Tereza Vitková
CzechTrade Mexico
Expert Contributor

The Czech Republic Stakes Its Claim as a Startup Haven

By Tereza Vítková | Wed, 04/14/2021 - 08:59

The Czech Republic became the destination for many international investors and multinational companies not only due to its location in Central Europe but also due to other important factors. According to the Global Peace Index from 2020, the country is the eighth-safest country out of 163 surveyed, moving ahead of Japan, Switzerland and Germany in the ranking. The Czech Republic is demonstrating long-term economic growth (before the pandemic, GDP was expanding at a 2.6 percent rate; after a 7 percent COVID-related slump, Deloitte estimates a 2.8 percent increase in GDP for this year), and it has a stable political system and low unemployment (3.1 % before the pandemic; Deloitte estimates 3.4% for this year). In the publication Doing Business 2020, which evaluates the business environment in 190 countries each year, the Czech Republic was ranked 41, ahead of Belgium and the Netherlands. Comparing to the other European countries, it is characterized by lower employment costs (US$13.4 per hour on average) and by a huge qualified labor force. In the Czech Republic, there are around 300,000 IT experts and every year the number increases by another 10,000. No wonder that companies such as eBay, Oracle, Skype, DHL, IBM and Microsoft have decided to establish their IT centers there. Total investments into research and development by the private, public and university sectors increase annually and in 2019, the total reached almost US$5.5 million, so approximately 2.5 percent of GDP. In this country of 10 million inhabitants, there are 19 universities with STEMM faculties, at which around 22,000 students finish their studies every year. There are also around 48 research centers and 42 technological and scientific parks.

The heavy network of innovative and technological centers has resulted not only in activity by multinational companies and their R&D but also in the establishment of many startups, which have had an attractive environment for their development since 2011. The main areas of interest for Czech startups are cybersecurity, AI, big data, fintech, e-commerce and biotech. In the last year, the number of IT startups in areas such as agriculture, food, life science, transportation, logistics or mobility increased. External support also increased significantly – primarily from the innovation centers, the accelerators and the incubators. Many accelerator and incubator programs are financed from private funds as well as from the funds of the European Union, which are managed by various ministries, such as the Ministry of Industry and Trade, or by city and regional governments in the country. The result has been a gradual improvement in the support from the state side (grants and subsidies for getting know-how, science, research or extension of production capacities) and from the bank side. The number of investors is also increasing significantly. A summary of information concerning financing, incubators and accelerator programs, network actions (competitions, hackathons, coworking places) and technological parks can be found at Czechstartups.org.

As has already been mentioned, the internationally successful startups could not exist without external support. Among our important accelerators is StartupYard, which ranks among the oldest accelerators in the CEE region, having been established in 2011.  Since its establishment, it has focused on Deep Tech, primarily AI and big data. In 2020, 80 companies took part in its program. Among other important incubators, which also fulfil the role of investors, are Impact HUB, JIC, Green Light and ESA BIC. Local banks also support startups. For example, ČSOB offers the accelerator program START IT. Česká sporiteľňa is the main partner and investor for the networking event MashUP.

Since 2011, the state agency CzechInvest has also taking part in the support of startups. Established in 1992, its original aim was to attract international investment to the Czech Republic. After some time, it started to focus on supporting the business scene, including startups. It has representation in 24 countries worldwide, including Mexico, thanks to its international offices. Among the important programs to support startups is CzechStarter (a seven-month basic program with mentoring and the best startups can attend a two-week Silicon Valley camp), CzechMatch (networking and matchmaking event), CzechDemo (participation in international events such as Slush, TechCrunch, CES) and CzechAccelerator (a three-month acceleration program in a foreign business incubator – London, New York, Silicon Valley and Singapore). CzechInvest provides consulting not only for Czech startups but also for international startups that are interested in reaching the Czech startup scene. These, of course, can get involved in the programs, which are managed either by private or by state institutions; however, one of the conditions is to create a local entity. If you would like to get more information on this topic, do not hesitate to contact our office, in particular the official representative of the agency CzechInvest in Mexico, with further questions.

In 2019-2020, approximately 34 percent of startups was located in the capitol of the Czech Republic, Prague. Nevertheless, due to an increase in regional innovation centers and programs to support startups, the attractiveness of other cities such as Brno, Ostrava or Plzeň is increasing, too. It is said that Guadalajara is the Mexican Silicon Valley and Brno is the same for us: every fifth company in the city operates in the IT area along with the headquarters of companies such as IBM and Red Hat. Internationally successful Avast (a Czech unicorn), which has been developing its antivirus program since 1988, can be found there. Among the most important Czech startups is Kiwi.com, which is celebrating its success on the international scene. Kiwi.com was the first platform to interconnect the flights of air companies that do not usually cooperate. The company was established in 2012 and today employs approximately 2,600 employees worldwide. Productboard is the most discussed and the most promising startup at the moment. The reason is that the company Sequoia is Productboard’s main investor. Previously, Sequoia had invested in Whatsapp, Airbnb and Linkedin. Productboard has been developing the first tool for product managers for six years. The system can not only register and consolidate requests on product development but also connects the product team with the customers’ expectation. Microsoft, Zendesk, Outsystems and Avast are its most important customers. Another successful startup that has expanded to the international market is Rossum, a tool for automatization and digitalization of business communication based on paper documents. The solution is working with AI and the ability to get data from non-structured documents.

There are many challenges and areas of improvement ahead for the Czech Republic; nevertheless, in recent years, it has created an attractive environment for establishing internationally successful and very promising startups. The proof is the second and third ranking, respectively, on the Deloitte Technology Fast 50, which maps the 50 fastest-growing startups in the countries of Central Europe, by the Czech companies DoDo (courier service) and UlovDomov.cz (a portal for renting properties and apartment sharing).

Photo by:   Tereza Vítktová