My interest in Hungary and the region stems from an opportunity to study an advanced business degree in Budapest.  After living in America and China, two countries that dominate both their region and much global news, Hungary, the size of Pennsylvania, was a distinct change of perspective.

In 1999 I arrived in Hungary, straight from China.  The country and many of the seven countries that border Hungary were shaking off decades of planned-economy paralysis.  The region was entering a renewed sense of opportunity and Hungary was stabilizing its voice in the region, in Europe, and in the world.

The opportunity, and the challenge that lay ahead, for Hungary and others in the region was to set the proper goal.  The more I worked and studied at Central European University, the more I discovered a region, from the Czech Republic through Mongolia, full of immensely brilliant, able people to have an impact on a global scale.  With a brilliant work force, many in government chose a low-wage competitive strategy.  I felt then, as I do now, the race to the bottom is a short-term solution.

I discovered, in Hungary, a country that had:

• a century of education dedicated to math and engineering;
• geographic position at the border of the largest middle market in the world;
• an economic and policy opportunity to become harmonized with the greatest economic experiment in centuries:  The European Union

Any review of Forbes, Fortune, Economist, Financial Times, and other glossy magazines were touting CEOs leaping into China and gave a sense if you were not heading to Asia you were missing the boat.  While the journalists and followers were touting the Asian Tigers, I landed in the most fertile opportunity.  In March 2000 I started The Arctic Group to work with the government on technology transfer and foreign direct investment.  The future for Hungary and the region was not bright, but incandescent.

I now live in Boston and see regional investment and competitive advantage from a world view of options.  Just as a private equity team manages a portfolio of risk, regional and competitive advantage plays a portfolio of risk made up of human capital, government policy, financial investment, and organization leverage:  each with their own agenda that plays, too often, against each other.

I continue to look at Central and Eastern Europe as a unique opportunity.  My return to Boston shines a perspective on how this city and this country competes and invests, this is the perspective I look to contribute to nowEurope.  I hope the comparisons draw insight on what works, what is not working, and what might offer an alternative thought.

I continue to believe, as I did founding The Arctic Group, that “diversity in thinking, diversity in planning, and diversity in execution” is the key to innovation.  There are two choices in business:  either do it cheaper or better.  Each strategy has merit, but either position requires commitment.

with all due respect for the #barcamp #budapest speakers – powerpoint presentation suicide & u don’t have to speak magyarul to notice it.

The truth is I hardly watched any of the presentations, except to occasionally poke my head in the door. I had been lead to believe that at BarCamp, the audience is the content, and so I used this as my excuse to largely ignore the prepared program and talk with people about what’s currently happening in the Hungarian online market.

Everybody’s heard about Jeremie, and several people I met had a business idea in their back pocket. The ad recession hit hard last year, and revenues are down across the board. One local media agency, Arcus, recently imploded. I have the impression that a good number of talented people are knocking around for opportunities.

It’s understandable why Hungarians might be pessimistic (this is after all their nature), but with €160M in venture capital available over the next four years, 2010 feels like a good time to start a company. It’s also a good time for a startup competition, and I’ll write about this one a little further down the page. First I’ll share a few impressions about this market.

Conversations in the foyer

One of the first people I ran into was Gábor Gerényi, who had recently left Index (where he was a co-founder and director of content) to join Mandiner, a blog publication which styles itself along the lines of the HuffPo. He believes he can take on Hungary’s bigger portals with his lower cost base, which surely says something about the state of affairs over at Index.

I also met István Türk, an SEO specialist at Kirowski and SEO blogger. He says local demand is growing for more sophisticated search services, including landing page optimization and keyword campaign management.

Downward pressure on ad budgets is driving the demand for search, and several competitors are ramping up. This is good news for data-driven e-commerce businesses, of which Hungary has a good handful. This development is about four or five years behind the US and UK markets, but that also means the best practices are well established.

Social media was a buzzword at BarCamp, but I saw little evidence that significant budgets are moving toward this sector in Hungary. This is not surprising, given that the model is still new, and best practices, scant. Despite the broad popularity of Hungary’s local champion, IWIW (or perhaps because of it) the local social media audience is unsophisticated and relatively small.

IWIW’s most popular application, Egymas Szemében, has attracted 1.5m users, but no significant revenues. The younger Hungarians I shared lunch with agreed that more sophisticated local users (such as themselves) now prefer Facebook. We also agreed the IWIW user interface is just …well, ugly. IWIW seems to want to take on Facebook, but they’re focusing on technology (e.g. applications) rather than user experience (interface). Too bad.

I met one young developer, Benedek Tóth, who has developed a popular Hungarian language Twitter mashup, Turulcsirip. He’s attracted a couple ten thousand users and apparently covers his costs, although I can’t quite see how. (Granted, his costs must be small and I admire his enthusiasm.)

Magyar Telekom has been talking about innovation lately. Unfortunately, I arrived too late to see MT CEO Chris Mattheisen’s presentation, which was apparently well received. Gábor Pukler, head of innovation and business development, was at hand with his latest product, a home security package which is apparently being tested in Szolnok as part of MT’s T-City project. Kitchen Budapest’s new co-CEO, Barnabas Malnay, was also poking around the conference.

The startup competition

You can read all about the six startup finalists on this page, but only if you read Hungarian. Oddly enough, each of the three winners at BarCamp have some kind of international ambition.

The day’s winner, Pocket Guide, is a product that might best be described as a Garmin device for pedestrian tourists. Those around me agreed the Pocket Guide presentation was, indeed, professional and compelling. (I was upstairs at the time watching a presentation by Hungary’s porn king, Kovi and Machomedia. What can I say? These guys have revenues.)

The second prize went to Otthonrol, an innovative service which aggregates remote labor (e.g. part-timers, housewives, the disabled) for ‘micro-tasks’ such as transcribing recorded text or conducting telephone surveys. The closest familiar model is Amazon’s Mechanical Turk. Otthonrol already has some 7,000 workers at hand, the service is generating revenue, and the owners are seeking capital to grow their service and expand outside of Hungary.

The third prize went to Joszaki, which might translate as ‘good handyman.’ As in most of Europe, finding a good electrician or plumber can be a nightmare in Hungary. Joszaki is an IWIW application that enables its users to rate and recommend these service providers. The concept is not unique, but with strong execution it might also have a chance.

Any conclusions?

With €160M in seed funding chasing good projects, things could heat up online in Hungary. Ten years after the dotcom boom, there’s a new generation of young entrepreneurs, the software tools are cheaper, the local web audience is larger and business models (for the most part) are better defined.

Having said that, the Jeremie money isn’t specifically earmarked for online. Web entrepreneurs are competing against renewable energy deals, as well as more traditional businesses – many with proven products and working revenue streams. Many local investors still have little experience with online deals.

The Jeremie funds are still in startup mode, and the first few deals might be closed by the Summer. It’s still too early to begin drawing any conclusions about these funds, their preferences or your chances. Execution is key, which means building a good team. A clear concept helps (what problem does your business solve?) and proven revenues are even better. Finally, you need to be able to communicate your proposition. More on that topic in a future update.

The BarCamp concept isn’t new, nor is it new to Budapest. What is new is that this fifth edition of the Web 2.0 Symposium / Bar Camp Budapest features a startup competition sponsored by Budapest Bank. Each of six finalists will be given 10 minutes to present their business ambitions to a jury of professional investors. The first three finalists will win undisclosed ‘valuable prizes’.

However, that’s not why I’m going. I go to these kinds of events to meet the other attendees.

A cursory glance through this event’s attendee list suggests that I’ll be one of the oldest people in the room. I know most of the older generation of entrepreneurs and investors, but we are clearly the minority.

The one constant in Budapest is change. I played a small part in Hungary’s last startup boom (1999-2001) but I have very few preconceptions about what and who I’ll discover this Wednesday at BarCamp Budapest. This is a new generation.

I do find one thing remarkable, though. The conference materials are available only in Hungarian, but the two keynote speakers are English-speakers.

I suspect Chris Mattheisen (CEO, Magyar Telekom) will be presenting in English, but he could probably pull it off in Hungarian. Mike Butcher (Editor, TechCrunch Europe) doesn’t speak Hungarian, but I’m sure most of the audience won’t have any trouble following his presentation in English. (They will have to, as no simultaneous translation is on offer.)

What I also find striking is that one of of the startup finalists is obviously reaching beyond the borders of Hungary (Ninimo.com, a website for parents to create and share photo albums of their children). Otthonrol.hu aggregates an online labor force (similar to Amazon’s Mechanical Turk). The founders have international ambitions, but for now the service is focused on the Hungarian market. You can read about the other finalists here, but only if you happen to speak magyarul.

Here, again, I’m ready to abandon any preconceptions.

In the 1999-2001 dotcom boom, investors were looking for deals that could scale beyond Hungary. Ten years later, the Hungarian web audience is larger and possibly more prepared to spend money. Having said that, the Hungarian economy is still relatively small. That much hasn’t changed. Maybe this time around there’s more VC money chasing a limited pool of investor-ready deals.

The best I can do for now is keep my eyes and ears open. I’ll report back later this week with my observations from this year’s BarCamp Budapest.

The concept of online investment brokerage isn’t new, but to the best of my knowledge this model has never been applied specifically in this region. The US market leader appears to be Funding Universe, but I’m more familiar with Angelsoft. The logic behind such sites is obvious: entrepreneurs want money, and investors want dealflow. Success mean building a critical mass of investors and deals, and providing both parties the means to evaluate each other and build trust.

So the question is, will CEE Chips be able to build that critical mass in Central Europe?

It’s still too early to tell. Petkov launched his site in January 2010, and has so far managed to attract about 50 investees. Most of the deals are based in the Balkans, which is not surprising considering that Petkov, himself, is Bulgarian. These deals embrace a wide range of sectors, from agriculture to tourism, including online, real estate and retail. This spread is also not surprising, considering the relatively immaturity of these markets.

I noticed that the criteria for capital-seekers to post their deals are much looser than at, say, Angelsoft. That gives investors less information with which to evaluate these deals, but having said that, these deals are likely to be much less developed, on average, than US investors would expect. This is not necessarily a bad thing, it’s simply a reality of investing in Eastern and Central Europe, including the Balkans.

As Petkov explained to me in an email, Bulgaria has only been doing business for the last 20 years. A handful of angel investors are active, according to Petkov, but the country still has only one VC. Petkov belongs to a younger generation which in small numbers, across the region, is embracing entrepreneurship. On his LinkedIn profile, Petkov lists his previous job experience as ‘Get-Yes-Man’ for the Start UP Foundation, a group that ‘empowers the entrepreneurial spirit among the young people by organizing national and local entrepreneurship events.’

I’ve been getting to know a similar, younger generation here in Budapest, and will write about that in a future post.

Will CEE Chip be able to extend its reach beyond the Balkans into the rest of Central Europe? That might be difficult, given that the Balkans have a rather negative perception in the rest of the region. Markets like Hungary and the Czech Republic are also more sophisticated – but not in comparison with the US.

The real issue is whether CEE Chips can attract a critical mass of investors. Due to the small size of local markets, many investors here work on a regional basis. They also care less about local perceptions concerning the Balkans. In the end, what they care about is dealflow.

Petkov hopes to grow the CEE Chips network by building an affiliate network with partners in each of 18 Central European markets. The site intends to make money by charging a subscription fee rather than asking for a cut of each deal (which is clearly a trickier proposition). Petkov is also considering starting a consulting business to help companies prepare a business plan and presentation. This might indeed, be his best business model, using his investment network to generate leads for a consulting business.

So what’s the conclusion? I reserve judgement. The pace of change in this region is so relentless that I am continually surprised at what I see. I genuinely hope that CEE Chips becomes a viable platform for regional online investor brokerage. I like Aleks Petkov’s entrepreneurial spirit, and I wish him well.

Money has a way of making things real.

Part of our job, with CITT, has been to share a dream. Centrope designates the border regions of four countries (AT, HU, CZ & SK). The distances are short, but the cultural differences are big. This region has great potential for innovation, but most of this knowledge is locked away in research labs, divided by increasingly abstract national borders.

CITT’s dream is to knock down those borders. Fortunately, we are not the only ones at work on this vision. If CITT and similar projects are successful, the results will be measured in new products, new companies, new jobs and new opportunities.

This is a big dream, and big dreams need money.

The European Commission has already pumped big money into the Centrope dream, financing a wide range of projects, including CITT, in order to create a regional infrastructure for innovation. What’s been missing, up to now, is startup capital. The European Investment Fund’s Jeremie programme aims to fill this gap, providing badly needed startup capital, which has the potential to make the Centrope dream a reality.

Jeremie is now rolling out in Hungary with roughly €160M, distributed in eight new VC funds. By the end of 2010, Jeremie will be active in all four Centrope markets.

This money couldn’t have come at a better time. With the economic downtown, many talented people are now looking for opportunities. (Just about everyone I know had a down year in 2009. This includes me.) In the first quarter of 2010, the CITT project is coming to an end.

As a result, I am now turning my attention (and the focus of nowEurope) increasingly toward Jeremie.

Oddly, very little is being written about Jeremie in the Hungarian media. I’ve only found a handful of articles, mostly talking about the political delays in the Jeremie tender process and listing the newly created funds. Nothing much is being published in English, either.

In the coming days and weeks, I’ll be writing about Jeremie’s potential impact on the local tech scene. I’m now talking to startups and I intend to profile a few of them for nowEurope. I’m also talking to VCs and angel investors. I believe Jeremie could be the catalyst of a new, vibrant technology sector in Hungary and in Central Europe.

If you have a perspective on Jeremie, I’d be interested in talking. Please contact me in the comments, or directly by email (steve AT noweurope DOT com).

I found it interesting because it provides several hints on how you can transfer/uptake technologies!

However, I personally still keep myself away from Facebook, Twitter etc. My biggest doubt is how to separate the different aspects of my real and virtual life from each other. What are these aspects?

1. I work on several projects with interesting people, but basically they don’t care about my sport or hobby activities.
2. I do different sports. In one of my sport activities, most of the team don’t know each others’ business background. It is simply not important, we are there to enjoy the same sport.
3. I’m a member of an online community. We are there for a certain hobby, but don’t care about others’ business or sport activities.

In each of the above mentioned groups there are working communication channels: email, instant messenger, forums.

My biggest dilemma: why should I connect all of these aspects of my life together through a Facebook identity?

It is already disturbing when I see in my IM the following blinking message: ‘Thomas joined to Andrea’s Network”. It is totally irrelevant for me, because I know Thomas, but not Andrea.

How did you solve these questions?

The ICT Europe event looks at ICT business and research in Austria, the Czech Republic, Hungary and Slovakia, focusing on technology transfer, highlighting opportunities and obstacles, and presenting best practices. Although this is an “end of term event”, this conference is the unofficial launch of a new project aiming to build a Centrope-based ICT cluster.

Our keynotes speakers are John Tait, Chief Scientific Officer at IRF, Vienna, and former Professor at the University of Sunderland, Francisco Eduardo De Sousa Webber, the CEO of Matrixware and Chairman of the Executive Board of IRF, and Eugen Antalovsky, CEO of the Vienna based Europaforum platform.

Our CITT team will present their findings, plans and tools. Regional experts will outline the technological and economical features of Centrope. Potential stakeholders and interested parties will have the opportunity personally meet the representatives of the cluster project.

The conference will be hosted by Vienna’s business agency WWFF and welcomes ICT entrepreneurs as well as researchers, opinion makers, strategists and decision makers, people who are involved in national and European ICT strategies, representatives of ICT platforms and the press.

Admission is free, but registration is required. For more information, click on the ad on this page or got to www.centrope-itt.eu.

Centrope is not just a new geographical term. With projects such as CITT which is behind ICT Centrope, and its successors, it is being filled with life. Join!

With the quick search function, you can find easily who is who in R&D in Centrope. As I mentioned in a previous post, the centrope_tt international voucher system awards 50 fortunate companies up to € 5,000 worth of research service, at no cost. This call will be published some time before summer 2010, so stay tuned, Meanwhile, use the R&D Map to located your potential partners, and let me know what you think in the comments!

I confess that TEDx Danubia completely slipped in under my radar. Having said that, I was looking forward to attending TEDx Budapest - which was previously announced, but yet to be scheduled. Confusing? Yes. The events appear to be competitors, but I don’t know the background.

TEDx is a spin-off of the popular TED (Technology, Entertainment, Design) event series, organized around the mantra ‘ideas worth spreading.’ Speakers are strictly limited to 18 minutes. TED videos featuring prominent figures including Bill Gates, Al Gore and Gordon Brown are widely linked and commented, helping to spread the TED meme. The TEDx format offers independent event / community organizers a license to hold one event at a time, following the event format guidelines.

Upcoming TEDx events in Central / Eastern Europe include Vienna, Sarajevo, Sofia, Zagreb, Tartu (Estonia), Warsaw, Bucharest and Cluj (Romania). Vlastimil, does this give you any ideas?

TEDx Danubia takes place this coming Wednesday just down the street from my apartment in downtown Budapest. I’ve made a last minute application, so hopefully I can still get a spot. Attendance is limited to 200, and judging by its Facebook page, the event will be well attended. Wish me luck, and if I make it in I’ll post my impressions in a follow up post.