A Venture Capitalist in Hungary Scott Alexander Young speaks t


F


ollowing up on last month’s story about Budapest City,


the Startup I recently interviewed Csaba Gaal. Csaba is the CEO


of Core Venture, a partner of the New Széchenyi Venture Capital Program’s Shared Seed Fund Subprogram. Assets managed by the fund and the amount of available resources for companies equal 7 million Euro. Csaba took time out of his busy schedule (3 meetings a day with entrepreneurs!) to discuss his views on entrepreneurship.


Is Budapest in 2013 a good


place for entrepreneurs? Most definitely yes. For one thing, Hungarians are naturally creative and are used to approaching problems from many different angles. Looking at the amount of available money it’s very attractive, not only for Hungarians but for international projects.


Right


now for example, you have Spanish entrepreneurs reaching out to make contact with Hungarian incubators.


And challenges? Well, the condition of Hungary, as seen from an international investors’ point- of-view, is a very big challenge. In many respects, it looks better from the inside than it does from the outside. We can combat people’s negative preconceptions, by using examples of worldwide success that have come out of Hungary. UStream and Prezi are good case studies.


How does government encourage


entrepreneurship? I think the Hungarian government knows very well that it must support entrepreneurs. Of course, one way to do this is financially, which they have with the Jeremie Fund. There seems to be a lot of initiatives to support


30 entrepreneurcountry


What kind of businesses are Core Venture looking at? Core Venture is a ‘greenfield’ company, which is what drew me away from the life insurance business and to the venture capital scene in the first place. We ourselves are a startup, and only secured funding from Jeremie Fund 2 in the last six months. I am delighted that Julian Tzvetkov, Vice president of the Hungarian Association for Innovation sits on our investment committee. Now we have begun studying the market for opportunities. Up to this point, we have analysed more than 100 projects. From these 100, we have narrowed it down to 8 projects which look quite attractive. From there if everything is okay and measures up to our terms and conditions – and there are no skeletons in the closet - we will probably end up with 3 or 4 which receive actual funding.


What kind of investment


level are we talking about? Legally, there is no minimum, but we set up our own minimum of 40 million forint, and it can be up to 300 thousand Euro. I also look at this job in some ways as similar to when I was working in life insurance.


Minimising risk? Well yes, but I meant on the sales side. I should have 3 meetings a day, so 15 a week, and then we should have selected enough investment opportunities by the end of 2015.


What is the very first thing you look at when someone


submits a project? Something that is often missing from weaker proposals is information on


incubators. The question is how effective that support will be.


who generates the revenues for the project. So we’re not talking about profit at the very first stage, but only revenues. Not being able to answer this question is the number one reason for turning down a project. And actually feedback from the marketplace tells us this is how Core Venture is different from its competitors. If we turn down a project, we tell the applicant why. In many cases, I have received thank you letters from people whose projects we turned away, simply because we took the time to tell them why. Not only that, but especially if we see merit in the idea, but the business model needs work, we recommend mentors who can help to develop and realise its potential.


Is there a common fault with


the applications? So often the team is not ready. However, it is to be expected with startups that they have for example the technical team, but no-one in sales. The problem occurs when entrepreneurs think they can do everything alone, and refuse to build in contingency for a sales person, a manager or whatever.


So, here’s your chance, are there any particular industry sectors you’d like to see


more applications for? Telecommunications is definitely one, another is agricultural


related


activities which add value to the raw materials, such as food processing and so on. Healthcare is another one, as is anything related to energy efficiency, and of course environmental protection. IT is no longer a hot button for us, not unless it’s something really special. We prefer tangibles.


Thank you for your time. Now we’ll let you get back to holding the interviews.


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