The start of the new year gives a perfect opportunity to take a break, and gaze back into the past to assess how far one has come. From the perspective of the Hungarian startup ecosystem the following tendencies, mostly of domestic origin, have shaped the events in the technology industry.
Waning venture capital investments
2013 brought a huge drop in the number and especially the value of investments. According to data from Startups.hu, technology entrepreneurs managed to close deals in worth only of $3.1 million (€2.3 million) in 12 deals. Compared to the $11.4 million (€8.1 million) total of 2012 it is a 60 percent drop in investments. Investors complained about the lack of high quality projects worth investing in, while startups blamed investors for unacceptable termsheets, practices, and 4-6 month long evaluation periods.
Due to these circumstances, the number of seed investments (stable average in the last 3 years) exceeded venture capital deals in 2013. Investments into Hungarian startups were comprised of 58% seed, 33% venture, and 8% angel deals. This tendency is actually the balancing out of the market following the inflated valuations and investments of the previous years.
Despite the harsh conditions, several startups managed to secure funding in 2013. The three biggest investments went to OptoForce (€ 670k by Finext Startup and Day One Capital), Agorix (€ 500k by Szechenyi Capital Fund Management), and Virtual Call Center (€ 500k by DBH Investment).
Accelerator boom
2013 saw the rapid expansion of accelerators. iCatapult presented its first accelerator programme aiming at global markets (primarily to the USA), and took 8 startups on a tech roadshow in New York. ACME Labs launched in September, and was followed shortly after by AVEC Accelerator in October.
In August the State announced that it would actively support the growth of the local startup ecosystem by channeling funding from EU grants worth around 5.5 million Euros in total. Financing would be done only through "Accredited Technology Incubators" that would become entitled to nominate companies to receive direct financial backing from the State.
The call by the State received 20 applications, incubators and accelerators popped up across the technology industry. According to the decision of the jury in October, four Hungarian incubators received accreditation by the State: ACME Labs (covered earlier), Aquincum Incubator, Digital Factory, and iCatapult (covered earlier).
Increasing engagement by the State
In September 2013 state officials called upon the well known stakeholders of the Hungarian startup ecosystem to form a working group dubbed as the BudapestHUB. Their aim is to establish a supporting entrepreneurial environment in the coming years, with the State acting as a catalyst and clearing obstacles along the way. In November the working group published a paper titled "Runway 2.0.2.0" (available only in Hungarian), outlining their ambitious goals for the coming years.
Closing remarks
2013 brought many changes, but the one thing that remained the same was the dedication of everyone involved in the Hungarian startup ecosystem. Thanks to all the people working hard, contributing to community life, sometimes by sacrificing their private time to expand the local startup ecosystem. Now let us focus on the year ahead.
