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The first venture capital fund in Bosnia and Herzegovina debuted this month, an encouraging sign that a startup scene is taking shape there 30 years after the Dayton Peace Accords ended the country’s brutal four-year war.
Cloud Health EuroVentures has been in the works for more than a year, but it officially launched Oct. 15 at Sarajevo Slush’d, a localized spinoff of Slush, a leading startup event originally founded in Helsinki, Finland.
The new fund focuses on digital health, life sciences, health sciences, and artificial intelligence startups based in Bosnia and other southeastern European countries that its managers believe have the best chance to scale globally, especially in the United States.
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“Our ultimate goal is to create Bosnia’s first unicorn, and there’s no doubt in our minds that we’re going to be able to do that. It’s just a matter of time,” said co-founder and general partner Edhem Čustović, an academic and entrepreneur who returned to Bosnia and Herzegovina in 2015 after 30 years in Australia.
The other co-founder is Mirza Cifrić, a Bosnian serial entrepreneur based in Boston.
“We’re not here to follow trends—we’re here to build foundations. Bosnia has the people, the expertise, and the ambition. Now it finally has the capital structure to match that potential,” Cifrić said in a statement.
The third general partner is Vesna Arabadzic, an entrepreneur and consultant based in Eindhoven, The Netherlands.
The fund’s managers are aiming to raise $10 million and plan to invest in 10 to 12 early-stage startups that they hope can establish intellectual property and attain global reach. The fund has already raised $2 million, some of which it’s already deployed.
Although Cloud Health just officially launched, Čustović started laying the groundwork for Bosnia’s startup scene 10 years ago by creating the Bosnia and Herzegovina Futures Foundation.
The foundation provides entrepreneurship training, leadership and skills development; access to technology and scholarships; and other efforts meant to nurture a generation of entrepreneurs.
“The end goal was that in 10 to 20 year’s time, you will have a whole new generation of young people that understand how the rest of the world functions, understands how to build businesses, understand how to commercialize IP, understand how to grow things globally,” Čustović said. “Now we are there.”
After establishing that entrepreneurial generation, the next step was creating the venture capital fund “as a necessity for that Bosnian entrepreneurial ecosystem to grow,” he said.
There are pros and cons to starting a business in Bosnia, Custovic noted. The country has a low corporate tax of 10%, cheap energy prices, and a talented workforce, but getting anything done requires a lot of red tape.
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Cloud Health’s founders decided to focus on digital health and life sciences because of the high number of medical specialists that Bosnia has produced that are among the country’s diaspora.
“Health sciences and life sciences have a strong foothold in Bosnia,” Čustović said. “We’ve produced more medical doctors, nurses, medical specialists and engineers per capita than most other countries in Europe. As a result, we now have two and a half million people living abroad, of which a very high percentage come from these domains.”
Sarajevo, Bosnia’s capital, is also home to two newly built private hospitals. One is the locally owned ASA Institute and ASA Hospital, and the other one is Medicana Health Group, part of a Turkish chain of hospitals that operates across Europe.
“We want to leverage this know-how that is being built up in these medical fields, couple it with private equity and private capital and VC fund structures, and [the two new hospitals] provide us with infrastructure and ripe terrain for testing new technologies, new software solutions, new clinical trials, etc.,” Čustović said.
While Cloud Health is Bosnia’s first venture fund, and the country has little early-stage investing experience, raising capital has been relatively easy, Čustović said.
“My main task now is to build up the limited partner pipeline. The capital is not the issue anymore.”
He estimated that half of the fund’s LPs are very successful entrepreneurs who have built very successful businesses and made exits but have no experience with venture capital funds. The other half are very experienced with venture capital, and have held senior roles, GP roles or sometimes LP roles in other funds where they were very involved.
“I’ve met many affluent and influential Bosnians who have made very successful careers in various domains: technology sector, banking and finance, private equity. For them, investment has never been a problem,” Čustović said. “But investment in Bosnia has always been a restriction, partly because they couldn’t find the right partners in Bosnia. For all of this to work, you have to have credible people on the ground in Bosnia.”
That’s one of the reasons he moved back to Bosnia: “To help LPs and potential LPs understand that I’m here on the ground, ensuring that whatever we do, we do with the utmost due diligence, that we do that with the utmost respect towards the investment that we’ve received.”
“The challenges will arise in finding exciting opportunities to invest into,” Čustović said, “but it’s much easier to do that when you have an expanded network of LPs.
Cloud Health has close to 20 limited partners including entrepreneurs and business leaders from 14 countries, roughly half who still live and work in Bosnia. The fund is in talks with about another 20 potential limited partners.
To buoy Cloud Health’s capital raising strength and expertise, managers have partnered with other funds in the region, most notably the Founder Institute and Labena Ventures in Serbia. They are also in partnership talks with Feels Good Capital in Croatia, and Silicon Gardens in Slovenia.
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Cloud Health has so far reviewed over 40 company proposals, and invested in two startups.
One of them leverages artificial intelligence to help doctors with billing, scheduling, and other administrative tasks, while another startup takes patients’ data and then uses it to create tailor-made insurance plans for them.
“The focus is to scale this globally. Everything that we invest into will have to have applicability in the United States,” Čustović said. Cloud Health wants to start there because it’s a unified market, as opposed to the European Union, which is fragmented.
“The primary focus will be to take and use raw talent in Bosnia with the ability to very quickly deploy tests and launch, but use the United States as the ultimate proving ground for the market. It’s a unified market with 300 million or so potential customers,” Čustović said.
Čustović and his fellow founders believe the time is ripe in Bosnia for a fund like theirs, not only because of the country’s maturing entrepreneurial landscape, but because of the rising number of acquisitions in its tech sector, which has also thrived in recent years.
“These acquisitions showed that Bosnians were starting to understand how global markets function, that acquisitions are not a sign of loss, but an exit strategy,” Čustović said.
The hope is that Cloud Health will encourage other funds, and that cumulatively they can persuade the capital and talent that are in Bosnia to stay in the country.
“This is more than a fund launch,” said Čustović. “It’s the beginning of a new chapter for Bosnia—a shift from dependency on remittances to an economy built on innovation, investment, and knowledge.”
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This article Startup Scene in Bosnia Heats Up: Country’s First Venture Fund Officially Launches originally appeared on Benzinga.com
