In a very short time, the very active startup ecosystem of Budapest, Hungary came to life. Much of its success was due to the tutelage and support of Peter B. Záboji. Professor Záboji, an entrepreneur and angel investor, founded and acted as the President of the European Entrepreneurship Foundation (EEF). This particular foundation is Eastern Europe’s oldest business incubator.
Peter B. Záboji was born in Budapest but grew up in Bavaria, Germany. After his graduation, he worked in different telecom companies and in 1999 started getting involved in venture capitalist companies in Europe. The president of Hungary gave him the highest civil recognition for his significant contribution to startups in Budapest.
In 2006, the first European Entrepreneurship Accelerator Program was established by Záboji and six years later he organized Hungary’s first Seedcamp. After holding high positions in the telecom industry in the UK, the U.S., France and Germany, he returned to Hungary in 2008, to fully support the country’s entrepreneurship and startup ecosystem.
Initial successes
In 2009, Budapest launched what would become its unicorn – Prezi. The popular presentation tool, which is an alternative to PowerPoint, was born in Budapest and launched in 2009 in San Francisco as well. Prezi started the ball rolling, so to speak for the tech startups in Hungary. It placed the focus on Budapest, where other equally successful companies such as LogMeIn, CryptTalk, NNG and Ustream were established.
LogMeIn was founded in Budapest in 2003 and now is headquartered in Boston. The company provides software as a service (SaS) as well as remote connectivity services in the cloud. These customer engagement, IT management and collaboration products allow administrators and users to access computers remotely.
Dr. Gyula Feher of Hungary is one of the three co-founders of Ustream, a video hosting live video streaming company. It was established in 2007. Earlier, he also founded a web-consulting firm in Hungary, which was the creator and owner of Googlerankings.com previously. Ustream was acquired by IBM in 2018 and is now known as IBM Cloud Video. Some of its partners include IMG Media, Viacom, PBS NewsHour, CBS News, Logitech, Samsung and Panasonic.
CryptTalk, a call and messaging encryption service, is a product of Hungarian startup, Arenim Technologies, which was founded in 2012. After coming out with a premium service, it recently launched a personal service package. CryptTalk has received several awards for its superior system in encrypting text messages and phone calls.
NNG, started as Nav N Go in 2004. It’s a navigation solution used for personal navigation, wireless, enterprise and automotive industries. One of its navigation products is used by iPhone. The software, which is available in 50 languages, is used in 30 brands of cars manufactured by 7 out of the 10 top carmakers in the world.
Due to the emergence of these successful startups in Hungary, the country attracted the interest of foreign media, such as Index.hu, Business HVG and Forbes Hungary. These media companies boosted the reach of emerging local startups outside Hungary. In effect, the two sectors grew simultaneously within the country.
Current situation in Hungary’s startup scene
The startup environment in Hungary, especially in Budapest, is already very active. The country has a large pool of affordable engineers and developers. It has many EU and foreign investors. In addition, setting up and registering company in Hungary is easy, fast and affordable.
Many young people are leaving the bigger international companies and venturing on their own, using the knowledge and expertise they gained from previous jobs. They are also drawing inspiration from the earlier startups that made it big.
The country has established Design Terminal that is in charge of stimulating the nation’s creative industries. Csongor Biás, who is the Design Terminal’s tech incubation head, says that the primary tech hub in Hungary is found in Budapest, which almost resembles the environment in the Silicon Valley in the U.S. He said the young Hungarian entrepreneurs are leading in innovation and the startup scene steadily attracts talent and capital.
The European Commission started the funding circle in 2007 through the Jeremie program, or the Joint European Resources for Micro to Medium Enterprises for its member states. It was specifically created to promote entrepreneurship and reinforce small and medium sized companies with the proviso that the program will only provide 70% of the capital. Private investors should provide the balance. The program is currently named European Investment Fund or IEF. It has provided funds for more than one million SMEs. Likewise, the tech ecosystem in Hungary has attracted several foreign investors.
According to CEO Peter Kovacs of IseeQ.co that is based in Budapest, Hungary is teeming with investors and venture capitalists. What the country lacks is international connections. He said that many of the investors come from various markets, many of them from real estate, but they do not have the global network needed to boost the popularity of the companies they support.
Hungary does have venture capitalists that are supporting the tech sector, such as Primus Capital, Fiedler Capital, Day One Capital and Conor Fund.
Moreover, it is expected that the recently announced Hungarian golden visa program will attract even more investors in the near future.
Networking opportunities
While mainstream opportunities for networking are scarce, upcoming entrepreneurs have alternative options for networking. Some of the opportunities come from investors; while the weekly business meet ups provide additional opportunities. Many of the participants are attracted to the events organized specifically for startups.
Although the Hungarian startup scene is vibrant, bureaucracy is one of the challenges the young entrepreneurs face. While there are government agencies in place, the government does not have a program to facilitate the process of setting up a company, including how to avail of funding according to Reka Forgach, the community development manager of Fiedler Capital.
The country is traditionally excellent in teaching mathematics, engineering, technology and science and constantly produces top talent in the field of technology. The country has a large pool of highly skilled developers and programmers and their salaries are far below what they can receive from the West, making it advantageous to foreign companies who are willing to establish their businesses in Hungary.
However, what turns off investors are the high taxes and payments for social security. The value added tax (VAT) in Hungary, placed at 27%, is the highest in the region. Ms. Forgach said that what are missing in Budapest are a sense of pride and a sense of community. Right now, the lack of confidence is the issue that Design Terminal is trying to address. The government initiative is busy organizing events to put focus on startups in Budapest and other cities in Hungary, such as Debrecen and Szeged, where the R&D centers of NNG are located.
Many Hungarians excel in technology and sciences. Several investors show keen interest in the fields of biotechnology and life sciences. This is no surprise, as the chemist Zoltán Takáts invented the iKnife. The surgical knife that has the ability to detect cancer cells on the tissue it is cutting.
Another Hungarian entrepreneur, the Adjunct Professor at Obuda University in Budapest, Tamas Haidegger, invented the Hand-in- Scan. It’s a machine that can point out the areas missed by regular sanitation. The idea for it came from one of his students who was doing hospital work and became interested in researching how nurses and doctors sanitize their hands post-surgery. While there are many products available in the market to sanitize their hands, the improper use of these product can induce infections. They have determined that in the west, the deaths of about 200,000 people were due to secondary infections they acquired while getting treatment from hospitals.
Talented Hungarians
Hungarians are very creative and innovative and many are very strong in mathematics, programming and other scientific knowledge. Many are venturing in the creation of processes, tools and programs that can help other industries, such as OptoForce. The 3D sensor is able to feel the direction and strength of the forces put on it. OptoForce can greatly help automation in different industries.
Enbrite.ly is a data-analytics program. The startup now has offices in Budapest and London. The program can help advertisers ensure that their online advertising expenditure reach human targets and avoid fake web traffic systems and other fraudulent acts. Related to Enbrite.ly is Sinetiq, which is a neuromarketing research organization that provides media companies with data regarding the emotions of consumers taken directly from their body and brain.
Promising future
While a number of cities in Hungary prove to be havens for startups, Budapest is getting popular as a tech startup hub. The broadband service in the city is fast and cheap and the city is very affordable. Several startup events, such as Hackathon-in-a-Box, Vittinger Meetup, Budapest Hackathons and Skill Goulash are very popular and well attended.
Several accelerators and incubators including DBH SeedStar, MyCo, Digital Factory, Oxo Labs, Aquincum Technology Incubator, ConnectEast, Traction Tribe and Kitchen Budapest are located in the city. Several investors are very active as well.
Many of the startups in Budapest are developing programs, software and applications for the automotive, financial, app development, online marketing, cloud services and data security
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