Ionut Budisteanu was 19 when he decided he could do a better job than Google. A Romanian student with an exceptional aptitude for computers, Budisteanu started taking an interest in the technology that underpins Google’s much-hyped self-driving cars.
He realised he could replicate it at a fraction of the cost. His system costs $4,000 (Dh14,696), compared with the $75,000 price tag for the Google car, which many see as the future of transport.
Budisteanu and his homemade self-driving car are at the leading edge of a technology revolution in central and eastern Europe.
Entrepreneurs, programmers and software engineers from the region, drawing on world-class mathematical and engineering education, are piquing the interest of the world’s information technology companies and investors, and building a reputation as an emerging technology hub.
“In central Europe, there are a lot of smart people who want to build stuff. It is like a cluster,” says Budisteanu, now 20. “From what I know, Romania is the country with the most IT experts in Europe and fifth in the world. The first spark, the first step, is the most important for a maker, for a hobbyist like me.”
A key growth market for global investors before the 2008 financial crisis, central and eastern Europe is again rising in significance as a destination for overseas capital, with technology emerging as a one of the most targeted segments.
Budisteanu is one of 100 innovators from the CEE region selected as part of the New Europe 100 project, which aims to raise the profile of emerging entrepreneurs and young businesses.
“The stereotype of the region’s industry is manufacturing, basic production businesses. This is changing rapidly, and these are the people who are bringing the change,” says Wojciech Przybylski, editor-in-chief of Polish political and cultural journal Res Publica. “These [100] are the faces of the new region, the names that will rebrand this part of the world.”
Creating the next Silicon Valley, the area of northern California that has cultivated some of the world’s biggest and most powerful technology firms, is the dream of hundreds of countries and cities, from London and Berlin to Bengaluru and Beijing.
But investors betting on central and eastern Europe say the combination of a high level of mathematical education, low overheads and a globalised, westernised young generation makes for a heady and successful mix.
“There is a growing confidence among those who did not grow up under communism, who see the world so much differently from their parents,” says Jack Stack, chairman of the supervisory board at Ceska Sporitelna, the Czech Republic’s biggest bank by deposits. “From a private equity point of view, from an investment point of view, people are starting to look much more closely at central and eastern Europe. There is a lot of interest and scouting out of opportunities.”
New Europe 100 list
Alongside Budisteanu, who is launching a crowdsourcing campaign to fund the production of his concept, the New Europe 100 list boasts a Hungarian doctor who has created a medical advice website driven by social media, a team of Polish students who have built an award-winning robot that could operate on Mars, and a Slovak inventor of a flying car.
“Google begun life as a start-up in a garage, so we know innovation and great ideas can come from anywhere,” says Agata Waclawik-Wejman, Google’s head of public policy for central and eastern Europe. “Twenty-five years after the fall of communism, the region has largely achieved the level of freedom and economic development that provides the momentum for strengthening creativity and innovation.”
Google, Res Publica and the team behind the New Europe 100 list hope that the recognition from being included on the list will bring the initiatives attention, investor interest and potential business partnerships.
“We have already seen how innovation and entrepreneurship have changed the face of Poland in just 25 years,” says Waclawik-Wejman. “A decade or so ago, the conversation was about catching up with the rest of the world, but the aspiration of Polish entrepreneurs today is to be the best in the world.”
There are stumbling-blocks, however.
Central and eastern Europe’s spending on research and development activities is about 1 per cent of the region’s gross domestic product, according to McKinsey, the consultancy. That is half the rate in the western EU, and trails the 1.5 per cent in the Bric economies of Brazil, Russia, India and China.
And low domestic saving and investment rates compared with other emerging economies were exposed when foreign investment slowed, and then disappeared after the 2008 financial crisis.
Others contend that entrepreneurs and technology start-ups depend little on either of those factors. Graham Conlon, the Ukraine-based international head of mergers and acquisitions and private equity at CMS, a law firm, says: “Eastern Europe has produced very well educated young people who are very savvy in technology. It is a forte for various eastern European markets. There are a lot of IT companies in the region doing very well.
“Eastern Europe is catching up and the financing is available for well-run companies here. A number of venture capital and private equity funds are dedicated solely to this space.”
Fully-fledged technology firms in the region have already begun catching the eyes of international investors.
Ceska Sporitelna’s Stack thinks foreign investors’ level of interest in the region over the past nine months has matched that between 2009 and 2013.
Private equity company CVC Capital Partners made an investment in Czech software security company Avast in March, valuing the business at $1 billion.
The communications and computer and consumer electronics sectors accounted for 20 per cent of all private equity investments in the region last year, according to data from the ECVA, the European Private Equity and Venture Capital Association.
Industry watchers say that after funding, the most important area in which central and eastern European entrepreneurs need support is leadership skills, through incubation centres or start-up hubs, or from the management boards of investors.
“These are young guys setting up these businesses,” says Conlon at CMS. “They have travelled. They have been educated abroad and have a western outlook. There is definitely a shift in skillset and mentality.
“But unlike the set-up in Silicon Valley, for example, they may have the ideas... but they do not necessarily have the experience of managing and running a business and driving growth.”
Microsoft has set up innovation centres across the region, including in Poland, Romania and Hungary to support local entrepreneurs, and has two outposts of its Microsoft Ventures initiative in Bulgaria and Ukraine.
The US technology company hopes that by providing resources such as software tools and test devices to start-ups, and by helping prepare fledging businesses for international markets, it can incubate the potential leading global companies of the future.
“Entrepreneurship is at the forefront of igniting economic growth across central and eastern Europe,” says Don Grantham, president of Microsoft Central and eastern Europe. “Driving investments is crucial to the region’s productivity, economic development and prosperity, and therefore critical for increasing CEE’s relevance in the global economy.”
— Financial Times
