Hungary has the economic and cultural attributes necessary to support the development of a healthy start-up ecosystem. With more cooperation among stakeholders the country could create a start-up culture that could generate some 30,000 high-value-adding jobs and up to billions of forint in additional local spending, according to a recently published study.
Hungary is battling economic hardships on several fronts: skyrocketing inflation, war in neighboring Ukraine, and an energy crisis, to name but a few. Most analysts agree that an extended period of challenging macroeconomic conditions is on the horizon.
Yet, to paraphrase Churchill’s famed remark: one should never let a crisis go to waste.
Challenging times open up opportunities and nowhere is this better capitalized than in the start-up world. Many of the world’s greatest start-up successes were born and built during economic downturns. At a time when many governments hope to soften the impact of a possible slowdown, catalyzing a thriving start-up ecosystem could be one of the more promising paths.
One Hungarian unicorn
Hungary has around 2,900 start-ups, according to data from Dealroom, a global provider of information on start-ups and venture capital (VC) activity. Collectively, these start-ups employ some 10,000 to 15,000 people and have raised over EUR1.4 billion in funding. “Hungary’s economy has several strengths, such as a culture of scientific innovation, innovative talent, and proximity to large European markets. All of these strengths could help to create a thriving start-up ecosystem. Combining them with the best practices of other countries would give Hungary a real opportunity to increase the resilience and competitiveness of its economy,” says a recently published study by McKinsey.
The authors of the study note that Hungary seems to be on par with the region as a whole in many things usually regarded as a basis for successful start-up life cycles. It produces a number of start-ups comparable to that of the other CEE countries, is on par with the Czech Republic and Poland in venture funding (an estimated €40 to €80 per capita), and has a largely similar talent pool. In some aspects, Hungary is even ahead of its peers; for example, it has the region’s highest share of information and communication technology specialists - 3.6% of the total workforce, compared with an average of 2.8% in the CEE as a whole.
However, a start-up ecosystem’s health is generally measured by successful, high-valuation exits (the acquisition or IPO of a start-up), both in number and in value. Data revealed that Hungary lags behind in one significant metric. While the start-up ecosystems of the Czech Republic and Poland generated the largest number of unicorns (startup company valued at over US$1 billion) in the CEE region - four and 11, respectively, Hungary has so far produced only one, LogMeIn. Given the low number of high-valuation exits, aspiring Hungarian entrepreneurs have fewer role models than some of their counterparts in more successful start-up nations. In particular, Estonia and, most recently, Romania have been able to build on their internationally successful unicorns: for Estonia, Skype, with a buyout value of $8.5 billion in 2011; for Romania, UiPath, with an IPO valuation of $31 billion in 2021. Hungary has not had similar exits in the past five years.
What’s at stake?
The McKinsey study stresses that over the coming decade, a more advanced start-up ecosystem could contribute to Hungary’s economy in terms of financial value added, job creation and digitization.
An increase in the share of start-ups converting from the pre-seed to the seed stage could generate EUR2.5 billion to EUR5.0 billion in additional funding. That in turn could create up to EUR1.3 billion in additional direct local spending for the economy. The resulting job creation could generate up to some EUR2.2 billion in employment taxes from 2025 to 2030. Further upsides include higher corporate income and other tax receipts.
A more advanced start-up ecosystem could generate almost 30,000 high-value-adding jobs in Hungary. These jobs, in fields such as software engineering, R&D, and product management, could be an opportunity to retain talent within the country and to attract lost talent back to it. In addition, boosting the start-up ecosystem would help to create additional top (digital) talent, thereby increasing the talent pool and thus benefitting not only start-ups but also established corporations in their quest for renewal and innovation.
In addition, a more advanced start-up ecosystem can promote digitization on a nationwide level. The potential economic and development benefits of such a nationwide digitization campaign could be as much as EUR9 billion in additional GDP by 2025.
A successful start-up ecosystem is also a sustainable one—it has a positive scale effect when successful founders create, reinvest, and spread their knowledge to new start-ups.


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