Successful local startup founders explain the important leap from sparking interest to obtaining big investment.
Several Hungarian IT startups have been bought up in the past few months by international firms on the lookout for fresh knowhow. What these businesses had in common was a global partner network and visibility on the international stage – musts for any startup aspiring to follow suit.
At a June 10 matchmaking event in Budapest, sponsored by the ICT Association of Hungary, Hungarian enterprises acquired by international players talked about how to go global.
“The fairy tale version of our story goes like this: I get a phone call, two days later I’m on my way to the United States; in two weeks’ time I sign the deal and a week later the company is at Tech Ranch,” Zoltán Prekopcsák, vice president of RapidMiner, an international Big Data handling company, told the audience. Prekopcsák was founder and CEO of Radoop, a data handling startup purchased by RapidMiner.
“What people don’t see is that it took us years of partnership to reach this point,”
IND Kft., an online and mobile banking software maker, had a one-year exclusive sales agreement with then client, now owner Misys, a U.K. financial service vendor, before the bigger firm bought the startup. “Sales figures were so good they decided to buy us up rather than share the profit,” said József Nyíri, a founder of IND and now an employee of Misys.
Another Big Data startup, SequenceIq, barely had to wait two months after its official opening to attract its dream partner, Hortonworks, a California-based data platform company, which acquired the former company this April. “We started to receive price quote requests when the product wasn’t even finished. That was when we thought we had found [out] something good,” Lajos Papp, a founder of SequenceIq said.
But why should founders sell a startup with global potential? Growth in these companies is usually restricted unless they switch from local investors to international ones with deeper pockets, which is exactly what Prezi, the Hungarian presentation software maker did. European IT firms also struggle from a lack of investor trust, while early-stage companies attract mostly angel investors, Gábor Vicze, head of IVSZ’s SME department told the Budapest Business Journal.
“It is useful to have experience in building and managing a company,” Péter Vityi, vice president of IVSZ also told the BBJ.
Radoop and SentenceIq opted for acquisition as they soon learnt they had neither the business development nor the sales skills, and they lacked the knowledge or capacity to build a market in the United States, a key target for IT firms.
Mobile app developer Team Distinction – bought up by Skyscanner, a global search engine that allows travelers to compare flights, hotels and car hire firms – said yes to the buyout to reduce risks. “We swapped a startup with high growth potential and high risks for a big company with considerably less risks,” said Ákos Kapui, developer/founder. The startup saw 100% annual growth in the past three years with a 50% profit margin, but the workload was so heavy that Kapui said he and his colleagues risked burnout.
While money may have been an important factor, strategic partnership and creative freedom weighed more during negotiations. “We received a great professional opportunity at Skyscanner, as opposed to being a small player within a big organization that might have offered a hundred times more,” Kapui said. “Getting a seat on the board was one important consideration for IND Kft.
Yet the biggest reason for selling for all the above startups was the ability to go global. “Our main goal was that more people use our software in the world. Ever since we set up the company, that is what has driven us,” said IND founder Nyiry.