Are you sure?

MNCs Looking to Help Startups Scale-up

Budding Hungarian enterprises with innovative technological solutions may reach their potential markets with the help of large corporations, a new initiative promises.

Startups looking to move on can get an inside track at Technopolis Innovation Center.

There is a swarm of innovative solutions on the Hungarian market from wearable ECG monitors to customer behavior analysis tools to intelligent indoor heaters – all looking for new markets. 

That only a fraction of them reaches this goal is not a question of finances, experts say. With ever more resources (from the European Union and the state, not to mention private equity and venture capital funds) available, the number of programs to mentor startups and early-stage enterprises abound. Firms that have been operating for a while, have various other options – they are more likely to enter tenders if they want to expand. 

Yet despite the funds and programs, most don’t get to grow at the desired pace, let alone enter foreign markets. This happens because most lack a proper business model, are not aware of the intricacies of the chosen foreign market or simply haven’t been able to find potential clients, many experts hold.

To help them (and themselves) several large international firms, headed by IBM, offer a program that aims to fill precisely those gaps. A new initiative by Technopolis Innovation Center, a Budapest-based business accelerator and IBM, along with partners such as T-Systems, KPMG, and K&H Bank invite Hungarian companies with a technological solution to join their program. 

Health and Tourism

The target group are scale-ups – firms that already have a ready product, but have not really been able to scale it, commercialize it or cross borders with it. In the first round of the program, companies with innovative solutions for the health and tourism industry using artificial intelligence, cloud, IoT, etc. have until January 19 to enter.

The subcategories for health industry are wearable health devices, solutions that use big data smartly, and are able to automatize imaging diagnosis assessment. As for tourism, applicants do not necessarily need to come up with something new; they can enter a solution used in another sector that could be repurposed. 

Entries are welcomed from across Central and Eastern Europe, not just Hungary. “We are looking for already operational startups aiming to enter foreign markets which we can provide with technology and clients,” explains Gábor Varga, CEO of Technopolis Innovation Center. 

That is the main idea behind the initiative: all the multinationals lined up behind the program offer market information, product testing and, potentially, their clients. They would act like match-makers: they monitor what their clients need, and pick from among the applicants accordingly. Then they help tailor the product to be in line with their clients’ needs, test and validate it, thus upping the startups’ chances of finding their way to customers. 

“Our corporate partners are the guarantee that the products get tested in real life and among potential clients,” Varga adds. The participants will become part of the IBM Global Entrepreneur Program, gain access to IBM Cloud, and can even incorporate these technologies into their products. The use of IBM’s cloud and AI solutions, through which some products may receive IBM’s technological validation, will ensure that quality products will end up at clients, he added. 

Building on Networks

Once admitted, the roughly 16 companies the organizers are expecting to work with will go through a six-month program. In the first eight weeks, they become familiar with the markets; in the second phase, their solutions are tested in the market. In the third stage, they are supposed to enter foreign markets.

Most of the firms in the cooperation, such as KBC Equitas, offer their worldwide clientele and network. Should some, say, wish to go to the United States, the bank’s local office would advise them on how to open an account, etc. in any of the states, Viktor Kovács, head of K&H’s SME marketing division says.

“At this point, it is hard to say whether T-Systems will invest in any of these firms,” Klementina Krégl, head of Innovation Competence Center at T-systems tells the Budapest Business Journal. “If we can find a solution that is really relevant for us, T-Systems may include it in its portfolio: it is possible scenario.” 

However, it is not the lack of investment or securing it that causes a problem, rather that companies are unable to create real market value and enter into markets, she said. T-Systems’ added value in this program is its ability to find what clients a product can be aimed at and how to reach them, Krégl adds. 

According to the founders of the program, one major impediment in the way of scaling up is the inability to identify potential clients and markets. Yet, despite the financial resources available, finding investment still has its challenges. 

“Securing HUF 1-3 million is fairly easy. But building a functional prototype that resembles the future product, which investors actually expect, can cost hundreds of millions, which is difficult get in Hungary,” György Kozmann, CEO of wearable ECG device, HeartBit told the BBJ. 

The cost of the investment also matters: Hungarian investors usually require a majority share in the company in return, he said. The CEO has just returned from Australia, where he met with local investors. For foreign investors, such an amount – HUF 100-200 million – is so marginal, they are unlikely to want to get involved, Kozmann says. “Rather, they are interested in how you will achieve half or one billion dollars of sales – and such things are not taught anywhere in Hungary.”