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Introduction to Budapest’s startup ecosystem
Situated along the Danube River in Europe, Budapest has mesmerized many with its beauty and vibrancy. But of late, a new buzzword is doing the rounds of the city: startups.
The city is bursting with new ventures, and helping their development are co-working spaces, accelerators, startup events, tech blogs, and hackathons.
Owing to its rapidly growing startup ecosystem, Budapest is now believed to be one of the best places to enter the startup scene in Central Eastern Europe! In StartupBlink’s 2019 report, Budapest ranked 1st in Hungary and 89th globally.
Most successful startups of Budapest
- Prezi (@prezi): Created in 2009 by Adam Somlai-Fishcer, Peter Arvai and Peter Halacsy, Prezi was meant to replace ordinary slide presentations. It was built with the support from Kitchen Budapest and Magyar Telekom. The hugely popular company now has raised over $70M from investors such as Accel Partners.
- Ustream (@Ustream): The company was founded by Hungarian Dr. Gyula Feher, along with John Ham and Brad Hunstable. Today, Ustream is the world’s fastest growing live streaming platform, with unique monthly visistors of over 50 million.
- LogMeIn (@LogMeIn): Boasting of a worldwide user base of over 15 million, LogMeIn was founded in 2003 by Michael Simon and Marton Anka. The company had one of the most successful initial public offerings when it went public in 2009 on the NASDAQ stock exchange.
- NNG Llc (@NNGglobal): Formerly Nav N Go, this Budapest company is a global leader in navigation and GPS systems. It was founded by Peter Balogh, and won the Hungarian Innovation Grand Prize for its software, iGO Automotive. It has offices in Switzerland, Hungary, India, Australia, Israel, China and the USA.
Advantages for startups in Budapest
A successful startup ecosystem is the result of ease of collaboration and access to mentors, investment and talent. And Budapest provides entrepreneurs ample opportunities to access these through the various startup events held in and around the city. It boasts of a good number of coworking spaces, local meetups, and events to encourage collaboration. What’s more, all major destinations in Europe are easily accessible from Budapest, owing to its central location. So there’s your chance to meet and greet founders, mentors and possibly your future employees at events such as Le Web, Startup Weekend, HowToWeb and WebIT!
The city’s geopolitical location, situated on the crossroads of Western, Eastern and Southern-Europe, with obvious cultural proximity to the Western business, legal and social environment, is also mentioned by Nikolett Barta, of Kaptar Coworking. Further, she says, “Traditionally one also ought to mention the country’s rich traditions and bold ambitions in higher education, especially in natural sciences, IT and technology education. Budapest has all the potential to become the startup hub of the Central East European region.”
Zsolt Oleg Berta, CEO of iCatapult, believes Budapest is a great place to live, work and come up with innovative ideas. He says, “The “burn rate” (cost of living, working labor and infrastructure -this is very important especially in the seed phase) is lower than in Western-Europe or USA, even though you can find talented tech specialists, business development managers, mentors, etc.”
The low cost of living and availability of top notch technical talent makes Budapest an ideal destination for startups to flourish.
And what do the city’s startup founders do after a hard day’s work? Peter Kovacs, CEO of IseeQ, points to the city’s exciting nightlife and flourishing food culture! He also mentions how one can easily live in Budapest speaking English alone.
Disadvantages for startups in Budapest
As with any startup ecosystem, Budapest presents its fair share of obstacles to startup founders.
Bernadett Polya, facilitator at Demola Budapest, rues that there is not enough governmental support for startups yet and the investment culture is not the best in the world. “Funding is not the easiest topic in Hungary. Start-ups based in Budapest – thinking in a global market – usually try to gain funds by Western-European VCs, attend international accelerator programs and as start-ups are more B2C focused, crowdfunding campaigns are quite common too,” she says.
The other two major issues are high VAT and high taxes on employee wages, as explained by Peter Kovacs. Hungary has the highest VAT (27%) in the EU, fact startups should bear in mind. The taxes on employee salaries are a pain point too. Startups can expect to spend close to an employee’s net salary on taxes, health insurance, and pension funds. Sample this: The typical starting salary for a developer would be $740, which would amount to $1450 in total expenses for the company.
Also, some of the actions taken by the government make the current political scenario uncertain, which is something startups should take note of.
Lastly, for those moving to Hungary for a long period of time, prepare for an arduous immigration process. The road is not as easy as you may expect!
Important players in the Budapest startup ecosystem
Mentors in Budapest:
- David Trayford (@davidtrayford): The founder of coworking office, hu, David has mentored startups at Seedcamp and Pioneers festival. He is also a Team Project Coach at Singularity University.
- Peter Kovacs (@kowaxisee): Peter is the co-founder of a number of startup events and organisations such as Central European Startup Awards, Nordic Startup Awards, and IseeQ. He is committed to building a strong startup ecosystem across Europe.
Investors in Budapest:
- Day One Capital (@DayOneCapital): It is a business angel fund that invests in the early stages. They have a special interest in fields such as the internet, software, mobile, medical technology, cloud, biotechnology, and consumer services.
- Primus Capital: It is an international fund manager with offices in Budapest, Munich, and Vienna. They not only provide funding but also valuable advice and access to international partners, clients and investors.
- Conor Fund: It is a capital seed fund in Hungary, that offers startups networking opportunities and expertise. They invest 50K – 300K euros into companies, depending on their capital requirements.
- X-venture Alpha: It invests in small and medium-sized companies. They typically look for unique products and the possibility of expanding internationally.
Startup Events in Budapest:
- Hungarian Innovation Tech Show (@MMKlaszter): It is an event organised by the Hungarian Mobility and Multimedia Cluster annually since 2009. HITS provides an opportunity for local tech companies to showcase their MVPs and prototypes.
- Startup Sauna (@startupsauna): It is a semi-annual event where local startups can present their ideas and receive feedback from serial entrepreneurs and investors. It will be held in Budapest on the 11th of September this year. The best startups will get an opportunity to be shortlisted for the Startup Sauna accelerator program.
- Startup Weekend Budapest (@StartupWeekend): Startup Weekend has been held in various countries all over the world. The best performing startups in the event get a chance to participate in the Global Startup Battle and avail of funding and other resources.
Budapest has seen some noteworthy successes in the form of Prezi and Ustream and its startup ecosystem is evolving rapidly. Given its pace and ever eager startup community, it won’t be long before it becomes a leading startup destination in Europe!
We would like to thank the following people for sharing their insights about the Budapest startup ecosystem with us:
Nikolett Barta , Kaptar Coworking