Innovation 2015 – Budapest Business Journal

innoVATioN 2015

Price: HUF 990

S ta r t u p s

i n c u b at o r s

s u s ta i n a b l e d e v e l o p m e n t

S o f t wa r e

M o d e r n t r a n s p o r tat i o n

SUPPORT: Innovation infrastucture

IDEAS:

b publication

Startups to watch BIG NEW THOUGHTS from Hungary

Tรกvlatokat nyitunk

2

innoVATioN 2015

Dear reader, With its disproportionately large number of Nobel laureates, and the excellent reputation of its university programs in mathematics, engineering and science, it’s no wonder that Hungary consistently rates highly as a place for innovation.

The country’s R&D scene has become a magnet for multinational corporations, who are placing research facilities here with growing frequency. Meanwhile, Budapest is often ranked as one of the top startup capitals in Europe.

Still, more can be done to encourage local enterprises with big ideas.

This special publication, produced by the Budapest Business Journal, explores the world of innovation, here in Budapest and around the country. We look at the support system available for innovators, and review some of the suggestions that experts make for strengthening that infrastructure. In addition, we survey advice that experts offer to startup businesses.

Of course, we also outline a sampling of the great ideas coming out of enterprising minds in Hungary.

We hope that this publication provides worthwhile information – and perhaps some inspiration – for those who innovate and those who are seeking new ideas that merit investment.

Tom Popper Editor-in-chief Budapest Business Journal

Contents Networks of Support 3 Graphisoft CEO: We can make it on our own 4 Startups need good ideas, not just funding 6 Expert calls for better innovation funding 8 Maximizing innovation 10 Secrets of three winners 11 Smorgasbord of startups 14 Sustainability needs stable legal environment 18 Designing a better home for startups 22 Generating innovation 24 Building bridges for startups 26 Finding success in Hungary and the U.S. 27 Budapest’s Loffice stays on top by staying flexible 28

bright ideas Let Analogy do the thinking for you T-System International’s mobile advertising E-scooter Moveo: Unfold, unplug and go Pilots can navigate a virtual world Bicycles throw off their chains Jockeying with the big players Smart cities Keeping calls just between us Finale

30 31 32 34 36 38 39 40 42 43

Innovation a Budapest business journal publication

BBJ Editor-in-chief: Tom Popper • Innovation editor: Levente Hörömpöli-Tóth • Proofreader: Robin Marshall • Contributors: Aniko Fenyvesi, Levente Hörömpöli-Tóth, Christian Keszthelyi, Dan Nolan • Sales: Erika Törsök • Layout: Norbert Balázs • Publisher: Absolut Media Zrt • CEO: Balázs Román Media representation: Absolut Media Zrt • Address: Madách Trade Center • 1075 Budapest, Madách Imre út 13-14, Building A, 8th floor Telephone: +36 (1) 398-0344 • Fax: +36 (1) 398-0345 • ISSN: 1216-7304

innoVATioN 2015

Networks of Support

Startup incubators, government agencies, coworking spaces and successful entrepreneurs with good advice are all part of the infrastructure that assists innovation in Hungary.

3

4

innoVATioN 2015

Graphisoft CEO:

We can make it on our own Gábor Bojár, the founder of architectural design software firm Graphisoft, says Hungarians neither need nor benefit from government support for innovative businesses – they just require a fair playing field and transparent rules.

A

n iconic figure of the Hungarian innovation scene, Graphisoft CEO Gábor Bojár, who built his IT firm from scratch, opposes government efforts to protect and fund certain Hungarian businesses. He said this approach implies that Hungarian firms need “support” against big multinational companies because they do not have the creativity to find their own way.

Support is needed by the weak, and Hungarians are not weak, insists Bojár. “Graphisoft never needed any protection against its biggest American rival and we still prevailed,” he notes.

work is picking certain economic actors and helping them through protectionism or making laws with retroactive effect.”

Graphisoft was an early Hungarian success story; founded by Bojár in 1982, the firm, which produces software for the architecture and construction industries, soon became the world leader in its field. According to Bojár, Hungarians have the creativity to excel in innovative businesses, provided the government does not interfere.

He maintains that providing government grants will not make startups successful, because rather than learning how to compete, companies will simply become better at applying for grants.

Pouring money in the right places Bojár did see benefits in efforts on the part of the National Research, Development and Innovation Office to give encouragement to innovators. He said that founding relevant prizes, clubs, forums or competitions – or providing infrastructure or counseling – can help, though he maintains that the government’s most important work is encouraging competition through well-enforced anti-trust laws and the establishment of a clear, pro-business tax regime.

This does not mean that Bojár believes the government should be toothless. “To be successful and to run a prospering business is the dream of every entrepreneur. In order to let innovation exist, which is an essential part of building a successful company, competition must be flawless,” Bojár tells the Budapest Business Journal. “If the government lets everybody play by the same rules and the legal system is stable, that will encourage innovation. What will not

“What is also of key importance is education,” Bojár says. “We need skillful engineers who are aware of the mechanisms of the business world as much as they are experienced professionals. This is how they will know exactly what kind of products there is demand for.”

Bojár maintains that no one will respect the law if any part of it can be nullified for protectionist purposes. He said that recent measures that give the national grocery chain CBA an advantage over foreign competitors would not make CBA more innovative or competitive. In the end, Bojár said, the losers will not be the multinational rivals, but CBA itself, since it will no longer be forced to innovate or improve.

“We need skillful engineers who are aware of the mechanisms of the business world as much as they are experienced professionals.”

Rather than focusing on higher education, public education at lower levels should be improved, as that’s where it is decided who becomes

innoVATioN 2015

what. “If all that money poured senselessly into grants or funds of any sort would be spent for that purpose, the country would gain a lot,” Bojár says.

Empathy counts As much as he is a die-hard supporter of the startup culture, he is not impressed by every aspect of it. “For one, the hype around pitching is overrated. It is not those who can sell their idea in a matter of minutes who will prevail, but those who learn from their mistakes and know how to rectify them and are determined enough to work on hard till real results come,” he says. Investors won’t judge entrepreneurs by their talk, but their commitment.

Some fret about the lack of sales skills in Hungary, whilst acknowledging the unprecedented talent pool available. Bojár blames historical developments for this. For Hungary is located in an area that was out of the radius of the major commerce routes connected to sea transport. So the whole trade culture didn’t develop in a way it did in America, for example.

“But we are fast learners. It can be rebuilt.

And it won’t happen on the basis of pitches, but rather based on understanding what customers need. This empathetic approach should win in the long run, whereby you listen carefully to your client instead of overrunning them with bombastic, empty slogans” Bojár adds.

Innovation ‘in our genes’ Bojár is convinced that Hungary is a deeply innovative nation. “If it wasn’t in our genes, we wouldn’t have survived the past 1,000 years.

We confronted so many different invaders along the way that required a strong capability to adapt and, yes, innovation,” he says.

As for future prospects, Bojár says he can imagine that another Prezi could pop up; “Although under the current political circumstances, there is a tendency to move the headquarters out of Hungary, as Prezi and many others did, I do not believe that this the right way. Hungary is our home, and the best place for the headquarters is our home.

Graphisoft has been always told to move its center of operation beyond the borders. I resisted and it was worth it. This way we could attract more quality personnel who are motivated by the fact that they don’t have to leave their country and yet still can make a difference. What matters is, after all, where we want to live,” Bojár concludes.

GÁBOR BOJÁR

Gábor Bojár founded Graphisoft, a computer-assisted-design software firm for the architecture, engineering and construction sector, back in 1982. Since then the company has become a market leader. Graphisoft products are used by some 200,000 engineers in 100 countries. Bojár also established the Aquincum Institute of Technology in 2007, a school that receives students from top American universities to study here for a semester abroad. He holds several prestigious awards, including the Széchenyi Award and Ernst & Young’s “Entrepreneur of the Year” title.

5

6

innoVATioN 2015

Startups need good ideas, not just funding Imre Hild is the CEO of iCatapult, a business incubator that helps Hungarian startups get the traction they need to enter the international market. He spoke with the Budapest Business Journal about the kind of strategies and attitudes that can help startups succeed.

innoVATioN 2015

IMRE HILD

Imre Hild, drawing on his decade-long work experience in the United States, is one of the key figures in the Hungarian startup scene. Before that he worked for Lehman Brothers as an underwriter and he co-founded HILD Life Annuity as well as founding and managing OTP Life Annuity Inc., a bankowned life annuity for real estate provider. He then became a partner at Primus Venture Capital Fund, which also funds iCatapult, his current venture.

L

ately, the National Research, Development and Innovation Office has been quiet active in shaping the innovation agenda. It has been renamed and transformed into an agency that aims to have a more practical approach.

The fact that a new approach will be embraced is more than welcome. Any efforts to forge links with the real needs of the economy should be appreciated and hopefully it will help to get rid of certain misconceptions.

What sort of misconceptions?

The whole idea of startups is mostly misinterpreted around here.

Startups won’t get created or become viable just because they get a bagful of money from some fund scheme that they spend on experimenting. They should rather come up with a solution for an existing problem for which there is real demand. Our entire startup process is upside down: many startups think up an idea then spend months chasing down investors only to spend their money on experimentation they should have done before approaching investors in the first place.

This sounds like the allocation of R&D funds that are channeled most of the time to projects that almost never translate into market-ready products.

Only efficiency matters at the end of the day. I learned at a former stage of my career that you need to listen to your customers and you must start thinking like them. That is the only way to hit the right track in development.

Are you implementing this strategy in any of the startups your accelerator iCatapult is working with?

We work together with four young firms that have different levels of success rate. One has more than 140,000 users. It constantly monitors customer feedback and incorporates it into its product development. This is the essence of the lean methodology. Another one has only a few clients, but they are all big paying ones. We work hard so that our mentored startups make the breakthrough on U.S. soil. And we certainly carry on regardless of when and whether the government funds promised under the so-called Gazella incubation scheme are paid. This is due to our market-focused approach.

Speaking of Gazella, it has stalled spectacularly after it was praised as an exemplary project.

Our incubation program was selected among those to get state funding early in December 2013 and, indeed, no money has arrived yet. There has been a change in the administration chain several

times which resulted in more of a stop-and-go kind of approach.

But we have now received the cooperation contract from the government. However, we do not know what contract the startups will sign, we have not received any indication that processing of our submission will be timely (which is crucial for a startup) and there are some early indications that eventually the state will make the judgment call as to which project is truly innovative and worth supporting. We need to clarify what is our role as accelerator, if in fact that state decides which startup should receive support.

There’s a lot of hype around the startup ecosystem in Hungary. However, when you look it up in any relevant global survey, Hungarian players don’t get mentioned.

Indeed, we need to get on the map. Everybody must be aware that this market already exists and we are lagging behind. Capital won’t come here because it can find lots of places that offer far better conditions for financing. We lack two things most specifically. First, a critical mass of startups should be reached. Secondly, Budapest needs to find a unique focus.

Isn’t the city associated with Prezi already?

Positive examples and role models are good, but they cannot play the role of an industry. We live in era of specialization and, capitalizing on the brainpower of this country, we could pick a lucrative niche.

It could be anything from IT security, mobility, big data, wearables, cloud computing, 3D printing or some intersections of it. But selecting such a key field is a must, otherwise getting on the map for real will remain a mirage. If we throw ourselves into one such segment and focus on in for 3-5 years we can become the placeto-go for anyone in the world in that particular field.

iCatapult: A unique scheme up and running

Imre Hild heads iCatapult, an accelerator and business development firm that runs a concept unique in Hungary.

It identifies hot target startups working on global technology and then establishes a firm together with them whilst securing a maximum 19% stake. In return of that stake, iCatapult works with the company on its business development strategy, which ultimately targets accessing the U.S. market. Ideally, the team at that point is aligned with a local expert, who can provide market access for the technology utilizing his/her own investor or technology network. The goal for each iCatapult technology is to find traction or an investor base on the international market. This is a new, pioneering approach, which eliminates conventional risks at each step of the process, as it is built on years of American and CEE experience.

A precondition for iCatapult’s involvement is to have a working prototype, and the primary goal is to get development done on the basis of that. This way it is ensured that the bulk of the actual technological development has already been implemented. At the moment it is working together with four ICT companies where a total amount of HUF 130 million has been invested thus far.

7

8

innoVATioN 2015

Expert calls

for better innovation funding Hungary doesn’t spend enough on R&D, and the funding mechanism itself is not responsive to the realistic needs of innovators, says consultant András Somos (pictured). He suggests a recipe for setting things right.

T

he first part of the process is screening out the less-serious cases. “We do encounter the crazy scientist types who show up, make us sign a non-disclosure agreement before they would say anything about their alleged invention, and then talk nonsense for hours. Or when they are asked to give a slick presentation, they come up with a hand-written slip of paper with illegible equations on it,” says András Somos, CEO and owner of SKC Consulting Kft. Fortunately, an in-house engineering team assists in filtering potential projects and, thanks to a strategic partnership, experts of the Budapest Technical University and other universities and research institutes also

give a hand. In the process of assisting people with ideas, Somos has learned a lot about what will get funding. He has also seen some of the problems caused by the way research and development is funded here.

Despite the challenging environment, SKC Consulting has become known for turning ideas into reality. “I call our firm a dream factory, where we make dreams come true,” the CEO told the Budapest Business Journal. A major pillar aiding that is to acquire as much funding from EU or government money pots as possible, thus easing the burden of needing your own resources. The company also gets involved in the operation of promising businesses, and is currently running a HUF 456 million heat pump project.

innoVATioN

9

2015

BG

0.19

LV

0.23

RO

0.26

PL

0.3

LT

0.31

HR

0.32

MT

0.33

SK

0.34

HU

0.36

EL

0.39

PT

0.41

ES

0.42

CZ

0.43

IT

0.46

CY

0.5

EE

0.51

SI

0.52

EU

0.55

FR

0.55

AT

0.59

IE

0.6

UK

0.61

BE

0.63

NL

0.63

LU

0.68

FI

0.71

DE

0.73

DK

0.75

SE

0.77

modest innovators

moderate innovators

Source: Innovation Union Scoreboard 2014 (European Commission)

Embracing the product life cycle approach The experience of SKC shows that the key flaw of the system is that the process stretching from an idea to sales is not treated as a single unit, but its individual sub-phases are handled separately. “It must be identified at what stages of development investment is needed. A viable idea will turn into a prototype, then your infrastructure needs refurbishment and new equipment must be bought. Once the product has entered the market, expansion triggers more in-house jobs, training for employees and going global. From this chain of events the complete life cycle of a product can be drawn up. The entire system of funds allocation should be reshaped on the basis of this kind of thinking,” Somos said.

A “product life cycle” approach would require that funds should be available at all times according to the financing need of a particular development phase, Somos said. Right now, random calls for proposals are published at unpredictable intervals, so companies cannot prepare when and what there will be financing for. “Instead they should be able to access and call on public funds depending on where their project is at, from headquarter development to HR management or market entry. This would provide the product life cycle with resources in an uninterrupted fashion,” Somos said.

Applying for funds is mainly supply-driven in Hungary. Firms apply whenever there is a call for proposals, and not for what they need money for at that particular time. This should be replaced by an approach where only those companies that have a clear concept to stick to get funding, he said.

The National Research, Development and Innovation Office has been transformed as of January 1 and has been vested with powers to coordinate R&D funding payments and enforce an ever-more practical approach in selecting projects. Perhaps there is a glimmer of hope that Somos’ vision for encouraging meaningful R&D will come to pass.

EU Innovation INDEX (RANGING FROM 0-1)

innovation followers

innovation leaders

Note: Average performance is measured using a composite indicator building on data for 25 indicators going from a lowest possible performance of 0 to a maximum possible performance of 1. Average performance reflects performance in 2011/2012 due to a lag in data availability.

Ratio of innovative companies in Hungary and in the EU by size category Hungary

EU average

Small-sized

26%

49%

Middle-sized

46%

65%

Large

70%

79%

Source: Eurostat (2012)

Research what’s needed, not just what interests you In the case of innovation, channeling the funds is especially important, according to Somos. True enough, R&D spending as a percentage of GDP has soared by roughly one-third since 2008, and by 2012 it had reached 1.29%. But that figure still lags far behind the EU average of around 2%, not to mention the United States or Japan, where it is around 3%.

Free money alone won’t do the trick, though. In fact, Somos would like to see an increase in the proportion of refundable funds, as it would force players to be more efficient. “In a way there’s nothing to complain about. Advance payments are high, so is the funding rate and the range of costs that can be accounted for is wide. However, many times market demand is completely disregarded in the course of research and development,” Somos noted. It would take a crusade to fight dead-end research, a typical trend where only theory is addressed, no prototype is made and there is a tendency to ignore what is truly needed out there.

Another problem lurks in a lack of predictability, according to Somos. If you file a proposal to get funding for an R&D project, the period for assessment and financial settlement with the authorities drags on forever. That gives rise to the twist that even within one financing period the conditions of a call for proposals may change. Stability during the whole procedure would be more than welcome.

10

innoVATioN 2015

expert opinion

Maximizing Innovation InnoMax grants fund new ideas, to bring them to market. BBJ interviewed Invitel COD Imre Mártha about his firm’s initative.

How would you describe the InnoMax grant?

Invitel launched the InnoMax initiative six years ago in 2009. The initiative has grown into a real innovation boost and both the number and quality of entries in the tender have increased.

We would like to motivate an ever-greater circle to take up the opportunities of modern technology, that can make their organizations more competitive and efficient.

What was your expectation when you first offered the grant? Approximately six years ago Invitel expanded its portfolio beyond its telecommunication services with IT solutions. At the same time, we aimed to launch a project where innovative solutions of domestic companies could receive attention with the help of Invitel. As our main objective was to encourage business innovations and place successful companies in the spotlight, on the one hand we wanted people to learn about Hungarian innovative initiatives, while on the other we wanted to support these initiatives with info-communication services and professional consultation. At the same time, we considered it important from the very beginning that the support should not stop at the presentation of the award, therefore we created InnoMax Klub, which is a community based on Anglo-Saxon business models. In the framework of this community, participants can gather information regarding the world of innovation.

The grant scheme has just been extended, could you elaborate on that?

The system offers more categories and awards than ever before. As of this year any Hungarian

Crisis Foundation. The search module of the foundation is a very useful tool in finding missing children. The audience award of the category was given to Studium Generale Foundation for its program that helps preparations for the secondary school finals. InnoApps opens many opportunities for the imagination of the developer, that is well proven by last year’s winner. The winner of the “Stop Kidding Category” was Levente Cipak with his development entitled “e-motion or the GPS-based cowboy”. With this unique app, the users can track their cows with the help of a smartphone. The users of Invitel’s Facebook page chose the winner of “Keep Kidding Category”: a game entitled “Vitamin” by Viktor Kovács, which improves logic, memory and problem solving skills for all age groups.

Imre Mártha, Chief Operative Director of Invitel company can run for the InnoMax Business Award. We also expect applicants to present project ideas. For our existing clients we have established the InnoMax Loyalty Award, that welcomes already developed projects. As of this year there is another new category named InnoSchool Award, that invites creative projects of primary and secondary schools and has the motto of “School of the Future”. I believe that the InnoMax Grant Scheme with these addons is finally in a shape that makes it a leading player in the Hungarian world of innovation.

What are some of the innovative ideas the grant has funded in the past?

In the past years we have awarded many innovative ideas. The unique newsletter service of E.N.S. Zrt. helps companies to deliver every newsletter safe. The body language analysis tool of DLM Solutions Kft. makes negotiations more effective. The special sign language interpreter of SINOSZ (the Hungarian Association of the Deaf and Impaired Hearing) was also awarded, which makes the life of people with hearing impairment easier.

The novelty of the last year was involving non-governmental organizations, and the winner was the idea of Kék Vonal Child

The tender period for this year started on 3 February. We trust that we will receive numerous creative tender entries, as last year saw a record number of 114 applicants.

How does Invitel profit from the award?

We support initiatives that support society in all areas of life. We would like to show that even the most modern IT services are available in Hungary and these can make Hungarian entrepreneurships more efficient and successful. Besides this, we have established cooperation ties with many of our previous contestants. We would also like to educate Hungarian business community about ICT technology on a wide spectrum. Through InnoMax, Invitel has funded 62 organizations and companies since 2010, and we trust we will exceed 100 soon. We are proud that InnoMax achieved second place ranking prize in the year’s Social Investment Program Category and third place in the Most Innovative Supporter Program Category offered by the Hungarian Donation Forum (MAF) in October 2014. This shows us that six years ago we launched a program that was built on real demands, and this has become the most important element of Invitel’s corporate social responsibility.

Távlatokat nyitunk

NOTE: ALL ARTICLES MARKED E XPERT OPINIONS are paid promotional content for which the Budapest Business Journal does not take responsibilit y

innoVATioN 2015

Secrets of three winners

The founders of some of Budapest’s most successful startups share how they did it – and how others can too.

W

hen people talk about successful startups in Budapest, three names commonly mentioned are NNG, Prezi and Ustream. NNG makes navigation software that has become the industry standard for use in GPS devices, Prezi provides presentation software that makes Power Point look old-school, and Ustream has become the world’s most widely used streaming software.

The success of these firms, which were small startups just a few years ago, make them the envy of the hoards of founders out there. In the hopes of finding out some of their secrets, the Budapest Business Journal asked founders from each of these companies what it takes to make it in the business. Their answers include stories of serendipity, personal interests becoming businesses, hard work – and some surprises.

Péter Balogh, the CEO of leading navigation solutions software NNG, turned his hobby into his first startup. “The idea of game startup came as I was working as a programmer and started writing games as a hobby” Balogh said. “Initially I wrote games that were free of charge but later I decided to try to sell my games so the first step was turning my hobby into a business.”

When he realized that there is potential in his work he decided to establish NNG, the business that gained world-wide fame and success for him.

Teaching at the Budapest University of Technology and Economics (BME), Prezi cofounder Péter Halácsy was stunned by the

Gyula Fehér

11

12

innoVATioN 2015

presentation visualization of another Prezi co-founder Szabolcs Somlai-Fisher, who was Halácsy’s student at the time. When Halácsy asked about the software SomlaiFisher used, it turned out that it was only a set of codes, which the programmers shared. Later, when they realized the success of their presentations, they decided to create a graphic interface, and as more and more users praised the program, they decided to develop it into a business.

Ustream founder and chief technology officer Gyula Fehér said that his business started as a “time-consuming hobby accompanied by strong commitment.”

When he saw promise in the business, he quit his job and started designing and developing his product. He emphasized the importance of “investing loads of work and energy” in the foundation of his startup.

Hard work and dedication above everything When it comes to going from an idea to a successful business, all three entrepreneurs spoke of the importance of hard work, building the right team, and the willingness to take risks. They also noted the importance of finding a way to monetize their innovations.

“When I saw that my hobby could become a business, I quit my job at Nokia in Finland and I came home to start my startup and left everything behind,” said Balogh of NNG. He said he immediately gathered those experts whom he trusted for their expertise. “I had some friends who were experts, whom I had known well, so I made them an offer to work with me for free for a year, and after that I would give them shares and ownership of the startup. They agreed, and by the end of the first week we had a venture that regularly generated profit in the market, with 2-3 employees, and we were able to get our own salary.”

According to Halácsy, “The first step and the millionth step are the same: You have to work hard in order to provide the users with a program that makes their everyday lives easier. If you want to be successful you have to be persistent, hardworking, dedicated and you also need a pinch of luck.” Halácsy said his company was also able to make money from the idea quickly. “Prezi has been cash-flow positive from the very first day on” he said. “The main idea is that the software is free to use for creating public presentations for anyone, however, if companies wish to store private presentations they are required to pay a monthly fee for the service.”

Péter Halácsy Fehér said he believes that “startup founders go against the odds, as most startups end as failures”, and they need to avoid being discouraged. “You need to be able to stand up again following a failure and change your concept” Fehér argued. “There is no such thing as an original idea, as Facebook was not the first social media site and Youtube was not the first video sharing page, but it is the talent and the persistence of the people that determines success”. The founding partners of Ustream used to be the clients of Fehér at his

innoVATioN 2015

Péter Balogh previous workplace. They found they shared many common ideas for achieving success, so they started planning and developing.

At first, Ustream generated income by placing advertisements on their streamed videos. “Later, users said that they would rather pay for the service instead of having advertisements, and the business model started changing” Fehér said. “Following the business model of ‘software as service’, the focus is now on business users, although we still sell advertisement places on the site.”

Working locally, selling globally Hungary has several advantages that make this a good place for a startup, and thanks to the internet, it’s easy to reach a global market from Budapest, the founders said.

Halácsy noted the good system of startup incubators and a support system in Budapest, and said one such project started by his company is helping: “The success of Hungarian startups was greatly boosted by the initative of Budapest Bridge, which we jointly created with LogMeIn and Ustream in order to share good examples and practices.”

While there are many good developers in Budapest, and expenses can be lower here, the potential market for his product is much bigger than this country, Halácsy said. “According to estimates, there are approximately 2 billion people around the world who are willing to

share their ideas with others.” Balogh said Hungary has worldleading technology experts who are daring enough to be flexible.

“This flexibility helps a lot in the software business and in the world of startups, as a small startup has to believe that they can make great changes even if they are dealing with an already existing product or service” Balogh argued. However in his opinion, the Hungarian mindset is “a bit more tunnel-visioned”, which is quite understandable as “out of 100 startup ideas only one receives funding, and out of 100 funded ideas there is only one that can be successful”. He also agreed that the best target market is a global one, because it “is bigger, it is easier to find your clients, and once you are present and keep developing, more and more clients will show up. It is also essential to satisfy the special demands of the market, which can win you ultimate success.”

Fehér added that the “atmosphere of Hungary suits a startup well.

Although Budapest is a bit low-budget and less ostentatious, still the capital is inspiring and makes it possible for startups to reach the maximum result with minimal resources”. Yet there is room for improvement, mainly in nurturing entrepreneurial mindset. “Like Silicon Valley, Hungary should adopt laws that motivate entrepreneurship, probably by offering tax allowances” Fehér envisages. Education should also include entrepreneurial studies, according to Fehér, in order to show students how they can realize their ideas.

13

14

innoVATioN 2015

innoVATioN 2015

smorgasbord

of startups Innotrends, held for the second year running, has quickly become the biggest event bringing together innovative entrepreneurs and investors looking for something new.

T

he cute little cupcake bore the legend “Growth Hacking”, and it was pretty tasty too. It was being proffered alongside lots of other treats that were also adorned by buzzwords from the startup world. The treats were rather appropriately made by a startup, called KicsiCake, which is run by women – something that was also appropriate at the October staging of the Innotrends 2014 conference, as women entrepreneurs were being given special attention at the event.

Organized for the second year in a row, Innotrends is a governmentsponsored smorgasbord of startups, where people with bright ideas can meet eager investors, right here in Budapest. Some 100

“It is the ultimate place for those in search of partners to enter the market with an innovative product.” presentations were held in 16 different thematic areas, from brain research, to nanotechnology, to climate change.

“It is the ultimate place for those in search of partners to enter the market with an innovative product,” said József Pálinkás, a former head of the Hungarian Academy of Sciences who was managing the event as a government commissioner at the time of the gathering. By the beginning of this year, Pálinkás would be charged with heading the restructured National Research, Development and Innovation Office (NFKI Hivatal). At Innotrends he was immersed in the world of new ideas that NFKI Hivatal seeks to encourage. During his opening speech, Pálinkás noted that innovation is how we adjust to the complex world we live in. Other speakers included the well-known Canadian venture capitalist and best-selling author Leonard Brody.

“Personalities such as Leonard Brody definitely added to the uniqueness factor,” said Imre Hild, founder of iCatapult, an

15

16

innoVATioN 2015

accelerator here in Budapest that seeks to support startups. “The gathering managed to address topics that are not on the agenda all the time. Speakers were selected carefully.”

to cover was slightly overambitious,” the accelerator leader told the Budapest Business Journal. Overall, though, Hild said he was impressed by the well-run event.

László Korányi, vice president of the National Innovation Office, which became NFKI Hivatal as of January 1, was also enthusiastic about the Canadian speaker. “Brody is known as a real superstar and now it’s become clear to everybody why. He described in a powerful manner the extent of the technology changes under way,” Korányi said.

Teaming up with South Korea Since South Korea was hosted as the honorary guest of Innotrends, several South Korean experts gave featured presentations. “We have a lot to learn from their policies. For traditional reasons government measures play an important role,” Korányi said and explained further that the Koreans set up a special technology rating system in order to assess the potential of startups. In the course of that examination a network of specialists decides whether a newly established firm should get financing from the state.

“The gathering managed to address topics that are not on the agenda all the time. Speakers were selected carefully.”

In the shadow of Brody other speakers impressed the audience too. One Finnish expert, Juha Ruohonen, spoke about how Europe is lagging behind in competition and what could be done about it. Pierre Roy, deputy head of the French National Scientific Research Center, in turn, reported about best practices in France as to how to make use of research results.

As for the main event, the presentations of new ideas from startups, Hild said it was almost overwhelming. “I might want to see a more concise and focused program next time as the number of areas

Instead of using an evaluation system similar to credit rating, Hungary could make use of the Korean method where you can tell in good time when it is or is not worth pouring money into a project. “Even though their economy is based on the success of conglomerates, they are aware entrepreneurship is needed too,” Korányi observed.

Another link is the Korean knowledge-sharing program under

innoVATioN 2015

which Korean and Hungarian experts work on various knowledge transfer programs. Furthermore, the Korean Development Bank has a branch office in Budapest that spots exciting projects that might be eligible for Korean government investment schemes.

Gwan-pyo Nam, Ambassador to Hungary at the time of the event, who addressed the crowd in person, praised Innotrends as a forum where all the relevant stakeholders participate and exchange opinions freely. “When and where everything is closely intertwined, you cannot make your success alone. In this regard Innotrends 2014 rendered us many opportunities for networking and provoking innovative ideas,” he told the BBJ. The privacy of being streamed live The excellent choice of the location pleased everybody. The slick and cozy Akvárium Club replaced the vast buildings of the previous year’s Millenáris. “This way there were a lot more opportunities for meetings; in terms of interaction it was brilliant,” Korányi evaluated.

Cutting down on superfluous space brought participants closer. It gave a close to “sold-out” impression and it certainly favored the atmosphere of disruptive sessions. One on startups invited the first

four official guests to a regular roundtable discussion, who then gave up their places to members of the audience willing to join the conversation. All that in the privacy of a live Ustream broadcast.

There were a many who could have added to the wisdom shared at that roundtable from personal experience, namely the founders of the startups exhibiting in the building in big numbers. Their scope of activity stretched from 3D printing to food innovation. Merely walking around made you feel dizzy. You bumped into remote controlled LEGO cars by Sbrick; your jaws dropped looking at the foldable furniture of Plié by Atelier. Super-water-saving, Wi-Fi connected showerheads (5Litres), drones (ColibriLabs) and an app controlled beer-making machine (Brewie) made the impression even more futuristic.

The founder of vatera.hu, the leading online auctioning portal in Hungary said in one of the sessions that the Hungarian education system trains you to become corporate soldiers and to fail. Those bright and bold young people at their stalls apparently proved that system wrong. And though they might fail at some point, apparently they have already won.

17

18

innoVATioN 2015

Sustainability

needs stable legal environment Firms that might invest in innovation to ensure sustainable development say the uncertain regulatory environment is a major hurdle.

innoVATioN 2015

without a predictable environment,” Ida Petrik, director of BCSDH told the Budapest Business Journal.

Even though the overall sentiment suggests optimism, with around half of survey respondents claiming improvements in the field, only 16% of them have their own written local strategy to achieve long-term sustainability. This is important as, according to the assessment, “Sustainability needs to be integrated into business strategy otherwise it will not be successful.”

Unpredictability is not appreciated The obstacles haven’t change substantially when this survey is compared to last year’s. Factors such as consumer price sensitivity, the slow economic recovery or a lack of pressure from consumers and NGOs make it very difficult for executives to think in terms of investing in sustainable development for the long-

“Sustainability needs to be integrated into business strategy otherwise it will not be successful.” term. But when asked what the biggest obstacle to sustainable development is, 96% mentioned Hungary’s constantly changing regulatory framework. Statistics also shows that political decision makers are considered to have the ultimate responsibility for further evolution of sustainable development, with large companies are ranked second.

T

he unpredictable legal environment in Hungary is making it harder to protect the natural environment, according to the Business Council for Sustainable Development in Hungary (BCSDH), one of the leading promoters of sustainability in the country. While businesses are ready to invest in the innovations that can improve their environmental performance, respondents to a BCSDH survey say their uncertainty about changing regulations is an obstacle to investing.

BCSDH has gathered support from local corporate giants, getting them to sign up to an agreement that commits them to reducing the strain they put on the environment through seven key areas.

The number of signatories is growing, a clear indication of wide support for the issue. But just getting the big players to sign some manifesto would be a half-baked achievement. Through a systematic monitoring procedure involving regular surveys of the businesses, BCSDH is able to check on improvements.

“A core message of this year’s findings is that companies have a very hard time to take long-term decisions favoring sustainability

Due to the lack of a transparent legal environment, executives are reluctant to engage in any future commitment, and that puts sustainable development in a standby mode, according to Petrik. It has further become clear from the survey that it is apparently not a lack of availability of resources or commitment that is hampering the implementation of sustainable corporate practices. Instead, executive commitment is described as the key driver for a strategic approach. It would seem that respondents evaluate their own role as the most influential.

Time for Action BCSDH’s activity goes well beyond sending out and evaluating questionnaires. In November 2014, it unveiled Action 2020 Hungary in the presence of 160 corporate leaders and science experts. “We believe that this is a unique program where top CEOs think together about how companies could contribute to positively changing the domestic social and environmental processes by examining scientifically well-founded facts and trends,” Petrik said.

In fact, Action 2020 is a global initiative where prestigious scientists and researchers have identified nine priority areas. Of these, five were selected for the Hungary program, namely Food and Feed, Sustainable Lifestyles, Employment, Climate Change, and Water. In the case of each field, facts and trends have been gathered that require action, and goals have been set to be reached by 2020.

19

20

innoVATioN 2015

Attila Chikán Jr. Alteo Nyrt. is among those committed to the principles of Action 2020. “We are in a fortunate situation as our core activity, renewable-based energy generation, significantly contributes to withholding climate change and upholding sustainable lifestyles. But we still need to watch out for energy saving, minimizing waste and maximizing the use of recycled material,” CEO Attila Chikán Jr. told the BBJ. The company also gives priority to fair employment. “Colleagues are permanently offered training, the quality of the work environment is made a priority and wages are also adjusted to levels that are standard in the industry,” Chikán added.

“Work environment is made a priority and wages are adjusted to levels that are standard in the industry.”

Unilever joined the program very early on, and its Sustainable Living Plan has set ambitious goals. “By 2020, Unilever will help more than a billion people take action to improve their health and

well-being, and we will halve the environmental footprint in the making and use of our products as business grows,” Managing Director András Gyenes said.

“Thirdly, Unilever will enhance the livelihoods of millions of people.”

The company prides itself on having launched the first Landmark Farm program in Hungary, which is an agricultural role model for suppliers on best sustainable practices. “With the Flora screening program we promote a preventive attitude and health-conscious lifestyle,” Gyenes added.

BCSDH attempts to promote progress among all its partners by setting an ambitious schedule. “In 2014 the emphasis was on objectives, whereas in 2015 action will be focused on by finding and sharing business solutions supporting the goals,” Petrik said.

innoVATioN 2015

How do you evaluate the evolution of sustainable development over the last year, globally and in Hungary?

Global

Hungary

Improved

77%

52%

No change

16%

26%

Got worse

7%

21%

What is most necessary for companies to become more sustainable?

A more stable and predictable external environment

96%

A strict regulatory environment (with consistent follow-up)

65%

Governmental incentives

88%

Which were the most important criteria (in terms of drivers and successes) behind your achievements relating strategic approach?

Executive commitment

96%

Shareholder expectations

65%

Employee commitment

58%

Sustainability and CSR is competitive advantage in our industry

51%

Reputation, brand management

44%

Global/local agreements, guidelines

30%

Stakeholders’ interest, pressure/expectation

14%

Natural disasters

2%

Other

2%

Source: Business Council for Sustainable Development in Hungary (BCSDH) survey 2014 among Signatories of “The Complex Interpretation of Corporate Sustainability” Recommendation for Business Leaders

András Gyenes

21

22

innoVATioN 2015

DesigNing

a better home for startups

Design Terminal is a state-funded agency with the mission of promoting Hungarians in creative fields. Along with performing startup incubator services, it generally helps young entrepreneurs with big ideas to promote themselves. We spoke to Gergely Böszörményi-Nagy, director general of Design Terminal, about his work and the innovation situation in Hungary.

What does Design Terminal do to encourage and support innovative companies in Budapest, especially companies working in software? Can you detail some successful projects that you have undertaken?

Design Terminal’s mission is to invigorate and diversify the Hungarian entrepreneurial scene, particularly the tech, urbanism, design, and fashion sectors. Our focus on the creative and innovative industries is motivated by the observation that the significance of groundbreaking ideas, innovative technologies and unique products, in terms of economic growth, is steadily rising. In 2003, creative industries contributed 2.3% to the gross domestic product of the

European Union – by 2010, this had increased to 4.5%. In Hungary, the creative sector’s current contribution to GDP is 3.7%, with the industry expanding so fast that its exports are growing at twice the rate of overall economic growth. With targeted improvements to the underlying ecosystem, business environment and operations, we consider it realistic to see the industry’s contribution to GDP reaching 5%, its exports doubling and employment in the industry rising by 33% – all in the next decade. Design Terminal’s aim is to give the creative and innovative industries the boost they need to become a driving force behind the Hungarian economy and a defining factor of the nation’s cultural climate.

innoVATioN 2015

To ensure this bright future, we extend support to individual entrepreneurs directly, channeling local startups to international trade shows, conferences and study tours. On an annual level, we provide assistance to more than 120 creative enterprises, arranging consultations regarding multifaceted issues, including intellectual property protection and brand building.

As an example, we recently arranged for seven tech startups, including Synetiq, Robophone, Gravitalent, Play.io, and opp.io, to exhibit at the Northside Festival for Music, Innovation and Film in Brooklyn, offering them a unique opportunity to explore the NYC tech scene and get to know the East Coast startup community. Design Terminal has also launched a six-month-long incubation program recently – and while at the moment that is aimed predominantly at creative ventures, we do have plans to extend its scope to tech as well, in the near future.

Besides our incubation activities, we also recognize the importance of improving the business environment the nation’s creatives inhabit, to ensure their success and allow all manner of synergies to arise. To this end, Design Terminal organizes and hosts more than 300 events a year, including a wide array of training programs, meetups and community building get-togethers.

What makes Hungary a good place for innovative industries?

Budapest is thriving. With its booming nightlife and flourishing cultural milieu, it is a magnet for young talent. Remember, American counterculture, along with its center, San Francisco, were essential to the emergence of today’s Silicon Valley. The bohemian and diverse culture of Hungary’s capital is itself conducive to innovation – and there are so many other advantages. A relatively large, affordable pool of talent exists to recruit from: local universities offer world-class training in both engineering and design fields. In terms of premises and operations, the city offers both variety in real estate and ample infrastructure. Budapest – a colorful and prosperous metropolis, one of Europe’s most livable cities – can offer any remote team or new operation a comfortable and inspiring home.

However, “affordable engineers” are not the strongest selling point, if we consider that, for example, labor in India is cheaper and the labor market far wider. In my opinion, Hungary can offer an additional, broader set of advantages. Budapest is a popular, welcoming city. I firmly believe that there is a need for frequent travel, or even occasional relocation for remote teams to work successfully in the long-term. Budapest is one of the most attractive and livable cities in Europe – and perhaps in the world – and I think if people from the far corners of the globe were acquainted with the Budapest lifestyle, many would happily opt to spend a few years in a “remote office” here. Geographical location is also key. Hungary’s proximity to the rest of Europe helps tackle the European market, which is maturing at a rapid pace, often the second largest market for many United Statesbased startups. When it comes to time zones, its location is particularly convenient compared to other parts of the globe (with the exception of Central and South America), in terms of coordinating working hours with the United States. This may sound like a rather small advantage, but time zone differences are actually quite critical in day-to-day operations.

The topic raised in this question is one that Design Terminal wants to expand on in the future. In fact, we recently submitted a conceptually similar panel idea to SXSW 2015.

Does Hungary have a large number of homegrown startups?

Are there any software startups that you can mention as examples of successful, innovative firms?

There are a number of promising growth stage startups with their origins in Hungary. Companies such as Prezi, Ustream, LogMeIn, NNG (iGo), and IND (recently acquired by Mysis) have high valuations, a strong global market share, top class investors, and boast headquarters in San Francisco, Boston and other leading innovation hubs. Many members of the international tech community are still surprised to learn that these firms were founded in Hungary and retain operations here. Besides the startups cited, I’d also mention Balabit, focused on IT security; Tresorit, offering end-to-end encrypted and secure cloud storage; and Secret Sauce Partners, whose Fit Predictor for Apparel product offers purchases tailored to shoppers at e-commerce shops, using big data.

Do Hungary’s schools produce an especially high number of engineers and programmers?

Yes. Approximately 8,000-10,000 well-educated engineers receive degrees from Hungarian universities each year, a considerable number, particularly taking into account the size of the country. The majority of this talent pool land jobs at large corporations; however, thanks to the alternatives and opportunities afforded by the emerging startup scene, many fresh graduates now also consider joining an independent enterprise, or even launching their own companies.

On the early stage side, we also have a growing number of startups. More than 200 teams are currently working on their new ventures full-time in Budapest alone. A growing number of these early stage teams are now getting accepted to prominent international accelerator programs, and after their 3-6 month incubation, they return home with a wide range of know-how, which, in turn, enriches the entire local tech scene. I’d point out Robophone – still at a very early stage, it is working on building a robot and iPhone app teaching the basics of programming to children; Synetiq, which aims to re-segment the neuro-marketing market with a proprietary crowdsourced solution; and CryptTalk, which offers encrypted mobile calls and communications.

Do you get the impression that a lot of global companies find Hungary an attractive place to locate their R&D operations?

Most certainly. It is no coincidence that successful Budapest-born startups, such as Prezi, Ustream and LogMeIn, have decided to keep their product development here, even though they all have operations in the United States now. Their reasoning is that it is easier to find topnotch engineering talent in Hungary, compared, for example, to San Francisco, not having to compete with the tech giants. Not to mention that local engineers cost less than half of what their counterparts do in California, or even in Berlin.

Is there anything else worth mentioning?

Plentiful resources, when it comes to product development talent, are indeed a valuable asset for Budapest and for Hungary. It is, however, vital to keep in mind that this talent is often paired with a lack of cutting edge marketing, sales and business development skills. Quite the opposite of what we are seeing in the United States, actually. Most of the success stories we have witnessed in the past years have involved international co-founders and a strong American presence from the very beginning. I am convinced that allowing early stage startups to experience the global market and the international startup scene will be crucial in fostering the future’s successful tech ventures.

23

24

innoVATioN 2015

The founders of HInstra in the Open Laboratory of NI’s Science Park.

Generating Innovation: The National Instruments Hungary Innovation Program Opens Up New Opportunities for Innovative Hungarian Startups

innoVATioN 2015

SPONSORED BY NI

In 2001, the talent pool of Hungary made it possible for Texas-based National Instruments (NI), a leader in automated measurement and control, to establish its first overseas production facility in Debrecen, which has since been augmented by a number of regional and global shared service functions. Recently the dedication of NI’s HUF 4 billion Science Park in September 2014 opened up unparalleled opportunities for startups and SMEs and hence a new way for Hungarian scientific and engineering talent to succeed at home.

T

he uniquely novel element of the NI Science Park project is the Open Laboratory, which operates in the framework of the National Instruments Hungary Innovation Program (administered jointly by NI’s Budapest and Debrecen subsidiaries). In it, startups and SMEs with an innovative idea for hardware development are granted access to the most cuttingedge NI technology, which has the potential to accelerate their product development, testing, and prototyping and radically shorten time-to-market through graphical programming. NI offers all this, including training and software licenses, practically free of charge, in order to strengthen the Hungarian SME sector and dismantle barriers to innovation. Thus talented Hungarian engineers and scientists can turn their ideas into marketable products and economic success even without the means for a substantial technological investment.

they cannot deliver the speed that we think is possible. NI’s brand new sbRIO-9651 module, made of state-of-the-art components, such as Xilinx Zynq and DDR3 RAM, seems fast enough for our purposes and represents a cost-efficient alternative.” Once HInstra’s researchers complete the design of their card, which contains the necessary analogue and digital circuit elements, work in the Open Laboratory commences and the graphical system design approach will even allow the company to smoothly transition from the prototyping to the mass production phase.

The Innovation Program was implemented to assist innovators from the inception of the idea to the marketing of the turnkey product. HInstra’s three founders have already received extensive training in LabVIEW—NI’s flagship software, which will enable them to program their instrument in fraction of the time otherwise necessary—and passed their Certified LabVIEW Associate Developer exams, graduating to the more advanced training modules. “We are looking forward to working more closely with NI’s application engineers from January in the Open Laboratory” says Gábor Gajdátsy from HInstra. “So far NI employees have generally impressed us as open-minded and motivated professionals of high standards.”

“The first phase of our project in the Open Lab runs till June 2015,” informs Ferenc Benedek, “by that time we hope to finalize our prototype. We expect that the Innovation Program will also greatly help us in launching the product as well as in post-deployment improvements, and we have a number of other ideas lined up where using already widely adopted NI platforms might create confidence in our future products.”

“We intend to build a digital instrument that would boost the speed of atomic force microscopes (for) biological samples.”

The first to take advantage of the opportunity is Szegedbased HInstra Intruments Kft., which was founded in 2011 by three young university researchers who recognized that there was considerable demand for custom-designed measurement instruments of scientific standards. They have been seeking to gain recognition with their engineering and design services in optics and electronics as well as by launching their own instruments in biological measurements. When they learned about NI’s Innovation Program from LC InnoConsult—a partner organization that provides various consultancy services to participants of the program—they had already been aware of LabVIEW and NI’s modular hardware devices as widely adopted, reliable solutions in test and measurement. After finding out more about NI’s off-the-shelf reconfigurable systems, they realized that incorporating these into their own products could shave off significantly from their design efforts and time-to-market.

And now they have the opportunity to test the viability of their idea without risk, virtually at no cost in NI’s Open Laboratory.

“We intend to build a digital instrument that would boost the speed of atomic force microscopes used in the analysis of biological samples” explains HInstra’s executive János Kokavecz. “The devices currently available are based on analogue solutions, and

Initiatives like NI’s Open Laboratory and the National Instruments Hungary Innovation Program usher in a new era of innovation in Hungary, in which well-established corporations and agile startups pool their resources to achieve ever more amazing technological advancements. Says Kokavecz: “We would recommend the Innovation Program to idea owners who would like to turn their idea into a working prototype in the shortest time possible, using quality components.”

25

26

innoVATioN 2015

Building

bridges For Startups The CEO of Bridge Budapest shares her thoughts on how the city can become a regional capital for innovation.

B

ridge Budapest is a not-for-profit organization that seeks to support and encourage young entrepreneurs with innovative ideas in Budapest.

Founded by people from successful startups Prezi, LogMeIn, Ustream and NNG, the organization gives fellowships to young students, among other things. The Budapest Business Journal asked Bridge Budapest CEO Veronika Pistyur (pictured) about her tips for how startups can succeed, and what her organization is doing to improve the environment in Budapest.

What suggestions would you give someone who is trying to get a startup going?

You need a good team, because you will have to coexist for 14-16 hours a day. Only passion, commitment and humility can help you through the many months and even years of hard work that you will face. Don’t be afraid to ask questions and to make mistakes, as these are essential to coming to conclusions that help you learn. Don’t be afraid to start something – just give it a try. The sooner you test your product on the market the better, as that way you can see whether there is demand for what you are doing.

Is Hungary a good country for startups?

Hungary is not among the leading countries yet. The current aim is to become the regional capital by 2020.

Many of the basic conditions for achieving this are already in place: infrastructure, the “coolness” of Budapest, and entrepreneurial success stories. We still need to become more open-minded and tolerant, and need to exercise more humility. You have to believe that knowledge and performance can find its way in the global framework, and success does not only depend on your network of connections.

What can be done to encourage more successful startups in Hungary?

In order to boost innovation in Hungary, success stories need to be introduced at an early age, to inspire the youth.

Collaboration and teamwork should become a greater part of the school curriculum, to teach children how to work together with others for a mutual goal. Students finish their secondary school studies with little experience of teamwork, and running a company or innovation requires teamwork. It needs to be taught.

Veronika Pistyur, CEO of Bridge Budapest

innoVATioN 2015

Finding success

in Hungary and the U.S. Traction Tribe CEO Péter Kádas says startups need to avoid ‘stupid money’ and think like old Vegas mobsters who used to ‘give the people what they want’.

S

ingling yourself out is an imperative in the corporate world, and this rule seems even more important in the startup scene, which is obsessed with uniqueness. Perhaps that is why Traction Tribe, a leading startup accelerator based in Hungary and the United States, refuses to call itself an “accelerator”, but prefers the term “traction composer company”. A brief conversation with Traction Tribe’s cofounder and CEO, Péter Kádas, makes it clear that the firm is not only unique, it is also capable, well-positioned and professional. Kádas does more than preach about helping startups to access the market in the States, he spends a considerable amount of time there, to prepare the ground for the soft landing promised to its target companies. The Budapest Business Journal grabbed him after a three-month stint in Las Vegas, NV, where Traction Tribe also has an office.

Kádas says he can clearly see the difference between things here and across the pond. For one, in Hungary VC doesn’t work the way it does in America, where the point is to invest in 10 companies out of which only one would bring sweeping profits and the rest would break even at best. Drawing money into your business is not as hard as it seems, though, in either location. “The problem is that not enough smart money is abundant; stupid money is! In the latter case investors don’t filter according to realistic needs,” Kádas said.

even been entered in the system and you want to modify your course.”

Another problem is how decisions are made over R&D resources. “In the government it is not cocoordinated and respective roles are divided. In turn, Traction Tribe has a compact system with decisions taken at partner level as to how much will be invested for what and with whom,” Kádas added.

PÉTER KÁDAS

Péter Kádas is an entrepreneur and angel investor with 20+ years of experience who, through his companies Traction Tribe and BrandVocat, aims to help startups connect with their customers in disruptive ways.

He is also one of the most well known startup trainers in Hungary. His blog, startupdate. hu earned the independent blogging award of 2013 business weekly HVG.

Such lavish capital also might create a pitfall where companies try to make a living off it instead of from their clientele, and so it diverts attention from customers. But, apart from the capital tide, could corruption be a factor in any way for startups? According to Kádas, startups don’t really care what’s going on in terms of corruption as long as they are left alone. The latter includes keeping their immunity from government funds. Bodies such as the newly renamed National Research, Development and Innovation Office are welcome to be active; yet sometimes-bureaucratic involvement hinders the natural speed of development or stalls it entirely.

Lead us not into temptation of government funds “If you get funds, you need to explain your every move to a higher authority, leaving you no time for so-called pivoting where you test the reactions of your customers,” Kádas explained. “One of our startups went for pivoting six times in two weeks. Imagine that with Brussels where your file hasn’t

Asked to assess the local startup ecosystem, Kádas believes the country is doing all right in regional terms. In Slovenia the entire ecosystem is about 400-players strong, in Romania the related institutions such as accelerators don’t even exist.

“What’s needed in Budapest, however, is more ruin bars, places where members of the ecosystem like to hang out, where they can share their experience.

That helps the community grow. In Silicon Valley you find places like that on every corner,” he stressed.

As to overseas business culture, the overall picture is that we lag behind in that regard. But Traction Tribe has great experience with its mentored companies that pick up things very quickly; ten out of their 11 startups are progressing.

No such thing as an overnight success “It is exciting to see how the biggest mob bosses in America operated in their heyday,” Kádas said, drawing an unexpected parallel. “They are pictured in Vegas with their slogan ‘Give people what they want’.

Now ‘customers’ have replaced ‘people’. The mafia seems to have embraced the startup concept very early on.” Regardless of historical parallels, results come only if they are matched by performance.

“There’s no such thing as overnight success, even if the media likes to celebrate champions that emerge out of the blue. It’s rather long years of very hard work,” the expert said.

Traction Tribe is no exception to the rule. Its professionalism translates not only into the fast growth of its mentored partners. Not less than three of them are represented in CES, Las Vegas, the biggest consumer electronics trade show in the world in January. And admission is far from being automatic there. Strict requirements concerning the novelty factor of your products need to be fulfilled. Apparently, the Tribe knows what it takes to do so.

27

28

innoVATioN 2015

Budapest’s Loffice stays on top by staying flexible Kata, left, and Anna Klementz, and their offices.

innoVATioN 2015

A local team of innovators has developed a brand that helps entrepreneurs and startups get a leg up. The Budapest Business Journal caught up with Anna Klementz, co-founder of Loffice to talk about coworking, cool spaces and the evolution of the modern office.

L

office arrived on the scene in 2009, while the entrepreneurship trend in Budapest was still in its infancy.

The initial concept of Loffice, founded by sisters Kata and Anna Klementz, was to offer coworking spaces in a city where no other similar model existed. These shared spaces with common facilities meant flexible and affordable solutions for startups, and entrepreneurs entering the market. Six years on, Loffice has evolved into a vibrant community with four locations in Budapest and one in Vienna, a wealth of networking events and plenty of exciting developments on the horizon.

Coworking as a concept is relatively new but has grown exponentially since the first coworking spaces opened in San Francisco a decade ago. The idea is to offer cheap office space with the option of short-term rental agreements and access to the infrastructure essential for day-to-day business activities. But beyond its economic advantages, coworking provided an opportunity for like-minded individuals from different fields to interact, network and even collaborate. Unlike most social environments, however, these coworking spaces actually inspired productivity.

Loffice’s first building, also its headquarters, are located on Paulay Ede utca in Budapest’s sixth district, just off of Liszt Ferenc tér.

Formerly a sheet music printing house for the nearby Ferenc Liszt Academy of Music, the building was discovered by the sisters in a total state of disrepair and underwent a painstaking transformation to arrive at its current state. Many of the industrial features, so rarely found in this city, were preserved and give the space a great deal of character. A geothermal system was also installed to heat and cool the space using environmentally friendly technology.

Although there are a handful of coworking spaces in Budapest, Loffice was the first and is by far the largest. “When we first found this building, it didn’t take long for us to realize that Budapest needed a coworking space, because it’s a big city and this type of thing didn’t exist in Hungary at the time. It was really new and really cool,” Loffice co-founder Anna Klementz says. Anna and her sister Kata, went to The Hub in London to discover how a coworking space is run, and to gain practical knowledge on how to manage their own.

emphasis on mixed use has been the backbone of Loffice and the premise of its expansion. “The core of the concept is not just to rent out office spaces, but to build a community as well,” Klementz adds.

As the community evolves and businesses grow, there is also an infrastructure within the Loffice network of properties to accommodate that growth. “What we’ve seen are one- or twoperson companies, small startups, entrepreneurs and freelancers starting their business in the community spaces and when they expand they go on to the studio spaces… and if they expand further they have the option to move to our 150 and 250 sqm office spaces,” Klementz says. Contracts vary depending on the size of offices required, from one-month, to three-month, to yearlong rental agreements.

To make Loffice even more enticing, particular attention is paid to design from the industrial features, to the furnishings, and even the floor finishings. “In the beginning we already had all the design concepts in mind so the ideas came mostly from our family,” Klementz admits. As they expanded, they hired local interior design studio Supernova to transform their interiors into functional and exciting workplaces. “The floor [at Paulay Ede] for instance was our idea, to have these clouds. Our inspiration came from the painter Magritte actually, and with the golden benches by Supernova, people get the sense that they’re in heaven,” Klementz laughs.

The spaces are definitely inspirational and a handful of the small companies or individuals who started at Loffice have gone on to become very successful businesses including Distinction, a Hungarian mobile app developer bought by the UK’s Skyscanner late last year, and Koupon Világ which is now the largest daily-deal group-buying company in Hungary.

“Shehry [Piracha, founder and then CEO of Koupon Világ] came here directly from Belgium with his luggage in tow and we were the first people he saw. He had to put his luggage in storage so that he could work here for the day... From that day his company grew to 50 employees,” Klementz explains.

“When we started it was at the time of the financial crisis, or shortly after, and we felt our model could offer a solution in this difficult time,” Klementz explains. Back then, there were only a very small number of entrepreneurs and startups on the horizon, and Loffice was seen as an intrepid pioneer. “It wasn’t the timing that was the most important factor, but what we could do with our accomplishments. We had to be really flexible,” she says, “that’s how we built our company.”

With a new Loffice branch in Vienna, managed by Anna’s sister Kata, comes a new focus on building bridges for small businesses between Central and Western European markets. “We would like to cater to entrepreneurs who want to test the waters in Vienna by providing consultations on how to set up a business in Austria,” Klementz explains. Loffice is also currently in discussion regarding the next logical step in the process of its evolution, to act as an incubator for startups and small businesses in both Budapest and Vienna.

The Paulay Ede building is so much more than a coworking space; it also houses larger offices on the upper levels, and a large space used for workshops, training sessions and networking events. This

LOFFICE has three other locations in Budapest beyond its Paulay Ede head office: Király utca, Sas utca and Salétrom utca; and an office in Vienna’s seventh district.

29

30

innoVATioN 2015

Hungarians are constantly generating innovative concepts: A bike that runs with strings, a new standard for smartphone encryption, a foldable electric scooter and artificial intelligence that refines your sales pitch. We look at these, and other innovative businesses started here.

bright ideas

innoVATioN 2015

Let Analogy

do the thinking for you Software that can analyze best practices and case studies allows new sales people to refine their pitch, and helps businesses solve problems.

H

ave you tried selling insurance? Even the best agents have a hard time to succeed and when they do, sometimes some ultimate trick was used in a given situation with a particular client. But how does any new recruit ever learn about that twist in the sales pitch that was decisive in clinching the deal?

Analogy Zrt. apparently has a method in its pocket to handle this dilemma. It provides a virtual consultant that created from a database of real life cases. “We work from ‘stories’ such as best practices, case studies based on training, or FAQs,” CEO Gergely Szertics (pictured) explains to the Budapest Business Journal.

“What they have in common is that they tell what the problem was in a certain situation and how it was solved.” The system not only provides search results and the relevant paragraphs, it gives solutions or comprehensive conclusions in the sense that it summarizes the available options.

Aiding newbies The process has three phases: input, processing and output.

“Input can take place in an interactive way such as on a social networking platform where people write comments and exchange their experience or clients provide ready-made material from their own database,” Szertics says. He sees the biggest potential in call centers; as these represent a highly knowledge intensive area, and since it’s hard to keep staff long-term, it is vital to bring freshmen up to speed fast. This way, call center newbies can serve clients a lot more quickly, whilst the system is fed with valuable practical information.

Abstraction is one step further down the road, where the system could come up with new conclusions from the data available. Now it’s more like giving a summed up answer to specific questions on the basis of the material in the archives, but the team is working on that leap.

Analogy Zrt. is not alone on the market, and it is aware that it could become a target for some IT giant playing in the same arena. “An exit can be the most realistic objective for which we’ve got to start building up our network. It is a totally viable scenario that we would be bought by IBM’s Watson as an engine supporting analogy-based thinking. But getting integrated in personal assistants like Siri, Cortana or Google Now is also an option for us,” the CEO notes.

Natural progress Till then there’s still a lot of work ahead, including attracting enough financing for the next development phase. The first $300,000 has been secured. “The remaining part of the total $1 million should preferably come in the form of smart money, where it’s expected as part of the deal that investors know the global markets and can help forge strategic partnerships,” Szertics says.

Such cooperation could then lead to being gobbled up by bigger rivals.

But that is deemed as natural progress, after all, and not least because in this way the number of potential users can be maximized. And it’s a thought the startup’s founders are galvanized by.

31

32

innoVATioN 2015

T-Systems International’s

“location based mobile advertising”

BBJ interviewed Laszlo Posset, Product Leader at the Digital Division of T-Systems International (TSI), about their Data Driven innovative Big Data Solution, which provides a new marketing tool and a new free service for mobile subscribers.

TSI launched its location-based mobile advertising B2B2C solution in Hungary this past summer. By mid-September, 100,000 offers had been sent over a period of 10 weeks. How has uptake progressed since the program began?

The number of sent offers and of the opt-in subscribers has been doubled until now since we have launched our product in Hungary.

We are now also offering the service to retailers to operate the service to their million plus loyal customers.

Consumers are more willing to share information on their location and interests in order to receive better-targeted advertising. Opt-in based mobile advertising goes beyond youth (45% of consumers are between the age of 20 and 39) and it fits all verticals; most actively engaged are telecommunication, sport, beauty & fashion and automotive. Nor is gender a determining factor for receptiveness towards opt-in mobile advertising, with only slightly more women (52%) than men.

How many subscribers have opted to join the service?

The number of opt-in subscribers in Hungary had reached more than 200,000 by the end of last year as part of Magyar Telekom’s “Akció Nekem” program. The product was also launched in Croatia by Hrvatski Telekom as their “kupon2go” service in December 2014, and the number of opt-in subscribers reached more than 20,000 within two months. The popularity of Location Based Opt-in Mobile Advertising is growing, as it is the most effective way for brands and advertisers to reach the right audience at the right time. There has never been a more targeted and engaging advertising medium, which is viewed by the recipient as welcome, relevant and exciting at the same time. The

approach of permission-based marketing supported by opt-in puts control in the consumer’s hands, allowing marketers to deliver messages, promotions and advertising that customers desire.

What kind of response figures are location-based mobile advertising clients seeing?

Basic location targeting alone, which we used in the first version of our product without predictive location awareness, helped one brand’s mobile campaigns to reach a 12% response rate on average, well above the global average of clickthrough-rates (CTR) for online ads (0.04%) and mobile ads (0.3%).

The average CTR of our pilot in Hungary was 2.38%, three to five times higher than Facebook’s average CTR (0.65%). CTR is a measure of the percentage of users who opened the advertisement on their mobile phones. The service allows brands and advertisers to reach their target consumers via their mobile phones more accurately with the use of geo-fencing, a cellular technology that defines a virtual boundary around a real-world geographical area. This space can be configured to perform actions like sending a message or a promotion coupon to mobile users who trigger the command by entering the specified area.

What types of business take advantage of the service? Can you give examples of how small businesses are using it?

First the client, e.g. a brand, increases awareness of their products, reminding the consumer of a well-known product which is available nearby and maybe with a discounted price, or stirring interest in a new product which has been recently launched, which results in a drive to store marketing. Secondly, we will soon introduce for SMB’s a portal

innoVATioN 2015

enabling them (and also the advertiser) to generate campaigns with tailored promotions including text, pictures, and videos around their selected point of interest.

What sort of feedback are you getting from brands, advertisers or subscribers?

The key measure of service satisfaction is the close to zero opt out of the program, which means the opted-in subscriber continues to stay in a trusted relationship with their service provider. In some cases, although it sounds anecdotal, we have received “thank you” feedback for great promotions.

How has the service been refined or enhanced since you first began operation?

The first version of our product used the geofencing technology and the campaigns were entered into the system manually by our dedicated competence center at ITSH in Budapest. That has been enhanced, meanwhile, with a portal that will allow our clients to use web-based access to the platform, setting up campaigns and running reports by themselves. We are open to offers from third party partners to integrate our system to any brand or retail chain loyalty programs or club card systems. The system could give predictive support to campaigns based on customers’ behavior or third party CRM database history. The only requirement is that the client gives us consent to send discounts or vouchers to consumers’ mobile phone based on their location.

Features like predictive location awareness, unique vouchering and combinations of these with mobile payment solutions are also part of the product roadmap.

How can big data enhance communication between businesses and customers/consumers?

Our solution helps us bring relevancy to the consumer, to distinguish us from spam advertising by totally respecting subscriber security, interest and choices, and by also offering a direct communication channel between advertisers and consumers.

Big Data is bigger than ever, allowing marketers to find their target audience where they live, to better understand consumers, and to deliver a highly targeted and specific ad experience. The mobile experience provides even more information, allowing marketers to bypass cookies and learn much more about consumer behavior and trends. We all create huge amounts of Data (~5 M illion TB) every single day. Big Data can take that large volume, velocity, and variety of data and help marketers find the value in this information overload. Thanks to Big Data, mobile experiences can be more easily personalized to meet the needs of individual consumers. This means less guesswork when it comes to ad targeting, and more information to ensure that the ads target the right people. Thanks to the geo-location capabilities of smart phones and to the access of the MNO’s to the richest Data Pool using real time technologies and intelligent applications, it’s easier for marketers to target consumers with hyper local ads, which will be the next cutting edge of mobile advertising. Big Data will continue to change the way we work, the way we play and the way marketers find and inform their target audience.

Thanks to big data and sophisticated data science, it’s easier to analyze large amounts of information to create a profile of consumers, to target hyper-locally and to provide real value to consumers.

How do you see your service, and innovations based on this service, impacting the advertising market in the future?

Our service will create a new door for acceptance. It is unique because it is offering on-the-go consumers relevant, highly targeted messages. It

is innovative as it is based on Big Data analytics applied on the uniquely available real time and fast data of the MNO by also using sophisticated data science methodologies to effectively amplify brand messages to create a deeper level of engagement with active consumers, who spend money while they are going about their daily routine by also actively looking for information. According to Google, more than 50% of all mobile searches have local intent, and 17% of searches happen while consumers are on the go. In a recent survey by the Digital Place-based Advertising Association (DPAA) of strategic media planners, 64% of planners are advising their clients to shift their budget away from traditional out-of-home sources to digital place-based media, and recommending to move dollars away from television (41%) and online (40%) to fund digital placebased marketing channels and location-based mobile advertising.

Location has become the new currency of marketing.

Is there anything else you’d like to add?

The Next Big Thing is “Location-Based Marketing/Mobile Advertising” using Big Data to map customers to products. Marketing teams can understand and map consumers, know where they are, what they are doing, even how they are likely to be feeling. Building campaigns based on the analysis of customer behavior (combining real time with predictive analytics) is making a difference. Location-based marketing is extremely important but requires total insight into the customer, with the ability to respond to what the customer is doing in real time. Banks have credit card or bank account data; telcos have location-based data, they see web search requests, web page views, videos watched, apps downloaded. When telcos combine their location and insight data with banking information, the result is a really powerful understanding of each of their customers. Location-based marketing also means picking up intelligence from the Internet of Things – billions of RFID devices, capable of broadcasting data from clothing, vehicles, credit cards and so on. Location-based marketing means an SMS to your phone as you walk in a supermarket, with carefully selected special offers, based on your past purchases, other products that people like you have also liked, and on which aisle you are standing in right now.

33

34

innoVATioN 2015

E-scooter Moveo:

Unplug, unfold and go Given a well-timed investment, the Moveo foldable e-scooter – invented in Hungary – is ready to go global. production, we still decided on a face-lift,” Slezák tells the Budapest Business Journal. As a result, in spite of several awards, the prototype hasn’t been on display anywhere for the past 18 months, since a new version is in the works and should be finalized by March of this year.

The necessity to reinvent so soon was rooted in the fact that the folding technology had to be polished and a desire to reduce the weight to the bare minimum the technology will allow: 25 kg. The latter requirement proved the hardest to meet. “Beyond a certain point you encounter immense problems to go further; you’ve got to fight for every dekagram. Suppliers were requested to make their own light-edition designs, but for that obviously they need assurance that production would reach a given level,” Slezák says.

Whether full-scale manufacturing can start still depends on finding investors. “If they showed up in the spring, the first models could be sold in the fall,” the owner explains. Two scenarios are in play: a EUR 1.4 million business plan allows 4,000 Moveos at a net unit price of EUR 3,000 each, whereas EUR 5.6 mln could boost production up to 15,000.

And demand exists. Interest is growing by the day, and there are even dealers under contract in 60 countries from Turkey to Vietnam who are poised for the launch.

The domestic market is not a priority, but the government’s commitment may provide an unexpected boost to inland sales. The target is to have 5% of all vehicles running on electricity by 2020, which is to be reached through a set of incentives. A uniform charging infrastructure and payment scheme are in the pipeline, while buyers should be further encouraged by free parking and motorway use, and the possibility to drive in the bus lane. A radical VAT tax break is also being considered.

T

amás Slezák leads by example. He could drive a gas guzzling SUV behemoth. Instead his choice is a limousine running on electricity. Slezák is an e-mobility fan not only in terms of his own vehicles; he’s made development his mission.

Accordingly, he got involved in building the SOLO multi-hybrid drive concept car selected among the top 50 best innovations by Time Magazine in 2010. The solutions used in that project drove him to another territory, namely the idea for a creative scooter. The result is Moveo, a foldable, superlight, two-wheeled vehicle.

“We wanted to make a one-of-a-kind design. Achieving that needs time. Therefore, even though we thought we were ready for mass

“Our market research gave positive feedback and product positioning aims to make it a fashion object that people would buy because it’s hot,” Slezák notes. Since the body of the scooter can be folded in two and it can be pulled along like a suitcase, coolness is pretty much guaranteed. No wonder that luxury hotels and yacht owners are targeted, among others, and many are meant for the rental market. Indeed, Moveo would be ideal for holiday resort use. Its range amounts to 35 km on one charge, and its battery is validated to cover 35,000 km at maximum capacity.

The internet will be the main sales channel; the role of more conventional means is mainly seen in providing access to test vehicles, the handover to the customer, servicing, and in forecasting market demand, but any breakthrough is ultimately subject to proper financing.

Crowdfunding is also an option; if you feel like supporting the Moveo mission, go to moveoscooter.com.

innoVATioN 2015

The Moveo charges from a port in the rear, and can be folded up using the bolt in the center.

It is meant to provide easy mobility with low energy use. The photos on these pages have been newly released by the inventor.

35

36

innoVATioN 2015

Pilots can navigate a virtual world

Using special glasses and software, pilots can safely learn to fly without leaving the ground.

innoVATioN 2015

with, to help develop the product. Nagy explains how crowdsourced editing in aviation differs from that of other wikis, where it is immediately shared. “They advise you not to use the data for flight planning, to use the official sources. One database in particular is already very good, I haven’t found a single error yet,” Nagy adds.

Surprisingly for such a minute device, memory storage should not pose much of a problem. Maróy says, “We have calculated that to have all the elevation maps for Europe in sufficient resolution requires 4GB. The current development version of Google Glass has 12GB free space and is now more than two years old, so we are anticipating an upgraded version with more storage.” Nagy predicts, “We should have devices that will hold all the global data necessary for flying within a year.”

Maróy says he is in the business of “decluttering”: there is so much information, that if you just show everything it is overwhelming, adding, “Our vision is overlaying reality, and the current Glass (with its unintrusive screen above the right eye) is a transitional stage of that.”

He explains, “Pilots will have the ability to actually see relevant aviation information in 3D, super-imposed on their real vision, wherever they look. By increasing situational awareness and lowering workload, the app will improve navigation precision and safety. It helps you find the correct runway, keep the line as you take off, follow the route, make an approach and land. We don’t want to display everything, though of course we could if the pilot wants that; we want to always help with the next step,” Maróy adds.

“We will release a new functionality every quarter, for instrumentbased procedures, weather forecasts, support for gliders, and data sharing capacities. We will also have seriously fun things like Top Gun chasing games, in which you can virtually shoot down your buddy, virtual Red Bull obstacle courses, or we could put a virtual Chain Bridge 2,000 feet above the ground, where you can try and replicate that whole thing, at the safety of that height.”

B

udapest-based innovation company EU Edge released the world’s first 3D Augmented Reality app for pilots at Europe’s leading aviation conference, the AERO in Friedrichshafen, earlier this year. Since then, the company has won the ICT Innovation Awards from IVSZ (The Hungarian IT Association), and will compete in the final 50 at the Pioneer Festival in Vienna.

“Let’s see if we’ll make some further headlines there,” says Hungarian software developer Ákos Maróy, who has 250 flying hours under his belt.

Google geospatial technology guru and part-time aviator Ed Parsons tells the Budapest Business Journal, “I’ve had a play with the app and its very interesting. More personalized information is going to be one of the stories of the next decade: what information is relevant to me at this point in time? And there’s bound to be some overlap with aviation. Success in these sorts of apps is all about pulling that small but relevant information at that particular point in time and having the intelligence in the device or the cloud around to tell just what that piece of information is,” Parsons adds.

“More personalized information is going to be one of the stories of the next decade.”

“We launched our Pioneer beta program at the EAA AirVenture Show [America’s answer to Friedrichshafen] in Oshkosh, Wisconsin. We now have 200 beta users with Epson BT200s – one of several non-Google head mounted displays released in 2014 – to try out our stuff,” he explains.

While EU Edge is Maróy’s innovation development company, he cofounded AERO.Glass with Dániel Nagy, who he has previously worked

As for funding, Maróy says, “We have established a strategic partnership with Epson America, and are actively seeking funding, somewhere around $500-750,000, from a number of investors. We already have offers from Hungarian investors (Day One, Aquincum and a private investor), and are working on securing investment from the United States.” However, according to Maróy, the obstacles will not be financial but technical: “The greatest challenge will be when we want to integrate with actual aircraft instruments,” he says. • Dan Nolan

37

38

innoVATioN 2015

Bicycles

throw off their chains

Hungarian inventor uses ‘string’ rather than chains to create a smoother transmission system.

H

ungarian inventor Robert Kohlheb first considered his chainless bicycle design when he cycled over the city’s landmark Chain Bridge on his commute to Budapest’s Technical University in the 1990s. The Stringbike is now a reality, and its co-inventor continues to develop the wildly original design in Budapest. “It is a Hungarian design, Hungarian construction and Hungarian manufacturing, although we use some German parts,” he tells the Budapest Business Journal from his workshop in Csepel, a post-industrial brownfield district in southern Budapest. The area is becoming something of a bike “hub”: the company that oversees the city’s BuBi “loan bike” scheme is next door, and Csepel is even the brand name for a longstanding Hungarian bicycle manufacturer.

“Before university I briefly worked as a car mechanic and was also interested in cycling as an amateur, so all of this came from personal experiences,” Kohlheb says. “From the first idea [in 1991] to this point was more than 20 years,” he explains.

Rather than a traditional bicycle chain and sprockets, the Stringbike drive uses a rope and pulley system. The ride is smoother than with ordinary bikes, and it also easier to cycle uphill. The gear can be changed even when the bicycle is almost stationary. The overall effect is of a strange, hypnotic elegance, as pedaling smoothly propels the bike forward, while the Stringdrive’s pulleys swing in alternate pendulum motion.

Kohlheb explains the process that has brought the Stringbike to life is a long period of development, rather than one “eureka moment”.

He mentions another colleague who was closely involved in the early stages of the invention.

“First comes the essential computer modeling, then the construction, then tests, then the trial stage.” Once a design is conceived, the correct materials had to be chosen too, with the help of lateral thinking: Kohlheb explains that “the special German steel used in the drive was only used in military applications 20 years ago, but nowadays its more available and less expensive. It was a technological challenge; moving into the real prototype stage of road tests was harder, and then moving into the production stage was a big challenge again, just because of the manufacturing and technology involved,” he explains.

As for the all-important string: “Initially we used a wire thread, which was good for performance but its lifetime was only 50 kilometers, which obviously was no good.” Finally he settled for the super-strong Dyneema strings, previously only used in sailing boats, which last for 4,000 kilometers and cost only a few dollars to replace. Stringbike is also green, as the Hungarian environmentally friendly design firm has developed a new bio-composite frame for the bike.

For many years Stringbike was a hobby for Kohlheb, who meanwhile worked for five years at the Bay Zoltán Materials Science and Technology Institute, then as a patent attorney and official for six years, and finally as an innovation consultant. He went full-time with the Stringbike project around three years ago. Since then Kohlheb has made around 220 Stringbikes, which he says appeal to “the open-minded”, such as musicians, creatives, IT people, designers, and business people.

“We are not only looking for business in the bike subculture, but also in fitness, sailing and the fashion industry. The next step is to have showrooms in the city: not just in Budapest but also in Germany, in Vienna, France and England. Not in bike shops, but in a Stringbike showroom,” he adds.

innoVATioN 2015

Jockeying with the big players

TestJockey, which helps app-makers test their work, has had to totally rethink its strategy.

I

t all looked smooth at first. TestJockey, a startup focusing on mobile app testing, pocketed an award at the Hungarian Innovation TechShow (HITS) last summer. That fall saw it triumph against 22 Hungarian rivals in a selection procedure for Start Tel Aviv, one of the most prestigious events of the industry worldwide.

Reality, however, kicked in when it was least expected. “By the time we got to Israel, some of our smaller competitors had been acquired by giants such as Twitter and Apple. They gained a huge advantage, especially due to the fact that we were relying partly on EU funds, which slowed us down,” CEO Péter Vidos (pictured) tells the Budapest Business Journal. “We also managed to talk to Microsoft at Start Tel Aviv, from whom we found out that they were up to something serious in app testing. That made it obvious we couldn’t keep up and so we had to come up with a new plan.”

Getting back up and looking ahead This blow equaled total failure; the company has start over from scratch. “I meet many startuppers from around the world and what I noticed is how failure is interpreted in different parts of the world,” Vidos explains. “In Israel or in the US you can have a fresh start easily, whereas in Europe you have a lot harder time to resume business. I embraced the positive role model.”

He was helped by Virgo Systems, a company that was initially behind iWiW (International Who is Who), for a long time the leading Hungarian social media platform. Virgo provided TestJockey with financing and back-office support. It stood by Vidos when he and co-founder & CTO Zsolt Bányai rewrote the whole business concept upon return from Israel. “The idea with TestJockey was to have a one-stop-shop offering a uniform solution for problems relating to app testing. When we were forced to dump it, we decided to refocus on one – surprisingly abandoned – segment of the area. That’s how apptalk.ninja, which monitors communication between apps and their

backend servers, got started,” Vidos says. “This device diagnostics service is a one-of-a-kind solution, and should be helpful for app developers to indicate if they have an operational problem, and to make better quality apps.”

Vidos applies a basic startup method when going forward with development. “We need to find out what our would-be users want.

A dialogue with them can lead us to understand their needs,” Vidos says. Meanwhile a period of three months has been set as a milestone to see to what extent apptalk.ninja can gain traction.

But Vidos looks further ahead. “I also learned in Tel Aviv that you need to look for solutions not for today’s problems, but for tomorrow’s. That’s why we also intend to go into monitoring Bluetooth communication, which is bound to dominate our lives in the not so distant future via connected devices such as wearables, smart watches, smart homes etc.” That means being one step ahead at all times. Could it be simpler than that?

39

40

innoVATioN 2015

Smart Cities Interview with László Radványi FCCA, Director of Energy Utility and Mining Industry Group, PwC Hungary What does “smart city” mean?

According to PwC, the selection of modern technologies can be applied to create a city that operates more efficiently, becomes “greener” in an environmental sense, becomes more cost efficient and enhances the living standards of its citizens. Efficiency and cost efficiency are two separate concepts here, because efficiency means, for example, that you can quickly find a parking place, while cost efficiency could mean that the operation of public lighting costs less.

In Hungary, it is also important to note that the modernization of cities can be achieved through external sources. With the start of the 20142020 EU operative financial cycle, regional funds are becoming available for cities. A smart city can find these external sources and use them for the purposes of modernization.

increasing tax rates. These systems generate more income and create a fairer environment for local businesses.

There are national goals to fulfill also.

Hungary has made commitments to the European Union regarding energy efficiency. There are three main energy consumers in Hungary: households, the public sector and corporations. Through smart cities, the energy consumption of cities can be reduced significantly, for example through installing insulation to reduce heating costs or installing LED lamps for public lighting. You can also reduce the operating costs of cities with the introduction of centralized building management systems, where you are able to monitor the energy consumption of all council-owned buildings. In this way, consumption can be optimized and energy consumption can be reduced.

What steps can be made to make a city smarter?

First of all you should have an integrated How can a country’s economy László Radványi strategy about how and in which direction benefit from smart cities?

FCCA, Director of Energy Utility and Mining you want your city to develop. What are There are all sorts of benefits, from Industry Group, PwC Hungary the main goals, objectives and challenges? more cost efficient operation of the cities There are a high variety of smart city to more efficient municipality operations, as well as increased R&D activity. Let me give you some examples. products and solutions that can be matched to the objectives or The financing of cities and municipalities in Hungary is based on challenges of any given city. Let me give some real life examples internal sources like taxation and a central budget. The more cost here to make this more tangible. efficient a city’s operations, the less these internal sources are One way to make a city smarter is by installing sensors that tapped for money. Moreover, smart cities are open to innovation, help you monitor real-time what is happening in a city. With the through which the city can involve local companies, or local application of sensors not only can you monitor consumption, universities for research and development. As a result, these but also the condition of your utility tools, and maintenance can companies become stronger, their revenues and profits have the become proactive and not reactive. For example a burst water pipe potential to increase and this in turn leads to the city’s ability to can be prevented by applying sensors, and through monitoring, you collect more taxes. In this way, a smart city can become self- can see that there is decreased pressure in your pipe system, and you can act on it before the pipe bursts. sustaining and less dependent on the central budget.

Efficiency can be reached within the municipality’s operation itself. If you think in more complex terms, nowadays there are water If we examine how efficiently a city operates in Hungary, the ratio of pipe networks, gas pipe networks, cable TV networks and internet labor is very high. There are opportunities to develop the efficiency networks running under the street surface. At the moment, it is of labor through, for example, computerization. If the process of tax very difficult to tell where these networks are exactly. The relevant returns is computerized, it can be done faster and the work hours information is owned by each service provider, however no combined saved can be spent on, let’s say, detailed checking of company tax database/map is available. By collecting this data, three dimensional returns, or identification of tax avoidance. In this way, you can focus maps could be developed to see where these networks are, so that the work on value creating activities, enhancing tax income without when maintenance work is required, you can have an immediate

innoVATioN 2015

picture of where to look for the problem. Maintenance works can be harmonized in this way, and this would lead to faster and more cost effective construction.

Another quick win can be the modernization of downtown parking spaces. When you want to park your car in the city, it takes a great deal of time and gas to find a spot, since you don’t know where the free places are. You spend a lot of time travelling along one-way streets, use up a lot of gas, adding to traffic jams and air pollution.

With the installation of very cost-effective sensor systems, connected to smart phone applications, you can check where the free parking places are and this can make parking faster, cleaner and also more cost effective.

Waste management could also benefit from similar systems. If trash bins can tell you how full they are, instead of emptying all bins regularly, you can always plan the most optimal route for the collecting cars. No overfilled bins, less cost, less pollution and noise, less traffic jams downtown.

Smart technologies can be beneficial for tourism as well. For example, applications that use augmented reality projections can guide you through the city, can inform you about the history of the city and, with the help of a smartphone camera, can project how some parts of the city looked decades earlier. An application like this could boost tourism as well, drive the attention of tourists to new areas in the city, and help develop the economy in underdeveloped city districts.

There are also some technologies at our fingertips, where we do not exploit their potential. For example cellular information of our mobile phones could be used, without invading an individual’s privacy, to see traffic conditions for either pedestrians or motorists.

Information like this could be used to optimize public transport for example. There is so much information that we should be collecting and using smartly.

These were just some examples, but there are other great ideas already in practice around the world. We just need to open our eyes think smart and integrated.

What does PwC do for smart cities?

Our advisory line of service has a center of excellence here in Hungary for the whole CEE. We have the knowledge and experience to deliver complex smart city projects to all sizes of cities. We start with the understanding and mapping of goals, challenges and objectives of the given city, and using our smart city tool box we match globally applied technically and economically mature products and solutions to those goals and challenges. The end product of this process is a complex smart city concept and development plan covering all aspects such as energy and utility, waste management, transportation and tourism, municipality operation, even possible mega events topics. We are also supporting the execution of such development plans with industry expertise, project management and external finance mapping.

As these are very complex projects, it is our principle aim to involve all local stakeholders: the municipality, corporations, local universities and, of course, the local people and communities. We believe that an integrated smart city approach should and will serve all of the above stakeholders. Such efforts in themselves enhance innovative thinking, R&D activity and the effective cooperation of the decision-makers of the local community.

We aim to apply our professional knowledge and experience gathered in the business sector to find the right solutions for the public sector. We push cities out from their comfort zone and advise them on how to operate like highly effective and efficient development-focused corporations.

SPONSORED BY:

41

42

innoVATioN 2015

Keeping calls just between us

CryptTalk’s service for encrypting phone communication is so good not even the company’s own engineers can bypass it.

N

ow anyone can talk on his or her mobile phone without worrying that someone is listening in uninvited. This includes normal folks, not just people with the intelligence services or executives of Fortune 500 companies eager to keep business secrets, um, secret. Thanks to CryptTalk, developed by Hungarian startup Arenim Technologies, the liberty to talk on the phone without fear of eavesdroppers is only a download away.

The app uses a peer-to-peer encryption approach, directly between the communicating parties. Because only the communicating parties have access to the encryption keys, only they can decipher the transmitted data. Third party access, including access by CryptTalk, is therefore impossible.

The startup targets the needs of both enterprises and private individuals. “The emergence of our solution is huge progress for the purpose of mobile security,” Szabolcs Kun, CEO of Arenim Technologies says. “The version for individuals provides the same level of security as that for businesses. Furthermore, private users have a free trial period of 30 days. After that they can subscribe for a monthly fee of $9.99. An alternative is to continue using it for free in ‘passive mode’, that is they can receive incoming calls from CryptTalk subscribers free of charge.” This means that any user can make calls or compose messages without limitation for a reasonable amount of money under a protective umbrella.

The fee for small- and middle-sized enterprises is positioned higher.

What they get in return is more functions such as secure conference calls. However, whereas individuals are all set right after an e-mail registration, entities need to sign a customer agreement first. To make life easier, the latter is a cloud-based, flexible service that does not require an investment on part of the firm and it can be written off as a regular corporate expense.

A recent debut in the App Store should give a boost to popularity. The business version rocketed to the number one place among corporate apps just two days after its introduction. Individuals also downloaded CryptTalk in the thousands during the first week. “That shows that not only companies, but also consumers have serious interest in protection against illegal wire-tapping, since it is a right of every citizen,” Kun notes.

If that level of success continues, new versions for mobile devices other than the iPad or iPhone will be developed. And it seems likely we will hear a lot more of the CryptTalk story sooner than later.

CryptTalk’s Awards

Most Innovative Company 2014 (Innovation Tech Show Hungarian Startup of the Year 2014 (Central European Startup Awards) Hungarian Founder of the Year 2014 – CEO Szabolcs Kun (Central European Startup Awards) EuroCloud Partnership Award 2014 Selected among the best 40 mobile technology firms

by CTIA, the leading association of the global wireless industry

Photo: Tamás Bujnovszky

FINALE T

he concert pianist Gergely Bogányi unveiled the second prototype of his stunning, self-designed piano to an astonished public in late January, with the claim that this was the biggest event in piano design for 130 years.

The currently accepted design of a modern concert piano reached consensus at the end of the 19th Century, but the former child prodigy says his new Hungaricum could be the start of a re-examination of the piano, or even the whole orchestra.

The “Bogányi” was developed by the virtuoso over a decade in a workshop near his hometown of Vác, north of Budapest, with several technicians, who collectively dedicated more than 8,000 working hours to the project.

Definitely more a visionary than a businessman, Bogányi can only estimate that he spent some EUR 500,000 in developing his new take on the instrument. The pianist says he has made 17 significant design changes to the standard Steinway D, including replacing the requisite wooden sound board - “the soul of the piano” - with one made from a patented carbon composite material, and creating a lighter keyboard action by employing an obscure agraffe system

designed by a Hungarian piano designer in the 19th Century.

The instrument has a curved left leg, which directs more noise underneath the piano, creating a spacey effect. The sound engineer who miked up the piano for its debut CD recording remarked on how differently the piano behaves acoustically, compared to other concert pianos. Grants from the lottery fund and the National Bank brought that figure up to around EUR 1,000,000, which the industry considers remarkably low, compared to previous attempts from Peugeot and Audi to update the piano, in two separate collaborative projects.

Aside from his lower development expenses, Bogányi says the difference with his work is that “the other projects were for design pianos, while everything we have done was motivated by improving the sound”.

Bogányi says he does not yet know the retail cost of his first production batch of ten pianos, which he hopes will roll out later in the year, but warns that “with these materials, it won’t be cheap”.

Photo: László Jarai

A Hungarian concert pianist redesigns his instrument.

Innovation is seen as a vital driver for growth throughout the EU, but especially here in Hungary. The country enjoys a reputation for top-notch brains, an excellent education system and a strong local startup scene. While there are services that facilitate innovative businesses, and help to unite people with ideas and people with money, more can be done to support the important innovation sector. This special publication, produced by the Budapest Business Journal, explores the world of innovation, here in Budapest and around the country, looking at the existing infrastructure as well as gaps that need bridging. We also provide a review of just a few of the local innovative enterprises. Our goal is to inspire local innovators, to encourage enhanced support for these creative thinkers, and to ignite interest in their ideas.