2 SLOVA TARTP REPORT 216 - StartItUp.sk · 4 SLOVA TARTP REPORT 216 Slovakia is a small country...
Transcript of 2 SLOVA TARTP REPORT 216 - StartItUp.sk · 4 SLOVA TARTP REPORT 216 Slovakia is a small country...
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SLOVAK STARTUPS REPORT 20162
SLOVAK STARTUPS REPORT 2016 3
CHAPTER 3
CHAPTER 6
CHAPTER 1
CHAPTER 4
CHAPTER 2
CHAPTER 5
Introduction 04
Financing 22
Innovation,challengesandopportunities 36
ExecutiveSummary
Metodhology,contribition,abouttheauthor,organizationandpartners
Startupmetrics 08
Employment 30
Recommendations 40
Business 16
Export 34
Table of contents
INTRODUCTION
4 SLOVAK STARTUPS REPORT 2016
Slovakiaisasmallcountryfullofgreat
ideas.The startup ecosystem is fairly young as the first steps of getting to know each other and starting to collaborating were taken in 2009.Allofftheactivitiescamefromthecom-munityandentrepreneurs.Nowtheecosystemisslowlymaturing.Therearemoreplayersinvolved,andthegovernmentisrealizingthepotentialofinnovation,andtheaddedvalueofthesebusinessesfortheeconomy.
Startupfoundersunderstandthatthelifeofanentrepreneurisexcitingandchallengingatthesametime.AseveralSlovakstartupshaveturnedintosuccessfulcompanieswithglobalreach.PixelFederation,Sygicandotherwithaglobalreachsuchcompaniesnowfallintothecategoryofscale-upsasdefinedbySherryCou-tuintheScale-upReport1.Thesearethestarseveryoneislookingat.
Petra Dzurovčinová, Executive Manager at the Slovak Alliance for the Innovative Economy
Introduction
1Definitionofscale-up:Scale-upsareenterpriseswithaverageannualizedgrowthinemployees(orinturno-ver)greaterthan20percentayearoverathree-yearperiod,andwith10ormoreemployeesatthebeginningoftheobservationperiod.TheScale-upReportonUKEconomicGrowth–http://scaleupreport.org/
INTRODUCTION
5SLOVAK STARTUPS REPORT 2016
Aeromobil,oneofourmostfamousstartups,managedtobringtogetherahighlyprofes-sionalandskilledteam,auniqueproductandaninternationalaudience.Theyarealsoagreatexampleofastartupthatbreaksthestereotypeandwasfoundedbydrivenandexperiencedprofessionals.Thereisanincreasingnumberofpeoplewhodecidetostarttheirownbusi-nessaftergatheringsomeexperienceworkinginacompany.Theirprimarygoalisnotthespot-lightandmediaattention,buttocreateinnova-tiveproductsthatareuniqueandwell-receivedacrosstheworld.
We can see that there is no lack of ideas in Slovakia and the V4 region.Whatweneedisgoodpolicy,astablelegislativeenvironment,skilledprofessionalsandresourcessothatwecancreateaworld-classSlovakia.
INTRODUCTION
6 SLOVAK STARTUPS REPORT 2016
Executive summary
1 Slovak startups are young.60% ofthemhaveincorporatedinthelastthreeyears(2014–2016)
2 78%ofSlovakstartupslookto globalmarkets.The majority of them want to, or already export to the US (43%) or EU countries (65%). Only30%ofthemarelookingatmarketsinAsia
3 There is an increasing number of female founders.30%offoundersarewomen.Womenarealsorepresentedasemployees(41%)
4 83%ofSlovakstartupfounders areaged20–39
5 Mostofthestartups(39%)areintheValidation/ Pre-seed stage:theyhaveabetaversionortestedprototypewhichtheyarefine-tuningthroughincubationandaccelerationprogramsinthe Efficiency/ Seed-stage: product putonmarket,earlyrevenuefromsales,trademodelestablished
6 Amongthebiggestinternalchallengesforthemareinvestment and human resources. Externally,thebiggestissuesareconcerningexport and entering new markets, tax systems and legislative framework
INTRODUCTION
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7 Theyareeitherfinancingtheirven-turesthroughtheirown capital (87%), busi-ness angel (30%) or through a VC fund (local and abroad) 24%
8 Over50%ofthemaredevelopinganewproductorserviceinthetopthreethefieldsofweb services (26%), SaaS (26%) and mobile software services (23%)
9 Theyarealsoplanningtogrow in the number of employees in the next 6 months, 47%ofthemwanttohire1–3employeesand33%alreadydidinthepast3months
10 45%ofthemare planning to open a branch abroad
11 68%ofthemareregistered as a businessinthewesternpartofSlovakia, withBratislavarepresenting75%
12 70%ofcompaniesarelimited liability companiesregisteredinSlovakia (s.r.o.)oritsequivalentabroad
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CHAPTER 1 STARTUP METRICS
SLOVAK STARTUPS REPORT 2016
Who are they
Slovak startups are young and highly educated. 83%areaged20–39years.67%ofthemhavetertiaryeducation,with21%currentlystudyingatuniversity.Theirlevelsandfieldsvarythough,withthemostpopularfieldsbeingtechnical–mainlycomputersciences(appliedinformaticsorprogrammingcourses)andbusiness–rep-resentedbymarketingandmanagement.Theyhavechosenartanddesigninsmallernumbers.
Startup metrics
5% <20 45% 20–29 38% 30–39
19% Secondary 66% Tertiary
6% 40–49 6% >50
21% University 13% PhD.
Age The highest level of education attained by founder(s)
Thelargestpartoftheresponsescamefromthoseagedbetween20and29years.Thisgrouprepresented45%ofallsurveyresponses.Thesecondmostpopulatedgroupwasbetween30and39yearsold,with38%.Only6%ofre-spondentsthatwerebetween40and50yearsoldrespectively.Only4%wereyoungerthan20yearsold.
Thenumberoffemalefoundersisincreasing.30%ofstartupshavewomenasfoundersorco-founders.Amongstartupemployees,womenmakeup40%ofthebase.
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STARTUP METRICS CHAPTER 1
SLOVAK STARTUPS REPORT 2016
Location
ThemajorityofSlovakstartupschooseSlovakiaastheircountryofregistration(89%).WesternSlovakiaisthemostpopularplaceforregistra-tion–68%residehere.Furthermore,themajor-ityofthosewhostatedtheiroriginalmunicipal-ityinthewesternpartofSlovakiaarelocatedinitscapital–Bratislava.
Afewstartupsarealsoregisteredinthesouth-ernpartofwesternSlovakia,inNovéZámkyandŠamorín.OthercitiesintheWesternpartincludePiešťanyandNitra.
ThecentralandeasternpartofSlovakiaareequallyrepresentedinthesurvey,withhubsinŽilinaandBanskáBystricainthecenterandKošiceintheeast.
10%CentralSlovakia
10%EasternSlovakia
68%WesternSlovakia
75%Bratislava
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CHAPTER 1 STARTUP METRICS
SLOVAK STARTUPS REPORT 2016
Do you have or intend to have a branch abroad?
Looking outside Slovak borders
19%ofstartupshaveasubsidiaryabroadand45%plantohaveoneinthefuture.Ofthesubsetofthosehavinganestablishedbranchabroad,onethirdislocatedinUSAandtwothirdsarelocatedintheEU,withtheCzechRepublicasthemostpopulardestination.
27%No
44%Plan
19%Yes
CHAPTER1 STARTUPMETRICS
SLOVAKSTARTUPSREPORT201610
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STARTUP METRICS CHAPTER 1
SLOVAK STARTUPS REPORT 2016
Legal form of your company Planned legal form
Legal forms
Inregardstothelegalformoftheirenterprise,thedatashowsthatthemostpreferedformisalimitedliabilitycompany(LLC)oranothercountry-specificversionofaprivatelimitedcompany–SROinSlovakRepublicorIVSinDenmark.Thislegalformdominatedtheresultswithaproportionalrepresentationof70%followedby17%ofrespondentsusingtheformajoint-stockcompany,and3%ofrespondentsbeingself-employed.
17% Joint-stockcompany 70% Limitedliabilitycompany 10% Other 3% Self-employed
87% LimitedLiability 13% Joint-stockcompany
Someoftherespondentshaven’tfoundedtheircompanyyet.Mostoftheserespondents(87%)areconsideringalimitedliabilitycompanyoverajoint-stockcompany.
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CHAPTER 1 STARTUP METRICS
SLOVAK STARTUPS REPORT 2016
Slovak startups are young companies
60%ofthemhaveincorporatedinthelastthreeyears(2014–2016).Themajorityofstartups(37%)werefoundedin2015.Ontheotherhand20%ofprojectshavebeenaroundsince2011andlonger.
Thosewhohaven’tcreatedalegalentityareworkingontheirprojectsince2015(33%) orformorethan3years(58%).
39%ofstartupsarenowattheValidation or Pre-seed stagewithabetaversionortestedprototypethatisbeingfine-tunedthroughincubationandaccelerationprograms.Thesecondlargestgroup(30%)istheEfficiency or Seed Stagewithaproductorserviceputonthemarket,earlyrevenuefromsales,andabusi-nessmodelestablished.
6% 2016 37% 2015 17% 2014
3% 2017 6% 2016 33% 2015
10% 2013 10% 2012 20% 2011&older
30% 2014 27% 2013&older
Year of registrat ion Date when your project was launched
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STARTUP METRICS CHAPTER 1
SLOVAK STARTUPS REPORT 2016
36% Yes 64% No
Have you been previously involved in a startup?
Other startup experience
36%ofrespondentshavebeeninvolvedinan-otherstartupinthepast,whichshowsthatthecultureofentrepreneurshipisimprovingandserialentrepreneursareontherise.Somemighthavefailedorsuccessfullyexitedtheirpreviousventures,andtheyhavedecidedtotryagain.
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CHAPTER 1 STARTUP METRICS
SLOVAK STARTUPS REPORT 2016
Development phase of your startup
7%Discovery
Ideation process, basic market research and team established
39%Validation/ Pre-seed stage
Beta version/prototype tested and fine-tuning through incubation and acceleration programs
30%Efficiency/ Seed-stage
Product put on market, early revenue from sales, business model established
CHAPTER1 STARTUPMETRICS
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STARTUP METRICS CHAPTER 1
SLOVAK STARTUPS REPORT 2016
11%Scale/ Series A
Increasing revenues and market share, growth strategies developed
11%Establishing/ Series B
Established user base and business model
2%Maturing/ Series C
Expanding and acquisitions
STARTUPMETRICS CHAPTER1
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CHAPTER 2 BUSINESS
SLOVAK STARTUPS REPORT 2016
Business
TheSlovakstartupecosystemwascreat-edbottom-up,basedontheenthusiasmofin-dividualyoungentrepreneurs.One of the most important elements was help and mentoring from successful and experienced entrepreneurs, while many co-working spaces have been sup-ported by successful businesses and corporate partners.Amongtheimportantcornerstonesformingthestartupcommunitywasthe StartupAwards.SKcompetition,whichplayedtheroleofconnectingtheentireecosystem.Thegovernmenthasrealizedonlyrelativelylatethattheneedtosupportthedigitaleconomyiscrucialforthefutureandsuccessofournation.
The critical question for the future is if these public activities can be tied to already existing initiatives by the private sector. Onlycoopera-tionbetweentheprivateandpublicsectorscanbringsynergiesandnotdistorttheecosystem.Thereisnootherchoiceforthefutureoftheinnovationeconomy.
Peter Kolesár, CEO at Neulogy
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BUSINESS CHAPTER 2
SLOVAK STARTUPS REPORT 2016
Character of products
77%ofstartupsprovidetheircustomerswithproducts,66%withservices,and28%withtechnology.Formostoftherespondentsthecasewasacombinationofthese.
77% Product 66% Service 28% Technology
What does your startup offer? (mult iple answers)
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CHAPTER 2 BUSINESS
SLOVAK STARTUPS REPORT 2016
Industry
Ourrespondentscoveredawiderangeofdigitalandinnovationindustries.Themostrepresent-edinourstudywereSaaS,thewebservicesandmobilesoftwareservicesindustry.
26%
SaaS
13%
MarketingTechnologies
2%
Marketplace
2%
ProgrammingDevelopmentTools
11%
E-Commerce
4%
Analytics/ResearchTools/BusinessIntelligence
13%
CloudTechnologies
4%
Big Data
26%
Webservices
6%
Internet ofThings
23%
MobileSoftwareServices
4%
Electronics/Robotics
Theyarefollowedbytheeducationsector,Cloudservices,e-commerceandsoftwarehouseservices.Ourrespondentsoftencombinemultiplesectorsintheiroffering.
Which industry do you operate in?
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BUSINESS CHAPTER 2
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6%
VirtualReality/AugmentedReality
9%
Telecommuni-cations
11%
Software house
6%
Content/SocialServices
15%
Education
21%
Other
6%
Gaming/Entertainment
2%
Transport/Logistics
2%
Lighting
9%
Finances
6%
LifeScience/Healthcare
2%
BusinessServices
2%
MicroandNa-noelectronics
4%
HRservices
6%
AdvancedManufacturingTechnologies
2%
Telemedicine
6%
Energy
4%
Design
...
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CHAPTER 2 BUSINESS
SLOVAK STARTUPS REPORT 2016
SlovakstartupsservebothB2CandB2Bmarkets.Individualconsumersareatargetgroupfor60%ofstartups.SMEsaretargetsforthemajorityofstartups,with38%ofmicrobusinesses,53%ofsmallbusinesses,55%ofmediumbusinessesand49%oflargeenterpris-es.Only26%ofcompaniesprovidesolutionsforpublicinstitutions.
Target customers
69%
38%
53% 55%49%
26%
Individuals Micro enterprises(upto10employees)
Smallenterprises(10–50employees)
Mediumenterprises(51–250employees)
Largeenterprises(morethan250employees)
Publicinstitutions(e.g.schools,hospitals,
governmentalagencies)
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BUSINESS CHAPTER 2
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Withregardstothenoveltyoftherespectiveproducts,51%ofstartupprojectsofferanewlydevelopedproductofservice,13%provideanupgradeto,orinnovationofaproductbeingal-readyavailableonthemarket,26%eitheradaptanavailableproductordirectlyimitateit,and11%areuncertainoftheanswer.
51%
13%
26%
11%
Newproduct or service
Weupgradeaproduct or service
Weimitateandadjusta product orservice
Hardtosay
Character of your product or service
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CHAPTER 3 FINANCING
SLOVAK STARTUPS REPORT 2016
Financing
Slovakia'sshortcomingsasastartupandinnovationhubstemprimarilyfromunderlying,systemicissueswhichneedcoordinatedactionforboththemid-andlong-termpublicandpri-vateactors.Whileinthelastfiveyearswehaveseenactivityandgrowthfavouringstartupsonbasicallyallfronts–universities,publicagen-cies,privateincubators,investmentsandmediaattention–thiswasmorearesultofpent-upenergybeingreleasedprimarilyduetothefirstangel,acceleratorandVCinvestments
andfirstcommunitymobilizingevents andinitiatives.
From the point of view an investors, there are only three problems – people, people, people. First,becauseoftherelativelyclosedimmigra-tionpolicy,Slovakfounderstendtobelimitedininternationalexperienceandmuch-neededlanguageskills.Second,thelong-neglectededucationsystem,particularlyatthetertiarylevel,doesnotproduceenoughbusinessand
Michaela Jacová, Investment Manager at Neulogy Ventures, co-founder of Startup Awards.SK
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technicaltalent,muchlessfounderswithskillssetinboththeseareas.Importantly,muchofthistalentmovesoutofthecountry,whereitisnurturedandmotivated.Reversingthisbraindrainisatoppriorityissuefortheprivatesec-tor,particularlyduetothelackofhome-grownexcellenceinthechronicallyunderfundedR&Dbase.Third,duetohistoricalandculturalreasonsincombinationwiththeabove,Slovakialacksaprominent,engagedandabundantclassofmid-careertoretiredserialentrepreneurs
withwealthofbothcapitalandinternationalbusinessexperiencethatwouldbereadilyavail-abletofirst-timefoundersinbothmentorshipandinvestmentroles.Unless we take action to address this talent problem, the growth of Slovakia's innovation ecosystem will be sub-op-timal for the years to come.
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CHAPTER 3 FINANCING
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What kind of support do startups receive?
Thevarietyofeventsofferedbyco-workingspaces,incubatorsandacceleratorsacrossSlo-vakiaareoneofthemostpopularwaysSlovakstartupseducatethemselvesanddeveloptheirbusiness.Mentoringasoneofthekeyfactors
Sources of non-f inancial support received
24%2%11%6% 2%
21%11% 6%
28% 32%11%
forsuccessintheearlystagesisalsocrucialforSlovakstartups.Localincubators,acceleratorsanduniversitytechnologytransferofficespro-videofficespace,networkingandadviceneces-sarytokickstartthenewventure.Competitions,
LOCAL INCUBATOR
INCUBATOR ABROAD
UNIVERSITY INCUBATOR
LOCAL ACCELERATION PROGRAM
ACCELERATION PROGRAM ABROAD
COMPETITION ABROAD
LOCAL COMPETITION
UNIVERSITY TRANSFER CENTER
MENTORING
COMMUNITY EVENT (CONFERENCE)
NO SUPPORT
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If you have used the services of a business incubator or accelerator, what was your motivation? (mult iple answers)
15%Information about funds
47%Mentoring and business advice
32%Networking with potential sponsors
13%Office space
eithernationalorinternational,areagreatwaytoraiseawareness,promoteideasandeventuallyaimtogaincustomersandinvestors.11%ofstartupscouldbeconsidered“lonewolves”thatneverre-ceivedorrequiredanyhelpwiththeirventure.
FINANCING CHAPTER3
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CHAPTER 3 FINANCING
SLOVAK STARTUPS REPORT 2016
WhenSlovakstartupsthinkaboutfinancingtheirventuretheymostlyusetheirowncapi-tal.ThedevelopmentstageofthemajorityofthesurveyedstartupsalsosuggeststhatangelinvestmentismoreprevalentthantheuseofVCfunds.Over20%ofstartupstookadvantageofpublicmoney.
Sources of f inancial support you have used
87%Owncapital
15%3F(fools,friends,family)
13%Bankloan
19%Localbusinessangel
11%Businessangelfromabroad
15%LocalVCfund
9%VCfundfromabroad
11%Crowdfunding
21%Publicsupport
9%Scientificgrant
9%Strategicbusinessinvestor
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FINANCING CHAPTER 3
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Plansforthefuturefollowasimilartrend.Themajorityofstartupswanttostayindependent.Sincetheinvestmentsinlaterstagesaremoresubstantial,startupsarelookingatsecuringdealswithVCfirmsabroadorsecuringastrate-gicbusinessinvestor.
How do you plan to f inance further growth in the fol lowing s ix months?
72%Owncapital
9%3F(fools,friends,family)
13%Bankloan
11%Localbusinessangel
9%Businessangelfromabroad
15%LocalVCfund
30%VCfundfromabroad
6%Crowdfunding
15%Publicsupport
2%Scientificgrant
19%Strategicbusinessinvestor
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CHAPTER 3 FINANCING
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Public Grants and Support
Startupsrealizethebenefitsofreceivingpublicgrantsorsupportthatmighthelpthemdeveloptheirbusiness.Themainreasonstoapplyforpublicsupportisfortheabilitytoacquirecus-tomersandtodoeffectivemarketingandenternewmarkets,theinabilitytoaccesscommercialbankingproductsandtohelpwithproductde-velopment,andtoinvestintoinnovativetech-nologies,andtousethefundstocreateanewserviceorproductwithhighcapitalintensity.
Itfurthercanbeusedtoemployprofessionalstodeploytheseproducts.Thesefundsarealsointerestingtosocialenterprisesthatareaimingatcreatingaviablebusinessmodel,buttheirprimarygoalistoservesociety.
44%ofstartupsdecidednottoapproachpublicinstitutionsforsupportduetothebureaucraticproceduresinvolvedwithapplyingforthissup-portorthattheyseenoneedforthesefunds.
Are you interested in receiving publ ic grant and support?
56% YES44% NO
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56% YES
Generating revenues
MorethanhalfofSlovakstartupsarealreadygeneratingrevenues.Somecompanies(19%)startedgeneratingstable,expectedandsuffi-cientrevenueafteracoupleofmonthsinthefirstyearoftheiroperation.
After what t ime did your company start to bring in stable, expected and suff ic ient revenue?
19%inbetweenthefirstandsecondyearofexistenceand11%ofstartupsaftertwoyears,atthetimeofthesurvey.6%ofourrespond-entsstartedgeneratingrevenuesimmediate-ly.45%ofthecompaniesarenotgeneratingrevenuesyet.
6%Immediately
11%Aftertwoyears
19%Aftercoupleofmonths,inthefirstyear
19%Betweenthefirstandsecondyear
45%Wearenotgeneratingrevenuesyet
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CHAPTER 4 EMPLOYMENT
SLOVAK STARTUPS REPORT 2016
Data about the labour market data is key for finding the right employees
In2016,Slovakiahasreachedthelowestunem-ploymentrateinsevenyearsandnowhasthehighestnumberofjoboffersavailable.
Thelabourmarkethaschangedinthepreviousmonthsanditshowssignsofoverheating.Ontheonehandtherearethehighestnumberofoffers,whileontheothertheunemploymentrateisfallingandthereareasmallernumberofavailablecandidates.The ratio between job offers and available candidates is leaning towards more offers and this will be worsening in the future.Thistrendisfavorabletocandi-dateslookingforanewposition,sincetheycanchoosefrommorepossibilitiesanditismucheasiertonegotiateanoffer.
Forcompanieslookingfornewemployeesthissituationgetsmorecomplicated.Sincetheunemploymentratehasdecreasedtherearefewercandidates.Theremeansmorecompeti-tionamongemployers,whichisthemostvisibleamonghighly-skilledprofessions.Newoppor-tunitiesariseforprofessionalswhoarealreadyemployed,butmightbelookingforabetterdeal.
In the high value-added fields there is fierce competition for the best talent.
InQ12016Profesiaregisteredayearlyincreaseinjoboffersof43%inservicesand30%inindustry.
Employment
InMarch2016wereached two magical milestones.ThenumberofoffersonProfesiareached20000andtheunemploymentratedroppedtounder10%.
Ivana Molnárová, Executive Director at Profesia.sk
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5 facts about the current labour market
1 There is more work and fewer people. Thereareveryfewavailablecandidatesandthosewhoareinterestedalreadyworkforsomeoneelse.Companiestodayneedtofindsuitablecandidateswithaninterestingandtailoredoffer.
2 Recruitment needs to happen where the crowd is. Tofindtherightcandidatecompaniesneedtobecreativeandtargetedonline.
3 Candidates know they have more options.Thebesttalentisreceivingoffersregularlysotheirselectioncriteriaaregettingmorecomplex.BasedonGraftonRecruitmentSlovenskoin2015,candidatesrefused23%ofjoboffer.
4 The best talent requires a work/life bal-ance.Thebestemployeesvaluetheirfreetime,health,andrelationships.
5 Create a HR strategyforrealpeople.
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Who works for Slovak startups?
LookingatSlovakstartupsthereisanincreas-ingmixofmaleandfemalefounderswiththenumberofwomenfoundersreaching30%.Thedatashowsthatstartupsusuallyhavemorethanonefounder.
Number of people in your company or project
Amongemployeesthegendersplitwas60to40formen,whichbuststhemythofthestartupandtechnologyworldbeingsolelyaman’sworld.
70% Male/Founders
30% Female/Founders
60% Male/
Employees
40%Female/Employees
56% Male/Unpaidworkforce(interns,advisors)
44% Female/Unpaidworkforce(interns,advisors)
CHAPTER4 EMPLOYMENT
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EMPOLOYMENT CHAPTER 4
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Reflectingtheneedtogrowandscaletheirbusiness,startupsarelookingathiringmoretal-entfortheiroperationsinthenextsixmonths.47%haveaconservativeestimateofhiring1–3newemployeesand17%arelookingat4–10newhires.Inthelastsixmonths,mostcompa-nieseitherdidn’tneedmorestafforhired1–3newpeople.
Startups are looking at hir ing more talent for their operations in the next s ix months
Increase in the last 6 months
48% 0 33% 1–3 12% 4–10 2% 11–20 5% 20andmore
Plan for the next six months
25% 0 47% 1–3 17% 4–10 6% 11–20 5% 20andmore
EMPOLOYMENT CHAPTER4
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CHAPTER 5 EXPORT
SLOVAK STARTUPS REPORT 2016
ExportYour primary market
79%Global
21%National
65%Europe
43%US
CHAPTER 5 EXPORT
TheUSandEUmarketsarelocationsofinterestformostofthestartups,theCzechRepublicbe-ingoneofthefirstdestinationsforexpansion.Almosteveryentityisoperatingorexportingtomorethanonelocation.SeveralstartupsarelookingatAsianandAfricanmarkets.
Intermsofexportourcompaniesaremostlyintheextremes.Theyareeitherhighlyexport-ori-entedoralmostnotexportingatall.Goingglob-alfromdayoneisastrategyfor79%ofstartups.
Just21%considerSlovakiaastheirprimarymarket.
IntheEU,companiesareexportingtothefollowingcountries:CzechRepublic,Austria,Hungary,Germany,France,Cyprus,Poland,Switzerland,Bulgaria,UnitedKingdom, andSweden.
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EXPORT CHAPTER 5
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What is the percentage of export in your sales?
40% 0–25% 3% 25–50% 11% 50–75% 46% 75–100%
Scale of operation: global vs. local markets
46%ofstartupsfullyrelyontheexportoftheirproductsorservices,another41%generatessalesonthedomesticmarket.
EXPORT CHAPTER 5
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CHAPTER 6 INNOVATION, CHALLENGES AND OPPORTUNITIES
SLOVAK STARTUPS REPORT 2016
Innovation, challenges
Cooperation with universities and research centres
BusinessanduniversitycooperationisstillinitsinfancyinSlovakia.Just3%ofcompanieswerecreatedasauniversityspin-off.Spin-offsdemonstratetheabilityofinnovativeideastobeturnedintoviablebusinesseswiththerealimpactofresearchonoursociety.
97% No 3% Yes
0% University(productdevelopmentcollaboration) 30% University(informalconsultations) 2% Commercialreserachcenter(collaboration) 11% Commercialreserachcenter(consultations)
Are you a research/university spin-off? Do you cooperate, a lso informal ly, with universit ies and/or research centres?
Startupspreferinformalconsultationswithuniversitiesandcommercialresearchcentersinsteadofnearlynon-existentcollaborationonproductdevelopment.ThesenumbersshowanopportunitytoimprovetheconnectionbetweenresearchinstitutionsandtofosterinnovationwithinSlovakia.
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INNOVATION, CHALLENGES AND OPPORTUNITIES CHAPTER 6
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How do you create your product?
Product development
Programmingismainlyperformedasanin-houseactivity.70%ofrespondentschosethisanswerandtherestoutsourcethedevelopmentoftheirproducteithernationally(17%ofthewholedataset),orabroad(6%ofthewholedataset).Asimilarsituationarisesinthemanu-facturingofaphysicalproduct,where30%ofrespondentstendtomanufacturetheirproductin-houseandanother30%outsourcethebe-fore-mentionedactivitiesnationallyandabroad.Materialsusedforthismanufacturingprocessareobtainedin-housein15%ofthecaseswhileothersoutsourceiteithernationally(17%)orfromabroad(17%).Nearly20%ofrespondentsdonotdevelopormanufacturetheirproducts.
In-house
70% Programming30% Manufacturing15% Materials9% Wedonotprogramandmanufacture
Outsourced nationally
17% Programming15% Manufacturing17% Materials4% Wedonotprogramandmanufacture
Outsourced abroad
6% Programming4% Manufacturing17% Materials4% Wedonotprogramandmanufacture
Legal protection
72%ofstartupsinthesurveydonothaveorneedanyformofintellectualpropertyprotec-tion,beitintheformoftrademarksorpatentregistrations.Theremaining23%haveregis-teredatrademarkorpatentvalideitherglobally(2%ofthosewhoansweredyes)intheEurope-anUnion(9%ofthosewhoansweredyes)orinSlovakia(27%ofthosewhoansweredyes).
Have you registered any trademarksor patents?
72% No 23% Yes
and opportunities
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CHAPTER 6 INNOVATION, CHALLENGES AND OPPORTUNITIES
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External – Finance, Marketing, Legal
Thelargestobstacleperceivedbystartupsistheabilitytoenteranewmarket.Theyhavereportedissuessuchaslackoffinancingtoenterthemarket,thedifficultiesofstartingmassproduction,andkeepingthepaceofinno-vationandcompetition.Culturalandlanguageappropriatebrandingandmarketingarecrucialareforcustomeracquisition,aswellasunder-standinglegalnuancesthatwilldecreasetheirlegaluncertainty;however,complexlegislativesystemsinotherEUmarketsaresometimestoobiganissueforasmallventure.Connectionstotherightbusinesspartners,suppliersanddis-tributorsbycreatinganetworkandreferencesfromcustomersareessentialtothesuccessfulproductionanddistributionoftheirproduct orservice.
What are your biggest chal lenges external ly? (mult iple answers)
Complexlegislationandtaxlicensingforstart-upsisreportedasthesecondbiggestobstacle.SomecompaniesareconsideringmovingtheiroperationstotheUS.ComplicatedlegislationsuchastheLabourCodecausesissueswhilehiringanewemployeeorprofessionalsfromthird-worldcountries.Dataprotectionandprotectingintellectualpropertyrightswerealsoreported.CompaniesstatedthatmissingeGovermentservicescostcompaniestimeandresourcesthatcouldbeallocatedtorunningtheirbusiness.Theyalsoperceivealackofsupportfromthegovernmentwhilestartingandrunningabusiness.Theenforceabilityoflegislationandofcontractualobligationswereamongthementionedchallenges.
32% Administrativeburden 47% Taxes
34% Complicatedlegislation 49% Export&entering
aforeignmarket
39
INNOVATION, CHALLENGES AND OPPORTUNITIES CHAPTER 6
SLOVAK STARTUPS REPORT 2016
Internal – Human Resources and Investment
Thebiggestinternalchallengesincludeinvest-ment,humanresourcesandnetworking.MostSlovakstartupsareusingtheirowncapitaltostarttheirbusiness.Astheygrowbiggertheyneedmoreresourcestooperate.Investmentisconsiderablewhenstartupsreachtheseedandscalingphases,andthesolutionmightbebetteraccesstoventurecapital.
Humanresourcesareoneofthehighestcostsforanewventure.TheirrecruitmentandretentioninhighlyskilledprofessionsseemstobemoreandmorechallengingbasedonthedataprovidedbythelargestjobportalProfesia.
What are your biggest chal lenges internal ly? (mult iple answers)
Startupscanusetheirbrandandmoderncompanyculturetoattractthebesttalentonthemarket.Connectionstotherightbusinesspartners,suppliersanddistributorsarecrucialtothesuccessfulproductionanddistributionofproductsorservices.
Amongotherinternalchallengesarethevalida-tionofthebusinessmodel,networkingthe righttiming.
51% HR 57% Investment 12% Skills
27% Network 12% Other
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40 SLOVAK STARTUPS REPORT 2016
Recommendations
1 Flexible forms of incorporation. TheSlo-vakgovernmenthasintroducedanewformofjoint-stockcompanythatwillcomeintoeffecton1January2017.Thisnewformofjoint-stockcompanywillalloweasierinvestorrelationsandmodernmanagementofahighgrowthcompa-ny.Policymakersshouldalsoconsidersupport-ingsocialentrepreneurship,whichconnectssocialcauseswithviablebusinessmodelswithadefinitionandsuitablelegalform.
2 Nurture early stage startups.TheMinis-tryofEconomyanditsdedicatedagencieshaveplansandfundsallocatedtostartupsinthediscovery,pre-seedandseedstages.Theirgoalistocreatementoringprograms,internationalinternshipsandeventshelpingentrepreneurswithissuesregardingtheirbusinesses.Men-toringandlocaleventsaresuitableforunder-standinghowtobuildabusinessmodel,financeyourgrowth,acquirecustomersandmanagetalent.Forstartupswithabetaversionortestedprototype,internshipsinentrepreneurialhubsacrosstheworldarevaluable.Thereareotherformsofsupportthatareplannedfromthestructuralfunds.Publicauthoritiesshouldbeawarethatgovernmentsupportforstartupscanbeadouble-edgedsword.Ontheonehand,morefinancialresourcesintheecosystemcan
stimulatetheprivatesectortoinvestmorehu-manandfinancialresourcesinyounginnovativecompanies.Ontheotherhand,ifnotdesignedwell,tobetransparentandsimpleandincollab-orationwiththeprivatesector,thegovernmentsupportschemescaneasilydistorttheprivatemarketinitiatives,especiallysincetheSlovakecosystemisstillrelativelyfragile.
3 Create the Slovak 300. Usetheex-ampleofIrelandtocreateanetworkofIrishprofessionalsworkingandlivingabroadwhofeelaconnectiontotheirhomelandandwanttohelpfellowIrishmen.Thisnetworkhelpsindividualsorcompanieswithintroductionstopotentialbusinesspartnersintheirspecificfieldsandcitiestheyresidein.TheyalsowanttoattractinvestmentinIreland,whichinthecaseofasuccessfulrealization,bringsthemafindersfeefromtheIrishgovernment.Slova-kia,similarlytoIreland,hasalotofexpatriateslivingabroadwhoareverysuccessfulintheirfields.Awell-thoughtoutprogramwillcertainlyactivatethemandbringsimilareffectsastheIrishprogram.
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41SLOVAK STARTUPS REPORT 2016
4 Scaleup. SupportthescalingofSlo-vakstartupsiswheretherealvalueiscreated.Thesecompaniescreatejobsforhighly-skilledprofessionals,generateturnovergrowthandexpandtonewmarkets.69%ofstartupsareinthepre-seedandseedstageandwillneedtools,supportandmechanismstoeffectivelyscaletheiroperations.Theirneedsaredifferentfromdiscoveryandpre-seedstagesandtheyneedtoberecognizedbypublicandprivateplayers.Amongthekeysupportmechanismsare:• Learningandmentoringprogramsfor
leadershipdevelopmentformanagersinscale-ups.
• Representationoninternationaltrademis-sionsandclosecooperationwiththeeco-nomicdepartmentsoftheSlovakembassiesabroad.
• Investmentininnovationshouldberead-ilyavailableandthegovernmentshouldconsidertaxbenefitstoencourageresearchandinnovation.
• Explorewayshowtoincreasetheinvolve-mentofscale-upsinpublicprocurementbymakingitmoretransparentandbydecreas-ingitsadministrativeburden.
• A‘startupandscale-upvisa’shouldbemadeavailabletoinnovativecompaniessotheycanrecruitstafffromthirdworldcountriesthatarenotavailableinthelocalmarket(professionalsinITorotherspecificfields)withintwoweeksofapplying.Theseforeignworkershelpexpandthedistributionoflocalscale-upcompanies’existingproductstoforeignmarketsandhelplocalscale-upsintroducenewproductsandservices.
5 Support diversity.Adiverseworkforcecreatesbenefitsforcompaniesaswellasthesociety.Employingtheyoungergenerationde-creasesyouthunemploymentandtapsintotheircreativepotential.Encouragingwomenaddsdifferentskillsandcreativepotential.Howevervariousgroupshavedifferentneedsthatneedtobecateredforthroughcompanycultureaswellaslegislativeflexibility–forexamplethelabourcode.
6 Transparent and simple use of public support for startups and scale-ups.Amongthekeybarriersofapplyingforpublicsupportistheamountofbureaucracyconnectedtothewholeprocess.Startupsalsoreportedthepotentialfearofcorruption.Atransparentandsimpleprocesswithcleargoalsandselectioncriteriawouldreducefearandallowtheinnovativesectortoflourish.
7 Deregulation and self regulation. Inthefieldofcustomeranddataprotectionallowcompaniesandthemarkettoregulatethemselvesandsupporttheinitiativestocreatecodesofconductsuchastheonefordataprivacy.
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42 SLOVAK STARTUPS REPORT 2016
8 Make it easy to employ people. Companieswithhighgrowthpotentialneedtobeabletohireemployeesmoreflexiblyandeasily.Recently,theMinistryofEconomyintro-ducedasupportschemeforSharedBusinessCenterstohireemployeesmoreeasily.Thisisagoodintention,butsuchschemesshouldalsoincludeemployingworkersinsmallandmedi-um-sizedbusiness,whicharereportedtobethebackboneoftheEUeconomy.RecentlyagreatexamplecameforLatvia-innovativestartuptax.Thegoalistolightentheburdenofthebig-gestcostatanystartup:employeewages.Thenewlawwouldsetaflatmonthlytaxof€252peremployeeforstartups,letstartupemploy-eesenrollina'highlyqualifiedworkforce'enroll-mentschemewherethegovernmentcoversallsocialtax,atthesametimewaivingindividualincometaxforemployeesandcorporateincometaxforstartups.
9 Tax system for innovation. Taxlicenseshavebeenmentionedasoneofthebarriersforearlystagecompanies.Taxincentivesforangelinvestorsmightencouragemoreinvestmentinearlystageenterpriseswhichwouldnotonlybringfinances,butalsotheprofessionalexper-tiseandthenetworksoftheangelinvestor.
10 Improve university and business cooperation.Thereisalargegapwherestart-upsarenotestablishedasuniversityspin-offsortheydonotcooperatewithuniversitiesondevelopingtheirproducts.
11 eGovernment servicescanimprovetheadministrativeburdenandsimplifyprocessesforstartups.
12 Support for local innovation hubs. TheinnovationecosysteminSlovakiawasfoundedbottom-up,butgovernmentsnowhasthefundstosupportexistinginitiativestocontinuouslytaketheecosystemtothenextdevelopmentphase.
METHODOLOGY
43SLOVAK STARTUPS REPORT 2016
Methodology
TheSlovak Alliance for the Innovative Economy (SAPIE)partneredwithsimilarorganisationsintheVisegrad Grouptoconductasurveyofinnovativecompanies,startups,inallfourcountries(Poland,CzechrepublicandHungary).Throughourpartnersandmemberswehavedistributedthesurveyoverthetwomonthperiod.Ourgoalwastocollectresponsesfrominnovativetechnologycompaniesregis-teredinSlovakia.
Thesurveyquestionsweredevelopedincollaborationwithourpartners,closelycorrelatingwiththeCzechversionofthesurveyduetoadministrative,legisla-tiveandculturalsimilarities.Mostofthequestionsinthesurveywerevoluntarytoanswer.Survey was completed by 47 startup companies based in Slovakia. Toevaluatetheanswerswehaveusedknowstatisticalmethodswithmodernanalyticaltools.Inthereportwehavestatedwheretherewasapossibilitytousemultipleanswers.WithourexperienceandknowledgeoftheSlovakstartupscenewecanextrapolatetheresultstoreflectthecurrentstateoftheinnovationeco-systeminSlovakia.
ABOUT THE AUTHOR
44 SLOVAK STARTUPS REPORT 2016
About the Author
Petra DzurovčinováistheExecutiveManagerofSAPIEsinceitsinceptionin2014.TheorganizationwassetuptorepresenttheneedsofglobalandSlovakinnova-tivecompanies,improvethestateofITeducation,boostthestartupecosystemandhelpcompaniesscaleglobally.AmongourmembersaretechgiantsaswellasgloballysuccessfulSlovakcompaniesandrisingstars.SAPIEactsasanindustrybodyforover40companies,representingthembeforepolicymakers,andcreatesnationalandregionalpartnershipsandadvocatesforinnovation.InthepastPetraworkedasDigitalCommunicationsManageratTheRoyalInstitutionofAustralia,anorganizationpromotingscienceandtechnicaleducation.ShestudiedInterna-tionalBusinessinBratislavaandÉcoleSupérieuredeCommerceBretagneBrestandFuturestudiesatSKKUinSeoul,Korea.
CONTRIBUTION
45SLOVAK STARTUPS REPORT 2016
Contribution
Matej Greš
Matej'sareasofexpertisearegraphicdesignandstatisticalanaly-sis.InrecentyearshewashelpinginthisareaswithpreparationandrealisationofpoliticalcampaingsandBlack-boxtestinginfinancialsector.InSAPIE,Matejisinvolvedinpreparationofsur-veys,eventsorganizationandinnovationeconomyanalysis.
Branislav Dudáš
BranislavDudášstudiedinternationaltradeattheUniversityofEconomicsinBratislavaaswellaslawattheDanubiusUniversity.Hehasheldvariousadministrativeandexecutivepositionsinbusinessandnon-profitsector.ForfouryearshehasbeenanadvisortothesecretaryofstateattheMinistryoftransport,con-struction,andregionaldevelopmentofSlovakRepublic.Hecaresdeeplyaboutwords,language,andlearning.
ABOUT ORGANIZATION AND PARTNERS
46 SLOVAK STARTUPS REPORT 2016
TheSlovakAlliancefortheInnovativeEconomy(SAPIE)wassetuptorepresenttheneedsofglobalandlocalInternetandinnovativecompanies,improvethestateofITeducation,boostthestartupecosystemandhelpcompaniesscaletothegloballevel.Amongourmembersaretechgiantsaswellasgloballysuccess-fulSlovakcompaniesandrisingstars.SAPIEactsasanindustrybodyforover40companies,representingthembeforepolicymakers,createsnationalandregionalpartnershipsandadvocatesforinnovation.ThisprojectwassupportedbyStartupAwards.SK,Martinus.skandESET.
About the organization and partners
sapieSLOVENSKÁ ALIANCIA PRE INTERNETOVÚ EKONOMIKU
sapie