Could you introduce Startup Hungary and what this beautiful name entails? What achievements have you made since your establishment?

“We founded Startup Hungary nearly four years ago, initially with 12 first-generation startup entrepreneurs who have already proven that starting from Hungary, it is possible to create success stories visible on the international map. Among the original founders are Prezi, UStream, NNG, BalaBit, IND, and several other exited entrepreneurs, as well as organizations like Google, IVSZ, Design Terminal, local market VCs, and Microsoft. This partner-founding circle has now expanded to 40 members, and new-generation success companies and exited entrepreneurs like SEON, Bitrise, Shapr3D, and Turbine have also joined the initiative. These founders contribute back with their knowledge, time, and smaller financial contributions through our platform.

We believe the real driving force of the ecosystem is the cycle where founders, after their successes, start to appear as angel investors, mentors, or founders of new startups. We want to accelerate this through various activities, so we regularly hold meetups and workshops. We have an online community where the most promising early-stage startups participate in various programs. We annually survey the ecosystem to create a more supportive legal environment for startups, participate in several international initiatives, and try to amplify the best stories and practices to help the next generation of startups as much as possible.”

You mentioned participating in several international initiatives. Could you elaborate on which ones?

We are board members of Allied for Startups, one of the most important Brussels-based advocacy organizations, where we try to represent startups’ interests around various data and platform regulations. Our goal is to achieve standardization and break down various legal barriers to create a unified European market, which we try to enforce through this organization and make the voice of domestic startups heard. Recently, we organized a meeting inviting community organizations similar to Startup Hungary from various Baltic and Central Eastern European countries to Budapest. Our international network is quite extensive, so Startup Hungary is starting to establish a position on the international map where international and domestic investors often discover early-stage startups through us.

In which direction should the domestic startup ecosystem develop? What can we learn from the Baltics, and what can inspire our ecosystem?

There might not be anything particularly new to learn from them. It is increasingly clear that the culture of giving back is missing here—the Skype effect, which is very evident in the northern ecosystem, showing how a major success story can be conductive. After the Skype story, dozens, almost a hundred angel investors appeared in the market who became wealthy and wanted to apply their experiences in starting new companies. Simultaneously, a major success story essentially generates the next success stories, suddenly raising the level of ambition because it brings the scale of success into close proximity. Unfortunately, perhaps only LogmeIn can be considered such an example in the domestic ecosystem.

A non-detailed but illustrative map in the latest Forbes shows a cycle of how founders of first-generation startups migrate from which companies and become new founders and angel investors. This cycle is observable on a smaller scale here, although increasingly larger in volume, and this is the key to development. The Startup Hungary platform proves that these people are motivated to give back to the ecosystem with their time and money. From this perspective, the culture of giving back is not missing here either; it just needs to happen on a larger scale, which will be triggered by successes.

Related to this topic, Nóra also recalled a World Bank chart from 2013, showing what financing startups receive in certain growth phases. This two-dimensional chart, which can show three-dimensional growth today, essentially illustrates the startup mafia model, where a part of the capital should return to starting companies at the time of exit.

Your article in Forbes in August 2022 was significant, where you dropped a bomb with the title suggesting that the Hungarian startup ecosystem was in a better position ten years ago than today. How would you phrase this now, almost two years later? Have you managed to initiate some processes, and have we succeeded in developing in any way?

(You can read the mentioned article here: https://forbes.hu/interju/startup-hungary-bias-csongor-interju/ )

The title of the article was a bit sensational and provocative. I think the saying, which I still hold today, was that in an international regional comparison, the domestic ecosystem was ahead 10-15 years ago compared to today. The reason is that when Prezi, UStream, and LogmeIn started, this model was not at all common—there were only six unicorns in the Central Eastern European region. Today, we count more than 45 unicorns, so previously, Hungary was a pioneer in this sphere, but now we are lagging behind.

In an earlier Forbes article, I wrote about the huge decline in the amount of venture capital flowing into startups. From the record 2022 amount of 180 million forints, it dropped back to 65 million in 2023. The primary reason is the same as in the whole of Europe—the macroeconomic situation change, which primarily affects later-stage growth investment rounds. Additionally, it is visible globally that many previously significant EU and state sources have stopped. I and several others on the Startup Hungary Board believe that state EU sources were overly dominant for years, which are necessary in this market environment, but because they were easy to access, it somewhat obscured what a truly venture-scale startup is, what a digital SME is, and what can be financed from VC and what cannot.”

Your research, which is the most thorough domestic startup research, almost inspires the respondents to answer because this way you can represent what is useful for them. What have you noticed over the years?

The champion startups typically focus on the international market at a very early stage, usually with a good track record, or the founders possess significant domain knowledge in the given industry. It is visible that the domestic ecosystem is still strongly dominant, and this dominance only strengthens year by year in B2B sales solutions. Eighty percent of startups work with some web and mobile applications, and one in ten startups falls into the tech category, making science-based technologies, AI, and biotechnology the most popular areas. We see various demographic patterns year by year, including that only 25% of startups have female founders, roughly matching the European average.”

In which areas are we entirely at an international level?

Yes, I think it is visible that there are two major segments from which internationally successful startups emerge. One category includes bottom-up B2B sales companies, where software service companies operate in such a way that the product sells itself, like Prezi, UStream, Shapr3D, Seon, Bitrise. The second category is deep tech, where we have a good chance due to the strength of education, such as the intersection of biology and AI, like Turbine, or software solutions around autonomous vehicles, like AI Motive, which produced the largest exit. These segments are most likely to succeed both here and in Europe.

Year after year, the metric showing that a significant portion of startups relocates their legal operations to a Delaware C Corporation or a UK Limited is also evident. One-third of respondents have already done this, and another third plans to do so in the next 12 months. In Europe, more than half of the 20-40-50 new unicorns relocate their headquarters outside Europe each year.

“We have often mentioned that regulation, rather than financing, should be addressed. The Design Terminal, HVCA, HunBAN, and HVCA’s legal committee, which invested enormous resources into the qualification work, participated in this process. One regulation we achieved is related to Convertible Loans, which are no longer considered lending within certain limits and do not require various MNB licenses. We are now trying to think through an official statement so that this works not only with Convertible Loans but also with Safe agreements. Additionally, there were changes in the tax aspects of ESOP regulation, where we now tax in line with standards, not as income but as capital gains, and the income acquired through ESOP programs or the taxation itself is due not at the time of acquiring the share option but after the liquidation event.”

What are you most proud of professionally since you’ve been involved in the startup ecosystem?

What I am the most proud of is that we created Startup Hungary, where more than 40 role models and founders honor me by allowing me to represent this organization on their behalf. Initially, SEON and Bitrise were two or three-person teams, and they still say that the professional environment was transformative for them and motivated them to think globally and start building their networks internationally. I hope that the next generation of SEONs, Bitrises, and similar companies will say the same about Startup Hungary because we work to create more and better startups, and I am most proud if we can achieve a real index in this.”