According to the Hungarian Central Statistical Office (KSH) there are about 1.7 million businesses operating in Hungary, of which about 600,000 are companies. Actual new companies are founded each year on a scale of 30 thousand, but roughly the same number of them disappear every year, too.

Looking at their sectoral distribution, a significant portion of the new businesses (25% of them) are engaged in commercial activities. It is noteworthy, however, that the next popular sector with about 10% distribution is enterprises with professional, scientific and technical activities. All the other sectors have a fairly even distribution with a few percentage each. Where to find the Hungarian startups among them? The word “startup” got embedded in the Hungarian language – we cannot really find a concise and expressive translation that would accurately reflect the true meaning of this word. Technical people like to have exact definitions, so let’s look into it a little deeper. As one can suspect, it’s not just about newly created enterprises, because as we can see from the above figures there are quite a few of those – but we hear much less about successful Hungarian startups. Compared to a new business the essence of a startup can be found in its goals. It’s about a company that targets its emergence on international markets with its innovative product or business model and has the growth potential to reach that goal, too. Businesses that are more local, like a store, a hair salon, or a car repair shop cannot be regarded as startups, even if they were just created. But if the store is using a business model, like online shopping, through which it can extend its customer base to an international level and show significant growth, then it can be classified as a startup.

At the same time it’s no coincidence that most of the startups are created in technical areas, because achieving those additional goals (new business model, international sales, and thus high growth) can be much more self-evident for a business with technological background. There are many new companies that use IT to revolutionize the business model of their – typically service-oriented – domain. After the first wave of the “sharing economy” with its well-known representatives of Uber, Airbnb or TaskRabbit, a number of companies are being created that try to verify the trustworthiness of the sharing partners, or to protect the private sphere. Many are involved in caring for the elderly, reducing distribution chains, sustainability or green transport. Rarely, there are exceptions, for example there are startups focusing on building materials and concrete technologies that are trying to achieve international success with a Hungarian background. Let’s not forget that development departments of large international companies are also working on, and even investing huge resources to renew their products. These changes are usually evolutionary, not revolutionary, but their tremendous advantage is that their brand is well-known and they have their own in-house customer base, so introducing and selling their new products to customers does not require as much of a fight as for a startup. An interesting phenomenon over the past period has been that multinational companies – sensing the wind of revolution in their own industries – try to create or outsource their own startups to generate revolutionary abilities for themselves. Rather have their own company lead the revolution in the industry than somebody else.

Analysis of the expected effects of Brexit have also revealed the possibility that London would no longer be a center for startups. To put it simply, an investment in startups is usually a speculative decision which has a great deal of uncertainty. If the environment itself is uncertain, the investor will not take on more risks and will move on. Budapest can take advantage of this situation. The general consensus is that there is no shortage of creative ideas in Hungary, and if that is coupled with a stable, predictable environment, these together can already create a step forward in becoming a startup center. But that requires quick action, because there are plenty of candidates to take on the role of London. Dublin explicitly thanked London for their decision, but Amsterdam, Berlin and Stockholm also have similar plans.

Therefore, it is important to promote the startup culture in Hungary, which, as defined above, is not only about the development of the entrepreneurial spirit, but also the formation of and the desire for ambitious goals, the openness to grow and to be more perfect. There’s a great need for this point of view not only in Budapest, but also in other Hungarian cities, too.

Let’s cheer that startup culture – and not just the cult of startups – will also become widely spread in Hungary, so the world of startups will be loud with Hungarian successes, thus bringing the world’s attention to Budapest and to Hungary.

Balázs Bodnár, Managing Director of evopro systems engineering Ltd.