Tech startups of New Europe
Over the last twenty-five years, we have been witnessing a spectacular development in culture, business, and politics. Here, as an example, we examine three cases of success of tech startups. A whole new generation of challengers in New Europe has been generating big ideas that better the lives of many. What is missing is an open debate about what makes those individuals take such initiative and how to make their success stories part of the global narrative. One of most overlooked forms of development in this respect is tech startups.
Hungarian Peter Arvai is CEO and co-founder of Prezi, an established innovative presentation software company, whose software is used by over 28 million users from over 190 countries. In 2012, in an interview with The New York Times he admitted that: “One of the challenges is that people just don’t know that these amazing companies are being built in Hungary.” This statement applies to the whole of so-called New Europe. Countries from Estonia to Croatia, from the Czech Republic to Romania, are still not expected to be hubs of great innovation.
We have not succeeded in communicating to the world that New Europe is a competitive place, characterized by daring ideas and the spirit of entrepreneurship. “People feel empowered, seeing examples like Prezi, and know that if you work hard, and have a little bit of luck, you can build a globally successful brand,” encourages Arvai. In addition to Prezi, Arvai also established the world’s first mobile newsreader to follow TED Talks and actively advocates for developing a startup culture in Hungary.
Rafał Brzoska of InPost, a private postal services company, has thrown down the gauntlet to the monopolist Poczta Polska (Polish Post). Nobody really believed in his endeavor. Everything was at odds against him: small resources and an enormous task to accomplish, not to forget regulatory matters concerning consignments weighing less than fifty grams, which he outsmarted by adding metal badges to all letters sent by InPost.
Today, Brzoska has not only won a number of the battles in the David-and-Goliath fight, but has also started international expansion. He established a business called easyPack by InPost, which enables the sending and collection of parcels 24 hours a day. Currently, the company boasts around 2,500 easyPacks on four different continents, and is planning to add 10,000 more by 2016.
Jan Koum’s tweet from February 2014 read: “If there is anyone out there who still doubts that America is a place where all things are possible”. It summarizes his journey from a poor emigrant to a billionaire with a net worth of around seven billion US dollars; an insane fortune created within five years with the use of an app.
The Whatsapp – immensely popular messenger app – founder was born in Kyiv. He moved to the United States as a teenager, enrolled in college, and started working in the consulting industry. A few months after the creation of App Store by Apple, he realized its great potential. His idea for business was simple to the point of being obvious: “Being able to reach somebody half way across the world instantly, on a device that is always with you, was powerful.” But he was most successful with his application. As it happened, he was not alone in his optimism in Whatsapp. The best comparison of the potential in Whatsapp was the price paid by Facebook for the company. Estonia’s GDP in 2012 was around 22 billion dollars; its population is 1.3 million citizens. Whatsapp valuation was 19 billion dollars. Whatsapp has fifty-five employees. Could Whatsapp’s worldwide success be repeated if the idea had never left Ukraine? It would have been much less of a success. Koum could have created a good app but he may not have had enough resources to make it great. Analysis of money stream flows from private equity companies to startups in New Europe shows that he wouldn’t have received enough backup on time. In all probability, somebody with a similar product would have taken Whatsapp’s place. Why does private equity funds rarely invest in New Europe? What constraints have we created for ourselves? Perhaps the most important of those is our own disbelief in our own potential. What if Brzoska’s easyPack had had substantial financial backup earlier as a startup? Imagine how many powerful innovative ideas are relegated to obscurity because too few expect greatness from this part of the world. What if somebody did notice them, believed in them, and decided to invest in them at an early stage? Keep these questions in mind when we announce our list of challengers – New Europe 100 – this autumn.
This text was first published in Visegrad Insight 1(5)2014.