Are you thinking of founding your startup in Budapest? Here is everything you need to know about doing business in Hungary’s vibrant capital
GPS direction: Budapest
The quintessence of Budapest is its bustling nightlife, mouthwatering gastropubs, and mysterious ruin pubs. Furthermore, many of the young crowd filling up these spaces are well-educated, English-speaking, and creative. Coupled with relatively low wages of brilliant developers and a thriving startup ecosystem, this should put Budapest in the crosshair of entrepreneurs looking to launch the next big thing in an inspiring environment. Prezi, Ustream, LogMeIn, NavNGo, Tersorit, and Antavo – just to mention a few – were not founded here by accident.
- Low living expenses (if you are used to western European standards) – even though Hungary has the highest VAT in the world, prices are relatively cheap compared to western countries.
- Very high-speed internet – Budapest ranks 6th in the world for bang-for-the-buck internet bandwidth at $1.16/Mbps.
- Excellent 3G or 3G+ connection wherever you go (4G growing fast) – whichever mobile operator you choose, you will probably have enough bandwidth to work with wherever you go. Hungary is ranked 12th in the global mobile internet bandwidth with an average of 19.2Mbps download speed.
- Welcoming startup community – worried about being new in a crowd? First of all, you might want to work on your courage if you want to be a successful entrepreneur. Second, come to a startup event and notice that all you need is a “Hi!” to get started with our friendly entrepreneurs.
- Lots of well educated specialists in any field – Hungary is well-known in the region for its high level of education. Business, technology, and medicine are studies where our universities and colleges excel especially.
- Ample capital available thanks to the Jeremie program (until the end of 2015) – Hungary was flooded by seed and venture capital thanks to the Joint European Resources for Micro to Medium Enterprises, or Jeremie. This permits accredited investors to use EU funds for 70% of the total invested amount – decreasing the investor’s risk. (The efficiency of this system is highly debated but the money is there.)
- Free, very easy to start and cheap to maintain a one-person company – you can start a one-person company for free in a few hours at most. Additionally, while your one-person company’s income is below HUF 6,000,000 ($22,500) per year, all you need to pay is a fixed HUF 50,000 ($185) per month of taxes.
- Central location for traveling to startup conferences or competitions – the renowned startup conference – Pioneers Festival – is a short two-hour drive away . . . or train, or bus. HowToWeb is an easy jet ride from Budapest. So is WebIT, or LeWeb, or anything in Europe.
You should also take into account:
- Extremely high VAT (27%) – if you are selling goods and services in Hungary, this is something that you should keep in mind.
- High taxes on employee wages – if you employ someone, be prepared to spend close to their net salary on taxes, health insurance, and pension funds. The starting salary for a developer is around $740 net, which is $1,450 in total company expenses. For a non-technical person it’s around $550 net.
- Uncertain political environment – the current political environment is worrisome with unpopular actions taken by the government.
- Funky immigration process – immigration is not the most fun of processes to go through if you want to settle for a longer period in Hungary. Prepare for a rollercoaster ride!
- Language proficiency is low in many offices – want to buy a public transportation pass? A train ticket? Prepare with a pocket dictionary! Unfortunately there are still more startup events held in Hungarian rather than English, but the ratio is constantly tilting more and more towards English.
First stop: discovering Budapest’s startup community
According to recent (February 2015) research, there are about 300 startups in Hungary. Nearly all of them are in Budapest. You can pick nearly every day which event you want to attend. Tech, business, and creative events alike are filled with entrepreneurial, spirited individuals. Also, the Hungarian startup community is especially welcoming towards foreign entrepreneurs wanting to join the ecosystem.
Find out about regular events in Hungarian community groups:
- Get notified of the Hungarian startup events with this awesome calendar created and maintained by Startup Hungary.
- Need some help with your startup/project? Shout out to the Budapest Startup Jobs Facebook group!
- Follow the Budapest Startups Facebook group for event updates.
- You can also follow the Startup Vállalkozók (startup entrepreneurs) Facebook group, which has much more people and more info; however, most of it is in Hungarian. (It’s a great place to ask for meet-and-greet if you are new to the Budapest startup community.)
- Tune in to the Startup Hungary LinkedIn group for more professional conversations.
- Check out these great Meetup Groups: Skill Goulash, Budapest Hackathons,Business Meetup (some events in English).
- Hackathon-in-a-box is a regular weekend grinding event with mentoring, held at universities around the country. Their website is in Hungarian, but the events are in English if there are non-Hungarian-speaking contestants around!
- Don’t miss the largest monthly gathering of Budapest startups every first Monday of the week organized by the European Entrepreneurship Foundation.
Must-go annual or semiannual events:
- Startup Pirates (annual) is a weeklong startup competition with great presentations and mentoring.
- Singularity University CEE Global Impact Competition (annual) with the prize of attending Singularity University aims to identify outstanding individuals and to promote entrepreneurship for positively impacting local regions.
- Startup Sauna (semiannual) helps local, early stage startups by providing honest feedback and advice from coaches, who are experienced serial entrepreneurs and investors. By impressing the coaches, attending startups have the opportunity to be shortlisted for the Startup Sauna acceleration program in Helsinki, Finland.
- Pioneers Unplugged (semiannual) is an evening full of pitches, tech talk, and networking.
- CEE Women Startup Competition (annual) is a five-day startup competition with coaching, workshops, and talks aimed at women looking to change the world.
- World-class tech events at RAMP.
Such events build up the startup community and are a great place to meet your co-founder, early employee, mentor, or investor. To be prepared and to learn more about the skills and experiences of people involved in the community, you can first look them up and connect with them via STARTUS (list is constantly growing).
Second stop: park your startup at a co-working space
Why start with a coworking space? By renting such a space you are usually joining not only a shared office, but also a community. Most of the coworking spaces, especially the ones primarily hosting startups, make sure to create startup-friendly atmospheres by hosting different events, meet-ups, and hackathons. It might be a place where you find your cofounder, early employee, or even a potential investor. However, you can also consider renting a flat for a home office for about $300-$600/month depending on size and location.
Here is a non-exhaustive (there are close to 100) list of coworking spaces in Budapest:
- thehub.hu (recommended – very active player in the community)
- LOFFICE Coworking
- KUBIK Coworking
Third stop: tank your finances: money, money, money . . .
Budapest is one of the best places where you can get a good bang for your buck! If you have some spare cash stored away in your bottom drawer, then Budapest is where you can make the best use of it. You can get a desk at a great coworking space for around $100 per month in the heart of the city.
When you run out of money or just want to expand faster, you can knock on the door of a couple of accelerators or incubators.
Incubators & Accelerators:
- Kitchen Budapest is rumored to be very flexible with the startups they work with. They support them with whatever they need without trying to force them to do things they don’t want. They still work very much like an innovation lab, which they started as. They invest around $22K per startup.
- TractionTribe concentrates on quick deals and fast validation. In their first year, TractionTribe enrolled eight startups. They invest between $50K-$150K. Reading their blog is highly recommended!
- Connect East (NEW!)
- Aquincum Technology Incubator – they invest up to $450K.
- Oxo Labs (NEW!)
- Digital Factory (NEW!) invest 10-30K euro with a 100K euro follow-up investment possibility.
- DBH Seedstar
If you are further along, you can pitch for early stage or seed investors. Most of them have funds for later Series A rounds.
Early stage or seed investors:
- Day One Capital is managing two seed funds totaling in $5 million.
- Core Venture (unfortunately the page is only in Hungarian, so the link points to their contact info).
- Conor Fund invests between $50K-300K and provides the startups with extensive mentoring from the fund experts.
- X-venture Alpha invests in small- to medium-sized companies with innovative ideas. Total volume of the investments is around $15 million.
- Euroventures is focusing on facilitating a fund collected from private investors and distributing to SMEs.
- Primus Capital is investing in the early and expansion stage startups and additionally provides them with development mentoring and access to international clients.
- Finext Startup
Fourth stop: where can you seek further advice?
There are a few key people who are good to know if you want to quickly get in the center of the Budapest startup ecosystem. Peter Zaboji is the founder of the European Entrepreneurship Foundation and organizes the First Monday, a go-to startup networking event in Budapest. David Trayford is the founder of thehub.hu, the most upbeat coworking office in the heart of Budapest and one of the best startup coaches around – mentoring startups from Startup Weekend in Cluj to Singularity University in Silicon Valley.
Peter Kovacs is the co-founder of Iseeq, Central European Startup Awards, Nordic Startup Awards, and HQ Cafe. Find Peter if you need to build your team from among the best people in continental Europe.
If you choose to start a company in Budapest, you can find information about the process here. Bear in mind that a minimum share capital must be presented at the time of registration. For an LLC this is HUF 3,000,000 (approx. $11,200). If you need any further help, Dr. László Bóné is the most renowned startup lawyer and tax advisor in Hungary.
For information regarding immigration go to the site of the Office of Immigration and Nationality.
Are you ready for Budapest?
This post was originally published on STARTUS Magazine.
Featured Image Credit: The Chain Bridge in Budapest in the evening / Shutterstock