Reimagining Batumi through a startup portfolio of options

by Tiko Tkeshelashvili, M4EG Project Manager, UNDP Georgia
Irmak Ekin Karel, Strategic Innovation Designer, CHÔRA
Igor Izotov, Head of Exploration, UNDP Accelerator Lab, North Macedonia [1], Rusudan Zhozhadze, Head of Batumi Municipal Policy Development Department

When describing Batumi, Georgia, Hemingway’s famous Paris quote comes to mind. For many guests, Batumi is “a moveable feast,” warmly welcoming its visitors as a good friend.

A new chapter in Batumi’s development began when the city was selected through a competitive process, by the EU-UNDP Mayors for Economic Growth (M4EG) initiative, to design an urban transformation portfolio and explore novel ways of development. For the M4EG portfolio journey, UNDP has partnered with CHÔRA, an organization that brings their Strategic Innovation framework and capability to co-design Batumi’s portfolio journey. The portfolio approach is designed to tackle complex challenges.

The EU-funded M4EG provides unique opportunities to local authorities across Eastern Partnership countries to apply systems thinking and promote coherence across various initiatives and measures in municipal management.

What is at stake for Batumi? [2]

Batumi is the second-largest city in Georgia, the capital of the Ajara Autonomous Republic and an important Black Sea port, with an estimated population of 172,000.

This vibrant city offers a unique blend of natural beauty, cultural diversity and economic activity. With its strategic location in the Caucasus and the Black Sea region, Batumi is a melting pot of different cultures and religions, which is evident in its architecture, cuisine, and way of life. Visitors are fascinated with its gorgeous beaches, located just a short ride away from the magnificent highlands and unique Colchic Forests. In 2022 only, Batumi hosted around 3.5 million tourists, and this number is expected to increase in the coming years.

Furthermore, Batumi is a major hub for maritime transport and logistics, which makes it an important player in Georgia’s fast-growing economy. The construction and real estate sectors play an increasingly vital role in the city’s economy, offering opportunities for growth and diversification.

However, the city’s economy is still highly dependent on tourism, which poses a significant challenge. This sector predominantly offers seasonal activities and low-skill service jobs, which limits the city’s economic growth and diversification.

Another challenge that Batumi faces is the emigration of talented youth (aged 14-29) in search of better education and work opportunities in Georgia’s capital Tbilisi or abroad. This brain drain not only affects the city’s economy but also its social and cultural fabric. The loss of young and educated people can lead to a decline in innovation and creativity, which are essential for the city’s long-term growth and development. Therefore, the city needs to invest in education and foster an environment of entrepreneurship and innovation to attract and retain talent.

The recent growth of the international IT community in Batumi has created a demand for co-working spaces and other relevant services. As a result, the private sector has responded by offering new co-working and community gathering spaces, like Terminal, which is a promising development for the city’s startup ecosystem.

Recognizing the need to diversify the city’s labour market and focus on high-skilled knowledge work, the local government has decided to prioritize the development of the startup ecosystem in Batumi. As part of M4EG’s urban transformation project, the government aims to address the challenges that the city is facing in this area. This initiative could not only boost the city’s economy but also position Batumi as a hub for innovation and entrepreneurship in the region. With the private sector’s response and government support, there is potential for Batumi’s startup ecosystem to flourish in the coming years.

What makes startup ecosystems an engine of economic renewal?

The 21st century was defined as “the era of startups”, made possible due to advances in technology and the rise of venture capital. But more importantly, countries and cities saw the potential of creating startup ecosystems where economic development, especially for entrepreneurs and innovators, fueled new businesses with almost no barrier to entry. In these ecosystems, startups have been a major driver of economic growth and job creation that transformed not only the cities where they were active, but entire countries as well. The whole aura around building startup ecosystems, where young entrepreneurs and innovators can thrive, has become something of a north star when it comes to youth mobilization and brain gain. Examples of such startup ecosystem success stories are Madeira in Portugal, Israel, and the Startup Chile programme in Santiago de Chile.

“City hall is interested in exploring new ways for economic diversification. Batumi has a great potential to become Georgia’s second startup capital and we are committed to enable this process. However, building an ecosystem is a complex goal, requiring cohesive engagement of various stakeholders. Therefore, we see great value in establishing new partnerships and are inviting other interested actors to contribute”.

Archil Chikovani, Batumi Mayor

The process behind creating the Batumi portfolio

The portfolio is co-created by the Batumi City Hall, UNDP and the Batumi Tech Park. Leveraging CHÔRA and UNDP’s urban transformation framework, the process started with a high intensity inception phase – sensemaking and defining the portfolio thematic scope. The portfolio design core team applied deep listening to better understand how citizens experience key problems and where they see underlying causes.

Then the team participated in a four-day bootcamp, allowing for a deep dive into intent-setting, problem exploration and mapping, followed by identification of portfolio positions, andideation. Batumi decided to work on the development of a startup ecosystem, to produce system-wide transformation effects in the city. As seen in the Statement of Intent (see above image) and mentioned earlier, the desired effects include diversifying Batumi’s talent pool, contributing to a renewed identity, igniting interest and developing startup-savviness, and reshaping the role of the Batumi City Hall in this transformation journey.

Subsequently, the seed portfolio options were defined. In the initial stage, the portfolio team decided to activate four out of a total of eight positions: youth narratives, education, networking and city hall capability. The seed portfolio options were developed to enable testing and learning about how they contribute to advancing the city’s intent around startup ecosystem development.

Now Batumi is trying to apply dynamic portfolio management tools to ensure smooth implementation of these seed portfolio options, capture learning and generate intelligencewithin the key thematic area. This will allow for a second iteration of the portfolio in support of municipal transformation.

What is the role of the Batumi City Hall? 

Every portfolio and complex problem needs ownership to be well addressed. Given the hyperlocal approach of M4EG, the Batumi City Hall is well positioned to ensure cohesion, bring together various actors, attract partners from the public, private and civil spheres, and connect the dots around the city’s new vision for development.

“We aimed to transform the city into the second startup capital of Georgia, gathered partners from different sectors, jointly developed the portfolio design and initial activities, the progress of which showed positive intermediate results, showing us different perspectives of development. All this gives us hope that the portfolio will have a significant positive impact on innovative professions among Batumi youth, promoting entrepreneurship and startups. The acquisition and employment of relevant skills, will help attract young talents and people interested in startups, and ultimately, diversify the city’s economy and development of the startup ecosystem.”

Rusudan Zhozhadze, Head of Municipal Policy Development Department, Batumi City Hall

During the portfolio design process, there were discussions about what a local government can do within its competence and power to promote local economic development, and whether it should take a guiding role when it comes to innovative entrepreneurship and startups, a field where the private sector and markets are natural drivers. Throughout the discussions about Batumi City Hall’s role in this complex transformation journey, the team has been open to taking on a facilitating, supportive, enabling seat, helping build alliances with private sector partners and innovative youth, to give them the space to grow organically. Below is a reflection of what the City Hall team sees as potential roles for themselves going forward.

Reflection of the Batumi portfolio team on the City Hall’s enabler capacity

The City of Batumi is lucky to have a team of young professionals engaged in the portfolio design process. The Municipal Policy Planning department, responsible for the portfolio journey, is led by Rusudan Zhozhadze (co-author), and supported by Shorena Pagava, Ninaka Tsintsadze, Nunu Bakhtadze, Magda Chogadze and Guranda Gobadze, as well as Ketevan Buliskeria, from the Batumi Tech Park. Having a dedicated team and committed leadership, with the support of the Mayor, is key to success on the way to transformation.

Building partnerships: the value of coming together around a shared intent

This urban transformation portfolio has been praised both locally and internationally for its success in securing a key stakeholder group’s interest from the very beginning of the portfolio journey. Among them the Tech Park/GITA and Startup Grind Tbilisi have become part of the portfolio team, investing their resources and ideas in the further development of Batumi’s portfolio. Furthermore, the city is in touch with the Government of Adjara, the You Regional center of Adjara, Impact Hub, Tbilisi City hall’s Spark business accelerator, Maritime Transport Agency, individual entrepreneurs and startups, the Tourism Institute, Batumi Shota Rustaveli State University, and others. These stakeholders are the life of the portfolio’s interventions and experiments in Batumi.

The startup ecosystem has been successfully developing in Georgia for 10 years. In Batumi, Adjara Tech Park started working only three years ago, offering various services, including education and pre-acceleration programs. Last year we engaged in the Batumi Startup Ecosystem Portfolio co-design process and already implemented a number of joint initiatives with the City Hall.

I can say that the ecosystem is gradually evolving.  Now there are up to 30 technological startups based in Batumi, which have the potential to scale globally. GITA expects these startups will secure investments; they will definitely contribute to the Batumi startup ecosystem development. The Batumi Startup Ecosystem Portfolio development is one of the most important processes that have helped us to take the right path in the region, as it brings a systems approach and encompasses various options.

Ketevan Buliskeria, Batumi Tech Park Manager, GITA 

Connecting Batumi with existing startup ecosystems, and why it matters

While Batumi is yet to build its own network of startups and supporting organizations, it became clear that the Batumi portfolio team could tap into existing momentum in Georgia.

With GITA’s initiative, startup ecosystem was accelerated in Tbilisi in 2014-2015, turning the capital city into the place in Georgia with experience in building a community of founders, consultants, tech talent, and supporters of different trades. Furthermore, international startup networks such as Startup Grind, Impact Hub and many others were not present in Batumi, but were well functioning in Tbilisi. There was a need to connect Batumi with existing networks and mature startup ecosystems to learn about other systems’ processes, and to leverage existing knowledge, people, and models to accelerate Batumi’s own development process.

The portfolio hypothesis was the following: If Batumi connects to networks in Georgia and abroad, and gains access to contacts and experience from other startup ecosystems, it wouldn’t need to start from scratch and can accelerate the emergence of the startup ecosystem. Batumi’s portfolio design team identified two types of work to be done:

  1. Connect Batumi from within, especially the fragmented startup and innovation-related changemakers, leaders and initiatives;
  2. Connect Batumi with the national and international startup networks to ignite interest, and test whether startups would be interested to move or expand to Batumi. Focus on connecting Batumi with two distinct network spaces:
  3. Tbilisi Startup Ecosystem;
  4. Startup Networks abroad (focus on Europe and USA).

Following this hypothesis, in 2022, as part of the seed portfolio, Batumi organized the following events:

Local youth: what they know and think about entrepreneurship

Research and stakeholder interviews revealed that despite existing efforts, entrepreneurship continues to be “uncool” in Batumi, especially still so amongst youth. Young people do not know what a startup is or have not heard of the concept at all. Even the ones who are engaged in creating high tech-supported innovative ideas do not identify as startupers.

Young people also do not have local heroes for positive role modeling – successful startup examples or initiatives in Batumi to inspire them or changemakers who can share their experiences about such employment or entrepreneurship opportunities. Thus, to develop a local highly-skilled talent pool, Batumi needs to excite its youth about innovative and meaningful startup job opportunities beyond the typical jobs available in the public sector or large international companies. But, emerging efforts by ecosystem actors such as Tech Park, Startup Grind and small NGOs are still fragmented, and need to be coordinated and cohesive.

Given the need to excite the youth about entrepreneurship, when designing the Batumi Startup Ecosystem portfolio, it was important to understand the existing narratives. The ACT, a global research and management consulting company, was tasked with conducting research to provide insight into the dominant narratives that shape the mindset, behavior, and career decisions of young people in Batumi. The Batumi City Hall, Batumi Tech Park and UNDP Georgia, together with the ACT, presented the key research findings early in 2023. While there is a low awareness about startups, it is promising to know that the ideal job for the majority of young people participating in the study is associated with innovations and technologies (17%), followed by law (14%), tourism (10%) and construction (10%). Other sectors of interest include: education (9%), health (8%) and business (3%).

“The portfolio and the narratives’ research have already influenced a youth policy change in Batumi. The findings of the research were used as evidence for a four-year youth municipal strategy development, in which startups, entrepreneurship and innovative technologies were defined as a strategic goal. In addition, research recommendations were taken into account in the 2023 youth development promotion program budget.”

Shorena Pagava, Specialist in Youth Issues, Batumi City Hall 

City Hall is learning how to become an ecosystem enabler 

During the design process, the team identified City Hall’s essential need to engage with others, learn in person from other ecosystems’ stories, and become acquainted and confident to talk and think about its own startup ecosystem development. The City Hall also needed extra capacity to move away from the day-to-day tasks and phone calls, so it can focus on systems thinking and strategic design. The design and management of a new portfolio requires strategic thinking skills, lobbying for a portfolio’s needs and resources at a high level, and engaging unusual suspects to create new synergies and learn from them continuously. Therefore, the team needed to boost both the municipality’s capabilities and capacity as it grew into its new role as an ecosystem enabler.

For this reason, UNDP created a tailored learning programme, run with the help of UNDP’s BOOST network [3]. So far, the municipal team has met the following people through a series of workshops: David Liu, Community & Engagement Lead at Norrsken House Stockholm;  Mark Stoevelaar, Project Coordinator in the CTO Innovation team at the Municipality of Amsterdam; Stavros Dalmiras, Department of Entrepreneurship, Blue Growth & Maritime in the Municipality of Piraeus, Greece; and  Thomas Kösters, Managing Director Deep Ecosystems.

Furthermore, tThe City Hall received mentorship along with partner meetings with both public and private entities from around the world to learn how they went about developing new startup ecosystems. As part of the learning journey, the city studied other’s experiences of arranging and managing physical spaces as places of attraction and interaction among ecosystem actors. As a result of the research, Batumi plans to create such a place in the city, thereby enabling exchange of ideas and experiences, networking and co-working among interested and talented youth. It could be developed into an additional municipal service – something the city can offer to innovators, changemakers and interested partners as part of the local startup ecosystem building.

The potential of Batumi’s emerging startup ecosystem

The Batumi startup ecosystem has the potential to become a major hub of innovation and entrepreneurship in the Black Sea region. The city is already a leading regional destination for digital nomads, affected by the war in Ukraine, with two major co-working spaces opening only in the past year alone. Batumi is strategically situated on the Black Sea coast of Georgia, with access to both the Eastern and Western markets. Furthermore, the city’s proximity to the EU makes it an ideal gateway for digital nomads, entrepreneurs and freelancers. If Madeira in Portugal can do it, why not Batumi?

Furthermore, there is an excellent opportunity for both internal and external actors to harness the local talent pool, the city’s favorable business climate, and its growing startup ecosystem. Internal actors, such as entrepreneurs and startups, have a limited range of resources and services to help them grow their business. However, thanks to the project and its strategic partners, new opportunities are opening up. GITA has nearly doubled funding for small scale grants and introduced quotas for startups from Adjara in a new competition announced in April 2023.

Additionally, together with the government of the Autonomous Republic of Adjara, UNDP has implemented various incentives and regulations in recent years, aimed at supporting the entrepreneurial ecosystem.

The way forward  

The Batumi City Hall attended a two-day Sensemaking and Intelligence Generation workshop, as part of the M4EG programme, where following the Dynamic Management methodology, the team discussed actionable intelligence about the implemented and ongoing portfolio options, and the design of the second phase of the portfolio, to be implemented during 2023-2024. Whatever the next iteration of Batumi’s portfolio will be, given the intelligence generated during the last iteration of the portfolio, the city will continue focusing on the following system dynamics to achieve system-wide transformation:

  1. Enable an environment to easily attract and retain talented entrepreneurs: The city will create a welcoming environment for talented entrepreneurs and provide resources and incentives for them to stay in the city and region. Models of how this is done elsewhere include offering tax breaks, special grants, and hosting at least one conference where startups can interact with follow-up capital in the form of VC financing.
  2. Invest in infrastructure: Infrastructure is key for any city that wants to become a startup capital. This includes investing in technology infrastructure, transportation, and services like internet access.
  3. Foster collaboration: The city will provide spaces for entrepreneurs to meet and collaborate. City supported co-working spaces, incubators or acceleration programmes, or places where entrepreneurs and innovators can mingle are a good starting point.
  4. Invest in education: To foster the next generation of entrepreneurs, the city will invest in education programmes that teach the necessary skills to become successful entrepreneurs. The educational institutions, which are already present in the city, in the case of Batumi – the Naval Academy and the University of Batumi – can be the places where the next generation of blue economy startups are nurtured.
  5. Add a special ingredient: As already mentioned, the Batumi State Maritime Academy, with its flagship programmes on marine-trade fleet management and maritime transportation, can be a powerful environment for new startups wishing to disrupt this traditional sector.
  6. Promote the new city identity: Promote the city as a great place for startups to launch and grow. Connect with influencers and media outlets to spread the word that this is happening. And at the end of the day: “Tbilisi is awesome, but Batumi is by the sea”!

This is Batumi’s open invitation to all potential partners interested in co-designing this portfolio and contributing to the city’s journey towards emerging as a promising and inspiring place of innovation.

Footnotes:

[1] The co-authors have been collaboratively  supporting and consulting  the Batumi City Hall team in the portfolio design process.

[2] Batumi Startup Ecosystem Portfolio Brief prepared by CHÔRA Foundation (not publicly available).

[3] Special thanks to Louise Skarvall (UNDP), for supporting the Batumi team in their education journey.

Main photo by Irakli Dzneladze