Keeping the heat up

Ivo Spigel says that more must be done to provide start-ups in New Europe with the ecosystem support they need.

First Tuesday was a poster child for the heady, go-go days of the dot com boom. More than a hundred cities around the globe had regular gatherings of – yes – the start-up community. I was glad to be part of the network back in the day, heading up the FT chapter in my home town of Zagreb, along with a few friends.

My co-founder in our local chapter, Ivana, was skilful in rounding up sponsors, so the Zagreb gatherings were renowned for the flowing wine and food passed around after the presentations and panels. No wonder it was popular.

After many ups and downs, First Tuesday continues to operate today as a networking event, although the number of chapters is smaller. The reason I bring it up are the three colored circles in the logo which the original founders came up with, which have remained a fixture of the concept to this day.

If you wore a red circle on your badge, name tag, paper sticker or whatever recognition tool was produced for that event, it would mark you as an investor. Green, you were a tech company, most likely a start-up, looking for money. Yellow, you were a “service provider”, which in effect meant everyone else involved in the industry: journalists, PR, marketing folk, lawyers, designers, accountants and headhunters. Real estate agents were a key piece of this service infrastructure, renting out digs in hot tech spots, often taking equity stakes instead of monthly rental.

Fast forward to New Europe today. Setting up a First Tuesday event in a city in Central and Eastern Europe (CEE) such as Zagreb, Talinn, Bucharest, Ljubljana or Kiev, chances are you would have no shortage of candidates for the green badges. Red and yellow… well, that would be more of an issue. We’ll get to the issue of capital availability in another instalment of this column, but let’s first talk about those yellow people.

CEE, of course, has no lack of talented lawyers, designers, headhunters and spin doctors. The issue is, however – which of these can spell “s-t-a-r-t-u-p”? How many law firms in Brno, Warszaw or Sofia can provide a real service to the ambitious and impatient start-up teams wanting to take over the world?

How many accountants in these lands will say “Employee equity options? No problem, my friend, we know exactly what you need and we also know how to structure those so they fit into our local regulatory environment”?

The ecosystem is crucial for start-ups. This may sound banal to Kernel readers from big-time hubs. “Which of our co-working spaces is better for start-ups: A, B or C?” “Is our government start-up support program great, or could it be better?” These are all legitimate questions in Barcelona, Paris or Berlin.

If you are a startup in CEE, the question might very well be: “Do we have a co-working space or not, and how do we get one started?” or “How do we get local government and business to set up a support program for start-ups in the first place?”

For some projects this might not be so relevant. Scooped up by big name investors, typically they will set up biz dev shops in London, New York or Palo Alto and keep the development team in the east, where it’s nice and cheap. In the long term, however, what does that do for the local tech ecosystems in these places?

In some cases it might work wonders, actually: Skype has a lot to do with the mighty Estonians being as strong a tech center as they are today. But it’s not a repeatable, sustainable model. In the long term, central and eastern Europe needs a local support ecosystem. We need qualified yellow badges.

Along with local capital, local service providers that understand the start-up world and are willing to adapt their business model (i.e., price structure) to start-up needs will need to flourish if the region is to become a high tech powerhouse, rising to the occasion to meet today’s and tomorrow’s generations of talented founders and teams that are already starting to make their mark on Europe’s technology landscape.

A critical part of this ecosystem which didn’t really exist in those faraway late nineties are the incubators and accelerators. When GigaOM drew a map of European accelerators, questioning whether perhaps there were already too many, most of the space east of Germany was alarmingly white.

Things are changing, but not fast enough. In an ongoing effort, a ragtag group from New Europe including your humble columnist is working on mapping various accelerators and incubators in the region. At last count we were able to name 31 of them, including some that were not native but very active here such as Seedcamp and several “Arctic” projects originating in Finland.

Notable for their wide reach among these has been the Vienna-based STARTeurope, with 3-day events spreading out from Austrian and German roots to Prishtina, Athens, Budapest and Porto in the past, and a full calendar for 2012 including Copenhagen, Cluj (Romania), Belgrade, Alicante and Split on the wonderful Croatian coast. (A shameless plug for Croatian tourism: combine it with a few days in sunny Dalmatia!)

Estonian (yes, I know, but it’s not my fault) weekend event Garage48 has apparently decided to simply go totally global, jumping from the Baltics and Arctics all the way to Johannesburg, Nairobi, Kampala, Lagos and Accra last year, with Mexico City and other South American and African destinations in 2012. Talk about ambition.

The Founder’s Institute, having established 8 European chapters, has made Budapest one of them – the first, but, as rumor has it, not the last FI outpost in New Europe.

Next month’s column will focus on the third, red badge: money. Is there local money available and do we even need to worry about it? We will also look at New European projects featured at some recent tech conferences and continue our overview of notable start-ups in or from New European lands. Stay tuned.