For the first time since it was founded, the non-profit organization Startup Hungary compiled a report examining the entire Hungarian start-up ecosystem - the Hungarian edition of Forbes reports. This detailed and thorough analysis seeks to identify the key points to success.
One of these, without a doubt, is to assess the Hungarian start up ecosystem by adopting the best international practices. Looking at the bigger picture does not only help the public but also businesses and policy makers to understand this sector and its challenges, while also putting the already existing results into context.
Based on their business results, Startup Hungary distinguishes between “champions” and “throne claimants” among the start-ups who completed their detailed questionnaire. The study then compares their results and characteristics with the market average, defining the factors required for international success.
“The study shows a marked contrast between the “champions” and aspiring start-ups” - says Csongor Biás, the head of Startup Hungary. “Some companies start out locally, planning to expand in the region step by step. They are usually financed by state or EU funds. On the other hand, we see a small number of companies that focus on international markets, grow rapidly, attract mostly private and international resources, and better adapt to global norms and expectations.”
While most of the respondents aim to become an internationally dominant player in their sector, many are wary of opening up to foreign markets and only the so-called champions have significant export earnings to show. Most companies are cautious about international expansion. This deviates from previous start-ups who envisioned themselves as international players from the outset. It came as no surprise, though, that B2B start-ups seem to dominate this region:
“Successful B2B start-ups are more likely to emerge from Hungary than consumer oriented products. In addition, verticals that require deep technological or engineering knowledge have the potential to break through. This is the strength of the Hungarian ecosystem, and it would be worth focusing on such companies”, says Biás.
While those who follow international standards and good practices have broken away from the rest, a kind of networking has already begun. Successful start-ups are channeling experience back into the ecosystem, sharing their network of relationships with new competitors.
“Those who act according to the global playbook and develop internationally competitive products also gain significant knowledge and social capital. Companies from the first generation of successful start-ups perpetuate a kind of cycle that can become the engine of the ecosystem”, Biás adds.
Perhaps due to the pandemic, most respondents said it was easier to raise funds 5 years ago. At the same time, start-ups do not perceive it to be a challenge to gain access to resources. The transactions of the past year show that those present on the international market had no financial difficulties, while many were supported via public funding throughout the pandemic. The Hungarian market remains rich in resources: Hiventures, the largest financier set a good example by throwing a lifeline to troubled companies.
While most start-ups would rather raise funds via international investors, it is mostly the current “champions” who have a chance to do so. Companies seem to attract either public or private funds, joint investments are few and far between. Yet overall, there is a positive outlook:
“Although we do not yet have comparable data from previous years, various industry surveys show that the amount of capital raised has increased in each investment circle”, concludes Biás.