is just starting.
“We may have started later than others, but we’re growing quickly,” she said. “You’ll be seeing a lot more of that in a few years.”
