Startup support for Hungarian entrepreneurs - Electronica Fast Forward Award 2020

Startups need a helping hand now more than ever, which is why, despite the restrictions imposed by the coronavirus, Elektor is going full steam ahead with a virtual Electronica Fast Forward Award in 2020. In total, 19 startups are competing for part of this year’s €150,000 marketing package prize. The addition of this essential element to their fledgling businesses will help them to ensure that their technical prowess and innovative electronic solutions find customers and partners, allowing them to establish themselves more quickly. Four of this year’s startup are being supported by the Hungarian government building on the rapid growth of the startup community there, especially in the country’s capital, Budapest. We sat down with the Hungarian Consul General to Bavaria, Gábor Tordai-Lejkó, and discussed the electronics-related startup scene, what makes doing business in Hungary so attractive, and why Bavaria, Germany’s largest state, plays such a significant role in international business relations.
 
Cording: Thanks for taking time out of your busy schedule to talk to Elektor. I’d like to start by finding out more about the electronics-related startup scene in Hungary. I’ve heard that there is a lot of activity in the capital, Budapest.

Tordai-Lejkó: First of all, I am glad and excited that for the first time the Consulate General of Hungary in Bavaria can support four innovative Hungarian startups at the Elektor Fast Forward Award. These Hungarian companies have all developed something unique; business ideas that have already gained the attention of experts. To tell you the truth, this is not a surprise to me. Hungary has few natural resources so, instead, the country relies on the inventiveness of its people. It would be difficult to list all Hungarian inventions over the past century, but it is worth mentioning a few such as sparkling water, electric motors, the carburetor, the design of the Model T Ford, and the discovery of vitamin C, of course.
A decade ago when the startups Prezi (a cloud-based presentation platform) and Ustream (a video conferencing solution later bought by IBM) became the country’s most successful startups, Hungary was not a popular startup destination. But recently, Hungary and its beautiful, historical capital Budapest have become a vibrant startup hub. There are more than 1,100 active startups in our country and 94 new startups are founded on average per year. Budapest, with its many universities, international companies, co-working offices, low cost of living, and young, highly-educated, technically-capable workforce, is a perfect location for startups.
 
Cording: A lot of today's dominant, big technology brands (Apple, Facebook, Google, Microsoft) were born in the USA. Are we doing enough in the EU to grow our own technology businesses?

Tordai-Lejkó: Obviously there is a lot we have to do since there are only very few global technology businesses originating from Europe. We should do more to develop the European Digital Single Market, help the venture capital industry, and turn European diversity into a source of innovation.
It is important to promote entrepreneurship, especially innovative startups, to achieve sustainable growth and quality jobs. At this time of a global pandemic, it is more important than ever to inspire, protect, and support the younger generation to bring new ideas and technologies to life.
 
Cording: Yes, the impact of the coronavirus has also impacted the Electronica Fast Forward Awards resulting in us moving them online for 2020. Is the pandemic also causing issues for the startup community in Hungary?

Tordai-Lejkó: It is an unquestionable fact that the startup community is being severely impacted by the coronavirus pandemic. Of course, all sectors are affected differently, but we are experiencing overall market uncertainty. Startups were facing significant challenges even before the crisis struck,  such as value being concentrated in major cities, a lack of inclusion in the startup community, and even tech giants faltering. The unexpected pandemic situation has resulted in a slump in both consumer demand and venture capital. The latest Global Startup Ecosystem Report shows that venture capital funding fell 20 percent worldwide in the first three months of 2020, while it plunged by 50 percent in China.
The startup ecosystem in Hungary is still in its early days but it has been growing rapidly over the last few years. The Hungarian state is also taking measures to promote innovation during this period, with the Hungarian National Office for Research, Development and Innovation responding to this emergency situation by planning rapid intervention to mitigate against potential long-term, negative spill-over effects.
 
Cording: Are there specific market segments that attract the attention of Hungarian startups?

Tordai-Lejkó: What we currently see is that the Hungarian startup community is very active In the areas of healthcare, life sciences, the automotive industry, artificial intelligence, and big data.
 
Cording: One way of helping startups is by providing assistance to enter contests that can raise their profile, which you are doing. Can you tell us some more about the four Hungarian startups you are supporting this year? What benefits will they attain by taking part?
 

Tordai-Lejkó: AXS Motionsystem Ltd. develops professional digital solutions for ergonomics experts. Their Ergonomics Evaluation System allows every human movement to be digitally recorded, for example in a factory, to then measure and evaluate precisely the physical forces during that work activity. This can then be used to ensure the health of their employees.
E-Fásli is an invention by a young Hungarian girl who is still in high school. This IoT device provides both cooling and heating therapy. It can even be used at home for conditions as diverse as a tooth abscess, broken limbs, and rheumatism. The machine can be attached to various parts of the body and is capable of maintaining a constant temperature of between 25°C and 45°C for many hours. It is unique because e-Fásli is the first self-learning thermotherapeutic device. The patient’s data is gathered by a mobile application before being sent anonymously to a server. Here it is processed to determine optimal and personalized therapeutic parameters that are then sent back via a Wi-Fi network.
Then we have Pix VR, a Hungarian startup with experience in immersive technologies. With their Workforce Development Solution, businesses can analyze, measure, and evaluate the performance of employees. Their goal is to revolutionize industrial training using spatial computing and analytics by focusing on the whole workforce lifecycle. This includes the candidate selection process, training, re-training, and employee evaluation. The product is particularly applicable in blue-collar industries such as manufacturing, automotive, and pharmaceutical.
Last, but not least, the startup SKART is engaged in designing and producing unique, limited-edition electric motorcycles. Besides their unique design, the bikes are special due to their frame, materials, and built-in technologies such as 3D-printed fixtures. SKART’s primary goal is to sell its first motorcycle model this year.
It is my opinion that entrepreneurs are always looking for new opportunities to promote their company and develop their businesses. One way to achieve this goal is to win business awards. The benefits of participating in startup competitions such as the Fast Forward Award are immeasurable and range from making new contacts, attracting attention, boosting team morale, and gaining new clients.
 
Cording: The support you are providing these four startups is unique in the history of the Fast Forward Awards. For those looking to select a city for their next tech startup, what sort of support and resources are on offer in Hungary?

Tordai-Lejkó: It would go beyond the scope of this interview to present all incentives available for startups. There are quite a lot of state-funded venture capital programs, including the EU structural funds as well as private-sector funded programs. Hungary was among the top users of the JEREMIE (Joint European Resources for Micro to Medium Enterprises) funds where 70% of the capital is provided by the EU and 30% by private investors.
I would like to draw special attention to ‘Hiventures’ that is a 100% state-owned venture capital program. Currently, it is handling about 200 million euros for pre-seed, seed, and growth investments, and has invested in over 250 startups so far. The Hungarian government has also introduced a Technological Incubator Program, based on an Israeli model, where private incubators can acquire funding of up to 80% in a co-investment scheme. Such incubators must run an approved incubation and mentoring program. Total government funding amounts to approximately 25 million euros and well over 120 startups have participated in the program. Last, but not least, an online, credit-earning university training program has started to provide basic startup knowledge and to help establish new businesses.
 
Cording: Often, startups struggle with funding and accessing technical talent. What would you say are the top three challenges facing Hungarian startups?

Tordai-Lejkó: I believe that there is no single challenge that can stop passionate entrepreneurs from successfully launching a startup. However, if you are asking me to highlight three challenges, firstly I would mention the lack of business and market knowledge. It is our experience that this is one of the top mistakes made by founders and sits at the top of a list of common challenges. It is important that you have already gained some knowledge about the industry you are entering, your competitors, your target market.
Second is the lack of financial resources. Let’s face it: you need enough cash. If you have income flowing straight into your bank account, this might not seem like an issue but, when this isn’t the case, you need to take swift action. You will definitely need cash to finance activities such as programming or product development, office space, and promotion, and that’s just the tip of the iceberg.
Thirdly, you need to be able to sell your product. It is not enough to have a good product: you have to be persuasive, you have to be good at sales. This is where Hungarian companies still have a lot to learn.
 
Cording: I noticed that there are two specific programs that can help: “Startup Campus” and the “INPUT Program”. What can participants expect from them?

Tordai-Lejkó: In line with the Hungarian National Export Strategy, one of the main goals of the Economic Bureau of the Consulate General in Bavaria is to help SMEs to enter into foreign markets. Accordingly, we have introduced a new program, the Bavarian-Hungarian electronic startup program, that aims to support four Hungarian SMEs to become part of the global market. Thanks to the INPUT Program and Startup Campus we were able to recommend more than 90 electronics-related Hungarian startups to Elektor. I do hope that we can organize similar programs in the future.
The INPUT Program aims to help startups succeed in foreign markets. While typical startup programs in Hungary focus solely on one particular field, INPUT functions as an umbrella organization and is 100% government-funded. It provides mentoring, technological assistance, as well as funding for accessing foreign markets. We are very proud of the fact that, for its activities and role in the Hungarian ecosystem, it won the Global Best Practice Award of the United Nations in 2018.
Startup Campus is an international incubator that offers programs for innovative businesses from the idea phase to the market entry. With a native team and a globally extensive partner network, it provides local representation, tailored market entry service, and complete sales support in several major European markets from their offices in London, Berlin, and Budapest. They are also organizing an online conference for, among other technologies, smart city solutions that will aid us in introducing smart-city related startups to more than 100 Bavarian and Hungarian twin cities. This online conference will take place on the 25th of November.
 
Cording: That leads me nicely to my next question. The Electronica Fast Forward Award takes place here in Munich, Bavaria, a state that accounts for around a third of German investment in Hungary. Why is Bavaria such a strong partner to Hungary?

Tordai-Lejkó: First, it is important to mention that we share a common history and culture as our history goes back to the time of King Stephen I. The Bavarian princess Gisela was married in Scheyern, Bavaria, to our first Christian king in 995 as a part of Hungary's policy of opening up to the West. Today over 77,000 Hungarian citizens live in Bavaria, and around 200,000 Hungarians with German heritage are living in Hungary.
Secondly, Bavarian companies trust Hungary. We have the lowest taxes in Europe (corporate tax is 9%, social security contribution is 15,5%), a well-trained workforce, quality higher education, and supportive, professional governmental institutions and support programs. The country has a great central location in Europe, making it easily accessible from everywhere. We also offer a stable legal framework that is similar to the German legal system along with employer-friendly labor laws that allow for a high degree of flexibility in terms of working hours and wages.
The best evidence of our joint success is that trade volume has doubled since 2010, reaching 14.76 billion euros in 2019. In total, 146 Bavarian companies have invested more than 1,800 billion forints in Hungary. Approximately 2,300 Bavarian companies have trade relations with Hungary, around 250 of which also have sites in our country. In terms of total trade volume, Bavaria was Hungary's largest trading partner among the German federal states and Hungary was its 10th biggest trade partner in 2019. The Hungarian Government has also concluded strategic cooperation agreements with four Bavarian companies: Siemens, Audi, Knorr-Bremse, and Güntner-Tata.
 
Cording: Finally, what are the long-term goals of the Hungarian government through these wide-ranging support programs? And how can businesses and individuals get in touch and find out more?

Tordai-Lejkó: The objective of the Hungarian government is to make the Hungarian business environment even more attractive and, in addition to the “Made in Hungary” projects, to increase the proportion of “Invented in Hungary” investments, R&D projects that generate higher added value, and promote the investments of companies using modern industrial technologies. To accomplish this goal, we need to inspire our citizens to take the risk to establish their own businesses.
Together with my colleagues, Mr. Gergely Janzsó and our Economic Attaché Mr. Roland Péli, we are committed to continue the success story of the Hungarian and Bavarian economic relationships. This is undertaken by organizing business events and conferences, supporting high-ranking political and business delegations, and offering tailor-made business trips for both Hungarian and Bavarian businesses. Our economic bureau is always there to help companies or private persons wishing to invest in Hungary or looking for new business partners and suppliers.