Brain Bar Budapest: CEE startup ecosystem

6 June 2015

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June 4-6th we were invited to Brain Bar Budapest, new global festival focusing on tech and humanity.  The event series features a diverse offering of presentations, debates and panel discussions, focusing on themes such as the complexity of the relationships between human labor and robotics, mass urbanization and the rural lifestyle or even singularity and religion. Besides leading experts, decision makers and opinion leaders, the challengers of the status quo – entrepreneurs and students – also took part. Startup Poland moderated a panel discussion about CEE startup ecosystem – What does entrepreneurship mean to New Europe?

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While nearly all high growth technology startups have historically emerged from no more than 3-4 startup ecosystems, namely Silicon Valley and Boston, this trend appears to have reached its end. Simultaneous with a global explosion of entrepreneurship has been an explosion in the rise of new startup ecosystems around the world, and a new found maturity in others. As high growth technology startups look to be the primary growth engine of the new information economy, we thought it is crucial to raise the question: what entrepreneurship means to New Europe?

In 2010 Professor Daniel Isenberg from Babson College published an article in the Harvard Business Review that helped to boost the awareness of the concept. The diagram below shows the nine major elements that are considered important to the generation of an entrepreneurial ecosystem. The focus of this first SEAANZ White Paper is on the role of government policy.

The first prescription was to stop emulating Silicon Valley. Despite its success the Valley was formed by a unique set of circumstances and any attempt to replicate it in other places were unlikely to succeed. This led to a second prescription, which was to build the ecosystem on local conditions. Grow existing industries and build on their foundations, skills and capabilities rather than attempting to launch high-tech industries from scratch.

The third prescription was the importance of engaging the private sector from the start. Here the role of government is indirect and one of a facilitator not a manager. In trying to shape the growth of such ecosystems attention should be given to the support of firms with high growth potential that can help to generate a “big win” early on. This is the opportunity for local success stories to become role models for others.

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During the panel we were talking about a CEE ecosystem and CEE startup revolution – what are our visions, aims and reality. Participants,  Veronika Pistyur – CEO of Bridge Budapest, Ivan Stefunko – Managing Partner of Neulogy Ventures and Zuzanna Stańska – CEO & Founder at DailyArt were representing NGO, startup and venture capital investor sites.

Knowing our different backgrounds, we were trying to discuss characteristics and challenges of the CEE ecosystem compared to EU and our closes neighbours – Wien, Berlin. We were discussing as well what could be the best incentives and what is crucial to boost entrepreneurship in our region. What should be the role of governments and policy makers? Is the current policy making is growth-oriented enough? How should governments eliminate barriers?

Startup Poland Brain Bar Budapest

Fostering the growth of entrepreneurial ecosystems

Over the past 35 years the level of government interest in entrepreneurship and small business development as potential solutions to flagging economic growth and rising unemployment has increased. It helped to spawn a new field of academic study and research.

This trend was boosted by the success the iconic “technopreneurs”. Technology entrepreneurs such as Steve Jobs of Apple, Bill Gates of Microsoft, Jeff Bezos of Amazon, or Larry Page and Sergey Brin of Google have become the “poster children” of the entrepreneurship movement. Today “science” or “technology” parks can be found scattered around the world. They usually follow a similar format, with universities and R&D centres co-located with the park, and venture financiers hovering nearby looking for deals. Most have been supported by government policy.

What governments want is to replicate Silicon Valley and the formation and growth of what have been described as “entrepreneurial ecosystems”. However, despite significant investments by governments into such initiatives, their overall success rate is mixed.

Startup Poland Brain Bar Budapest

Key recommendations for government policy

In summary, key recommendations for government policy in the fostering of entrepreneurial ecosystems are:

  1. Make the formation of entrepreneurial activity a government priority – The formulation of effective policy for entrepreneurial ecosystems requires the active involvement of Government Ministers working with senior public servants who act as ‘institutional entrepreneurs’ to shape and empower policies and programs.
  2. Ensure that government policy is broadly focused – Policy should be developed that is holistic and encompasses all components of the ecosystem rather than seeking to ‘cherry pick’ areas of special interest.
  3. Allow for natural growth not top-down solutions – Build from existing industries that have formed naturally within the region or country rather than seeking to generate new industries from green field sites.
  4. Ensure all industry sectors are considered not just high-tech – Encourage growth across all industry sectors including low, mid and high-tech firms.
  5. Provide leadership but delegate responsibility and ownership – Adopt a ‘top-down’ and ‘bottom-up’ approach devolving responsibility to local and regional authorities.
  6. Develop policy that addresses the needs of both the business and its management team – Recognise that small business policy is ‘transactional’ while entrepreneurship policy is ‘relational’ in nature.

Thank you for the invitation and hopefully see you next year!

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