Startup Hungary: waiting for unicorns

Sandra Loyd

It is also possible to establish a serious company listed on the international market from Hungary, according to the founders of Startup Hungary. But what are the conditions for this? What does Hungary’s startup ecosystem look like at all? Csongor Biás, Managing Director of Startup Hungary, will help you find your way around the main issues that characterize the recent, present and expected future of the domestic and international startup world.

Computerworld: How to describe the last two or three years of the Hungarian startup world?
Biás Csongor: We read success stories more often than would actually be justified. The media often picks up stories that do not count as a real success story from an international perspective. It is a fact that good processes have started, but even at regional level we are far behind, comparing ourselves to either Poland or the Czech Republic. Slovakia is also ahead of us, and Romania is incredibly dragged on. There are several countries in the region where three or four unicorns, or $ 1 billion worth of companies, have already been mined. We have not been able to do this so far. At home, there were typically smaller exits of up to about $ 100 million. Perhaps the biggest success story launched from Hungary is LogMeIn, which went public in 2014. Today, the company is valued at $ 2.5 billion. The first triumvirate, Prezi and Ustream, are also good examples, and there are still successful companies, but none of them have succeeded in generating high corporate value in the international market.

CW: What may be behind the more modest results?
BCs: There may be several reasons for this. The ecosystem has become a bit pervasive. There are many and easy sources of funding available, with public and EU money playing a key role. This makes domestic startups somewhat comfortable. Many start-ups think that you have to build your business at home first, then regional and then expand into large international markets. But in our experience, the entrepreneurs behind the real success stories immediately started to develop into the big western markets.

CW: You did not mention the Far Eastern countries as potential target markets. Why?
BCs: Asian markets are very specific. On the one hand, the competition is very fierce: local competitors are tough, the Chinese, Asian startup world is starting to compete with the US market. The level of capital inflows is getting closer to that of the US markets. On the other hand, it is a rather closed world with a specific culture. Culturally, we are closer to the Western world, where, for example, we need to localize a service or product less than in the Asian market. Overall, therefore, a domestic startup is more likely to succeed in the Americas or in English or German-speaking markets than in Asia.


CW : There is no shortage of good ideas, but somewhere the implementation lags behind, there is no success.
BCs: It’s almost commonplace that an idea alone isn’t worth much. Success is determined by how it is implemented. An idea at a startup is usually a set of assumptions and hypotheses. I saw a lot of successful startups that started working on a certain idea, then developed a completely different product, and eventually it became successful. It is precisely inherited by startups that they can quickly gather feedback about the market, incorporate it into their product, and progress gradually as it progresses. This also points in the direction that it is unfortunate to start only in the domestic market. If a company examines its market in Hungary for the first time, the feedback only applies to the domestic market. If you shape and change the product based on these, it is by no means certain that the iteration will lead to an internationally competitive product. Conversely, if the goal is to have a hundreds of millions of somewhat homogeneous U.S. markets right from the start, the product, according to feedback, is expected to hold its own throughout the Western world.

CW: What changes has the pandemic brought to the startup world?
BCs: We are currently conducting research with the participation of the Startup Hungary Foundation, in which we are examining the Hungarian startup ecosystem. In the survey, we also asked about the impact of the pandemic. About 40 percent of respondents reported a negative impact, 40 percent reported a positive impact, and 20 percent said their business wasn’t really affected by the epidemic. Many trends have accelerated, with e-commerce, for example, projected to have jumped virtually five years internationally. Companies that deal with digital devices to help them work from home and various business applications are also having a good time in business. There are also businesses moving in such areas at home, which are experiencing huge growth. In contrast, for startups working in tourism or marketing technologies, for example, this is a more difficult period, sometimes about survival. Nor should it be forgotten that every crisis situation offers enormous opportunities. Most of the dominant companies today started during the previous world economic crises.

CW: Because it can help the Hungarian startup ecosystem a Startup Hungary? BCs : The philosophy of the Startup Hungary Foundation is that cooperation is needed in the ecosystem. In the spirit of this philosophy, we have brought together twelve people who have already proven that it is possible to build a serious, internationally successful company from Hungary. Our founders include, for example, the founders of Prezi, Ustream or BalaBit. We see that the key to any advanced ecosystem, innovation hub, is for entrepreneurs who have already succeeded to start returning money and knowledge to the community. We want to make this easier for already successful domestic entrepreneurs. The model has been further developed and combined with the fact that different organizations can join the foundation. Our founding partners, such as IVSZ, Google and Design Terminal, have recently joined Microsoft, Citibank, PortfoLion and other investors as supporting partners. We try to bring together the most important actors in the ecosystem and work together to find the direction of progress. We want to do this in order to create more ambitious and serious companies with an international impact, which – by giving interesting and challenging tasks – are able to keep an already internationally competitive workforce at home. We believe that this will make Hungary a better place.

CW: Why do global companies like the startup ecosystem join the organization? Google or Microsoft?
BCs: Large corporations have already noticed that truly successful startups have a revolutionary power. If we look at the age of Fortune 500 companies over the past 40-50 years, a radical decline can be seen. It has drastically lowered the entry threshold to create a very valuable company, and this process has accelerated tremendously in recent times. All of this can even subvert entire industries. So it’s not unreasonable for large corporations to be a little scared and look for points of connection with startups. Through various acquisitions and collaborations, they try to translate the ability of startups to innovate and speed into their own practice. Our organization can create this connection between the startup and the corporate world.

CW: There is regional cooperation in each country startup
BCs: Our credo is that we need to open the eyes of startups across borders. This is the purpose of inviting foreign speakers. So far, more than forty people have performed at various online events. Our guest was, for example, Credo Ventures in the Czech Republic, which was the first investor in a company called UiPath in Romania. UiPath for robotic process automation is the biggest success story in the region, but perhaps in the whole of Europe. The company has already reached $ 35 billion. They are now preparing for the stock market, where they want to go public for $ 65 billion. We are constantly inviting founders and partners from renowned American accelerators and incubators. We try to help build international relations by bringing key players on the global stage. We want as many people as possible to take over their knowledge at home.

CW: What are the areas, technologies, applications that can be successful if implemented? a startup in Hungary?
BCs : Basically, we have a competitive advantage in so-called deep technologies. Deep technologies is a collective term for technologies that require deep scientific and technical expertise. These include, for example, artificial intelligence, biotechnology. There are great professionals in Hungary who understand these areas. If his knowledge is coupled with the skills needed to build scalable, fast-growing companies, it can lead to a significant competitive advantage. Our research also confirms that we are good at technologies related to artificial intelligence and health in particular, so we can expect success here. Less successful are those startups that think in products and services aimed at end users. It is easier to build companies from our region that travel in business (b2b) applications.

CW: How do you see the future of the Hungarian startup world?
BCs: There are very encouraging signs. A group of European investors is currently investigating three companies. Late last year, Turbine, a cancer research company based on artificial intelligence, announced a capital injection. THE Accel Partners, a leading international company based in San Francisco and London, has invested in the company. There was also news in late 2020 that the Banzai Cloud would be acquired by Cisco. Drops also sold out, a large tech company called Kahoot bought a domestic startup built on a language learning application for $ 50 million. The special feature of the Drops is that they did not involve external capital before, i.e. they reached this point on their own. So the end of last year was very strong, these stories also show that we have reached a turning point. It is the task of Startup Hungary to highlight role models among Hungarian startups and their founders.

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