Hungarian startups begin to smart up
Technological research and financial investment form two separate worlds. Making a match between them, however, can yield huge benefits. To help cooperation between the two fields, a whole industry has evolved, offering lots of sophisticated services. The BBJ presents three startup enterprises that have arrived at various stages of development in their business. The team of SmartSocket is on the right track to business success, going through the phases that its American and Western European peers and predecessors have already passed. Geotem Invest is more on the investors’ side, founded by corporate finance experts. HY-GO is just the opposite: a group of technical professionals struggling to incorporate their research enterprise.
In the beginning there was only a group of young technical scientists working together in the department of measurement and information systems of Budapest technical university BME. They managed to develop a method by which a software can recognize household, office and medical appliances merely on the basis of their power consumption profile. “Our IT algorithm can determine whether a vacuum cleaner or a copy machine has been attached to the power network with 99% probability; what’s more, it can even specify its type, e.g. Cannon 5018,” Szabolcs Erki, leader of the project told a venture capital forum this spring.
In 2008 they realized the business potential their invention carried: such software may serve the interests of all sorts of facility managers (be they medical, office or academic), as the system can both monitor and save much of the stand-by consumption energy. From then on, their purpose was to develop a commercial product that can remotely switch electric appliances on and off. “By the beginning of 2010 our development team was founded, that summer we formally established the company Remagine Technologies, and by the end of the year we had even created the prototype of SmartSocket,” said Erki, who is the majority owner of Remagine Technologies.
This spring SmartSocket was awarded first prize as most promising startup product of the year at the Elevator Pitch Competition. Currently, negotiations between Remagine and a European venture capital fund have entered into a “very advanced phase”, the BBJ learned from a source close to the deal.
This seems to be a straightforward success story; when telling it, however, one should not omit a silent helper working behind the curtains: Secret Sauce Partners. This Californian startup consulting company has done a lot to help Remagine break through. It has accumulated a huge amount of experience in developing future products without narrowing down the circle of potential consumers. As a matter of fact, top executives of Secret Sauce are on the advisory board of Remagine. (See correction below.) They have also helped Erki in gaining experience at prize-winning presentation techniques, which he has made use of at venture capital forums such as the Elevator Pitch Competition, and have assisted SmartSocket in developing along American models in a Hungarian environment.
Geoterm Invest (GI) is exclusively owned by venture capital fund Morando, whose owners are well-known investment leaders and portfolio directors like László Mészáros, Tamás Gazda and Gyula Gansperger, former CEO of Hungarian national asset manager MNV. Morando serves as one of the funds managing the SME investment sources of the EU, known as Jeremie (Joint European Resources for Micro to Medium Enterprises), to which it also contributes its own equity.
The owners of Morando are said to have picked geothermal energy as an investment sector in order to make use of the knowledge base of failed oil exploration projects in Hungary. “The documentation of unexploitable oil and gas deposits had been lying idle in the archive of the Mine Captain’s Office, until Geoterm Invest made use of it in exploring thermal water resources,” an oil-drilling expert familiar with the geothermal business told the BBJ. The brilliant idea lying behind this is that documented failures can spare GI a lot of trial wells: their success is almost guaranteed when drilling for hot water.
According to Morando’s business plans for this year, HUF 1 billion will be invested in geothermal energy projects related to GI. The geothermal firm has already acquired a majority stake in Materm, a project company that is planning to develop a geothermal district heating system and a spa for the city of Makó (southwest Hungary). Next it is planning to start a similar project in Csongrád, another town in the southern region of the country.
In the strict sense of the word, GI is not a startup company as its investors did not support an existing enterprise but created one for their own purposes. However, it serves as a good example for an idea related to renewable energy by a venture capital fund.
A team of six people has been working on developing the first Hungarian fuel-cell vehicle, called HY-GO. Each member is employed at the science faculty of Budapest’s ELTE university: they are mostly physicists, two of them are mathematicians, and one is a meteorologist. This probably explains why they have never tried to establish a project company as a framework for their product development. Their quest for business opportunities has been limited to finding sponsors. Like the SmartSocket team, they also took part in several venture capital competitions, and even won an award: last year in Düsseldorf their presentation earned a special prize of the European Venture Summit.
Their main sponsor is the Hungarian state-owned electricity provider MVM. It supports their scientific research on hydrogen fuel as well as experiments in modeling vehicles, but some experts still say that it is not in the interest of the power company to develop a fuel-cell engine on its own, however good the parameters of the engine might be.
Secret Sauce Partners is not directly involved with Remagine Technologies and its executives do not sit on Remagine Technologies' advisory board. The latter firm does not have a formal advisory board. It is only Zoltán Piroska, who is incidentally an executive of Secret Sauce Partners, who helped the start-up with advice.
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