How Central Eastern Europe Is Transforming From Outsourcin...

http://www.forbes.com/sites/ciocentral/2013/10/02/how-cent...

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TEC H | 10/02/2013 @ 9:00AM | 11,548 views

How Central Eastern Europe Is Transforming From Outsourcing To A Real Tech Hub
CIO Central Guest, Contributor

By Balazs zabo Rubi!"s Cube# the househol$ match# insulin# parachutes# an$ contact lenses% These are &ust some of the inno'ations that came from the countries of the former Communist Eastern Bloc of Europe% Hungary# the Czech Republic# (olan$# Romania# erbia# Croatia an$ Bulgaria are famous for their human capital an$ inno'ation% This has been the legacy of CEE# but the )uestion young business people are as!ing is when is this latent potential going to flourish into the !in$ of tech startup boom well un$erway in *estern Europe an$ the +% %, oooner than you thin!# if you as! the lea$ers of the entrepreneurial scene in the region% Central Eastern Europe consistently ran!s at the top of the worl$ ran!s in e$ucational achie'ement in math# science an$ technology% In -./0# /1 out of the -2 finalists of 3oogle"s annual Co$e 4am programming competition were from Central an$ Eastern Europe accor$ing to Bloomberg% This region also accounte$ for 5 of the /0 winners at this year"s AC6 International Collegiate (rogramming Contest# as a Bloomberg report shows% In the + # by comparison# companies struggle with hiring goo$ programmers% As a result# a growing number of $eals are so7calle$ ac)u7hires# $one for the sole purpose of securing s!ille$ staff in or$er to buil$ lea$ing technical teams% Buil$ing on these resources# companies ha$ been going to global outsourcing bran$s li!e E(A6 to combine great technical talent in CEE with business opportunities in the + an$ Europe% Besi$e the arbitrage of human capital in technology# in the past few years se'eral startup success stories ha'e emerge$ across CEE% These inclu$e A83 an$ A'ast from the Czech Republic# 9or$eus from erbia# Filestube from (olan$# Bit:efen$er an$ oft0- from Romania# an$ (rezi# In$e;tools# <og6eIn# an$ +stream from Hungary% Obstacles of the future development :espite a few internationally !nown companies that manage$ to be ac)uire$ or initiate a successful I(O# han$s on entrepreneurial e;perience is still rare in the region% In other European countries# outsi$e the tra$itional business hubs of <on$on an$ Berlin# startup success stories ha'e resulte$ in a boost to the regional startup ecosystem% A goo$ e;ample is the so calle$ =Estonian mafia> that resulte$ from the ac)uisition of !ype by 6icrosoft% Foun$ers an$ early employees of the company ma$e a fortune# but re7in'este$ their money in new startups that helpe$ the tech community in Estonia to grow%

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How Central Eastern Europe Is Transforming From Outsourcin...

http://www.forbes.com/sites/ciocentral/2013/10/02/how-cent...

To$ay there are hun$re$s of startups in Estonia# a country of /%0 million# wor!ing to gain mar!et traction% The Central Eastern European region is still waiting for such a boost% Challenges in the region One of the biggest challenge of the region is a conser'ati'e mentality that is a$'erse to ris!% As tephane 3antche'# 8enture (artner of <A+9CHub sai$% =<ots of people are tease$ by a secure &ob in a big tech company instea$ of chasing their $reams an$ foun$ing a startup% *e nee$ more e$ucation in entrepreneurship# customer $e'elopment# $igital sales an$ mar!eting# pitching%> An$reas Tschas# the Co7Foun$er of (ioneers Festi'al# one of the biggest entrepreneurial festi'al in the region also a$$resse$ the lac! of role mo$els% =The scarcity of entrepreneurial e;perience is $efinitely one big challenge% There are still 'ery few serial entrepreneurs who ma$e an e;it an$ who are in'esting bac! into the region with their money an$ their !nowle$ge%> Another $ifficulty is cause$ by the geographical $istance from main tech hubs that offer high 'alue a$$e$ resources @in'estors# clients# mentors# a$'isorsA that help startups $e'elop pro$ucts better an$ faster# while increasing their 'aluation% As I'an Burazin# entrepreneur# organizer of hift plit sai$# >in places li!e ilicon 8alley you can as easily get into contact with potential in'estors# clients mentors an$ a$'isors that coul$ potentially help grow your pro$uct faster an$ better%> 6a;im 3ur'its# an early stage 8C with Teres Capital says# =I thin! this is the biggest problem in getting to an$ establishing (ro$uct 6ar!et fit% Once beyon$ that stage# most CEE startups $o well# but getting to that stage in the absence of an ecosystem is har$%> Operating in mar!ets remote from tech hubs can greatly un$ermine this% ErnB :u$a# serial entrepreneur from Hungary an$ CEO of ol'o Biotechnology as well as (resi$ent of Hungarian Biotechnological Association# emphasize$ the challenges that in'estors" face% Accor$ing to :u$a# ='enture capitalists shoul$ in'ol'e entrepreneurs as a$'isers or partners to help them buil$ successful companies%> Howe'er# most in'estors in the region ha'e pri'ate e)uity or in'estment ban!ing bac!groun$s# without any han$s7on e;perience buil$ing companies% The result is that they a'oi$ ris! an$ ha'e limite$ !nowle$ge of how to help entrepreneurs buil$ successful companies% The journey towards a tech hub 6ost successful startups coming from the region ha'e their $e'elopment center somewhere in CEE an$ are $oing business $e'elopment in the +% % This way they establish a $irect connection with the mar!et while ha'ing access to highly s!ille$ technical teams in CEE% =?ou can buil$ up a company for much less Cin CEED than you can in the 8alley or *estern Europe%> sai$ I'an Burazin CEO of Co$eanywhere% Capital to the region is impro'ing than!s largely to European +nion initiati'es% The 4ERE6IE program $e'elope$ in cooperation with the European Commission# offers CEE countries such as Hungary an$ Bulgaria the opportunity to finance startups by means of e)uity# loans or guarantees% ays 6a;im 3uz'itsE =If you compare to Israel# it"s )uite a similar story F that ecosystem was -G years in the ma!ing% The history of Israel is similar in many ways# especially in the way go'ernment7run fun$s# 'ery similar to our own 4ERE6IE program# use$ to !ic!start support for scalable pro$uct startups# after which the first successes pa'e$ the way for pri'ate interest to fun$ inno'ation%> Huality entrepreneurial e'ents attract global thought lea$ers% E;amples

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How Central Eastern Europe Is Transforming From Outsourcin...

http://www.forbes.com/sites/ciocentral/2013/10/02/how-cent...

inclu$e the (ioneers Festi'al in 8ienna# the ingularity +ni'ersity European ummit in Bu$apest# the How To *eb in Bucharest# the hift plit in Croatia an$ the Iairos ociety# a global stu$ent7run entrepreneurial organization that is also e;perience success in the region% =There are a lot of goo$ initiati'es facilitating the $e'elopment of the entrepreneurial culture such as e'ents an$ acti'e local communities sharing !nowle$ge an$ connecting people#> sai$ An$reas Tschas% 6ore of the international accelerator programs @G.. tartups# tartup auna or ee$campA are 'isiting the region more often to coach an$ mentor startups% They also pro'i$e see$ in'estment for the right companies an$ access to their global networ!% =I belie'e there is great momentum an$ a critical mass of e;perience coming from success stories li!e <og6eIn# +stream an$ (rezi that will put Bu$apest among the global entrepreneurial tech hubs#> sai$ (eter Ar'ai the Co7foun$er an$ CEO of (rezi%com When can the CEE region get there? (eter B% Jabo&i# serial entrepreneur# in'estor# Foun$er of the European Entrepreneurship Foun$ation# an$ mentor to the Bu$apest startup community pre$ictsE =*e are /. to /G years behin$ *estern Europe# but our ecosytem is starting to grow% It will become more significant as the young generation spee$s up in learning languages an$ gaining business e;perience# which is essential to connect into the global economy%> =*e are 'ery positi'e about the future of the startup an$ in'estment scene in CEE% The arri'al of see$ fun$s ha'e fille$ a 'ery important gap an$ gi'e an initial boost to the best regional entrepreneurs% *e see more an$ more companies from the region raising series A an$ follow on roun$s from top tier European an$ American 'enture capital firms#> sai$ tephane 3antche'# 8enture (artner of <A+9CHub% CEE nee$s more successful business e;its# an$ more serial entrepreneurs ta!ing an acti'e part as in'estors or mentors of new startups% 6arton zB!e# foun$er of In$e;tools became a business angel after selling his company to ?ahoo% To$ay he fun$s an$ supports young companies% zB!e saysE ="I learne$ pretty fast after I sol$ my company that I nee$e$ to $o something to !eep my brain in motion% I wasn"t rea$y to get bac! to $ay7to7$ay wor! an$ but I misse$ the $ays when I !ept thin!ing on 'arious business mo$els# go7to7mar!et strategies an$ pro$uct $esign% o it was )uite ob'ious that I shoul$ start wor!ing with young entrepreneurs see!ing for money an$ a$'ice% I guess this is what angel in'estors $o%> 6ore success stories are nee$e$ in CEE% They ser'e to moti'ate people an$ show them that creating a winning startup is possible% CEE nee$s more successful entrepreneurs to function li!e a =CEE mafia> gi'ing birth to hun$re$s of high 'alue a$$e$ companies rea$y to ser'e global mar!ets% Balazs Szabo is a startup and venture capital expert in Europe. He is the Head of Business Development at InVendor and the Global Development Board Member of airos Societ!. " #EDx spea$er% blo&&er of 'EE Startups and (ounders#ime. #)itter* +szbalazs,Top /. Companies Hiring Foreign *or!ers

This article is available online at: http://www.forbes.com/sites/ciocentral/2013/10/02/how-central-eastern-europeis-transforming-from-outsourcing-to-a-real-tech-hub/

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