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Dec 15, 2023

Georgia’s Plan To Be a Tech Leader Where East Meets West

The Challenge

By creating an environment where startups and innovators can thrive, Georgia is looking to create a hub of technological excellence at the intersection of Europe and Asia. In doing so, it can tap into the immense potential for digitally powered economic advancement in Central Asia and Eastern Europe, where a combined market of around 300 million people is largely underserved by technology.

The Georgian government, recognizing the importance of creating a hub of technological excellence in the South Caucasus, has passed laws that grant International Company Status to overseas technology companies, offering exemptions on property and dividends tax and a reduced 5% tax rate on profits and personal income . Georgia operates a Virtual Zone for the IT sector which confers benefits including zero corporate tax and no VAT. Georgia supports international businesses with smooth company registrations, fast access to new bank accounts and high levels of privacy. It also operates an FDI program, offering cashback payments for investing companies. Lineate, a New York-headquartered global software consultancy joined the program last November after making an investment of $700,000 and creating at least 50 jobs at its new base in Tbilisi, Georgia’s capital.

The country’s digital infrastructure has improved rapidly in recent years, and Georgia’s Innovation and Technology Agency (GITA) has invested $12 million in around 200 startups since 2018, helping to create a deep pool of local tech talent.

The country’s innovative digital ecosystem has improved rapidly in recent years, supported by Georgia’s Innovation and Technology Agency (GITA). The agency has invested $14 million in around 240 startups since 2018, helping to create a deep pool of globally scalable tech companies. As a result, the top GITA beneficiaries have already raised 10 times the level of GITA’s investment through additional private capital,

The Impact

Georgia’s tech sector is booming and has doubled in scale since 2016, employing 36,707 people in 2022, a rise of 20% year-over-year. Georgia’s information and communications (ICT) sector grew 49.9% (in terms of GDP) between 2021 and 2022, according to the National Statistics Office of Georgia.Like many of Georgia’s IT companies, Sweeft Digital—founded in Tbilisi, Georgia’s capital—is growing internationally. The e-commerce payment platform and app development company has expanded its customer base and network of offices across Europe and the US, following acquisition by the Making Science consultancy. Georgian fintech company Payze, an online payment platform for merchants, has expanded into Central Asia. Such activity is attracting interest from international investors, such as Lineate, a New York-based technology provider that develops software, apps, and websites for B2C and B2B companies worldwide, which opened offices in Tbilisi in 2022.

In a recent report on the Georgian startup scene, the Asian Development Bank observed: “The enthusiasm of young entrepreneurs, coupled with supportive government programs, local and nonprofit initiatives, and international donor funding, is creating momentum for technology-based startup enterprises to flourish.”

Georgian startups are attracting the attention of technologists worldwide. At Web Summit 2022, one of the world’s largest technology events, Georgia-based AI platform Theneo fended off competition from 2,300 startups to win the prestigious PITCH contest. As a measure of the winner’s potential, 2021’s PITCH winner, medtech startup Smartex, has since raised $25 million in funding. Theneo has already raised $1.5 million in US investment.

The growing maturity of Georgia’s technology ecosystem was confirmed in 2021 with the first foreign acquisition of a homegrown startup, Pulsar AI. An advanced conversational AI platform that enables car dealerships to engage with customers, it was bought by American automotive software giant SpinCar, now known as Impel. Pulsar AI was one of the first Georgian startups to be supported by GITA.

Georgian Economy Minister Levan Davitashvili has praised GITA for creating 3,000 tech jobs and attracting $175 million in private investment into Georgia’s startup ecosystem. “By training professional personnel and providing financial and technical support to startup ideas, we will be able to establish such companies in Georgia that will make our country famous on the international stage,” Davitashvili said in March.

The Takeaway

Georgia is becoming the tech hub that can bridge East and West, attracting the best IT talent, generating exciting innovations and giving confidence to investors, so that transformative technology can flow throughout Eurasia.

Since 2019, the amount of additional capital raised by the 37 leading startups helped by GITA has increased 4,900% to more than $134 million. “The main criteria for the startups we select is that they have globally innovative ideas that work beyond just Georgia,” says Avtandil Kasradze, Chairman of GITA.

Strong support for the IT sector from Georgia’s government ensures that every advantage is offered to IT enterprises as well as investors, while recent tax and regulatory reforms have further facilitated the ease of doing business in Georgia.