Shattering upheavals have left Central and Eastern Europe longing for calm, but a disruptive new generation is looking towards innovation

There has been no shortage of out-of-the-box ideas: A flying car and an energy-self-sufficient mobile home were entries at Vienna’s Pioneers Festival from their neighbors to the east. Recently, a scheme to build the first high-speed air-cushioned “Hyperloop” between Vienna and Bratislava, first proposed by the American entrepreneur Elon Musk, again attracted tech geeks to Central Europe.

It doesn’t take blue-sky projects like these, though, to bring innovation onto the agenda in the CEE – the region is already

© NASA Ustream provides video streaming to more than 80 million viewers. Below, two astronauts answer questions live from the ISS on the NASA Public Ustream channel.
© UStream (NASA)

Ustream provides video streaming to more than 80 million viewers. Below, two astronauts answer questions live from the ISS on the NASA Public Ustream channel.

buzzing with wild and crazy ideas. Booming startup sectors can be found in Prague, Warsaw, Cracow and Budapest, where young people dream about hitting on the next big thing – inspired by the Estonian internet telephone provider Skype or, more recently, the Hungarian video streaming platform Ustream, which was bought in January by IBM for $130 million.

Roll over, Marx

“This culture of innovation is deeply embedded in Central Europe since the transition,” explains Wojciech Przybylski, editor-in-chief of the Polish magazine Res Publica Nowa and the Vienna-based internet platform Eurozine. Two years ago, Przybylski launched the New Europe 100 list of innovators from post-communist countries. The project, which includes dozens of -cutting-edge companies and award-winning entrepreneurs from the region, has already called attention to the huge potential in these societies, notwithstanding the persistent barriers that remain.

The problem, says Przybylski, is “scaling up” to practical applications. “We lack the knowledge and the strategies to make ideas profitable and self-sustainable.”

Politicians talk a lot about innovation. But in Central Europe, it is the individual entrepreneurs that set off the spark, with some help from the EU and other public subsidies. Here, though, conditions in the CEE differ most from the West.

© Skype

Estonia’s Skype has revolutionized instant messaging and video chatting (a Skype call is pictured above).
In 2011, Microsoft bought the European tech company for $8.5 billion. As of 2015, over 300 million people are using Skype’s services.

Capital in the Twenty-First century

“The basic difference is capital,” says Oliver Dlouhý, founder and CEO of the Czech startup Skypicker joining this year’s Pioneers Festival. “In the West, there is simply more money and therefore a bigger willingness to take risks.” In the Czech Republic, it’s mostly bootstrapping, financing new projects without external capital. As a consequence, startups are more modest, which doesn’t always produce the best outcomes. “In general, the Western approach results in a few super-successful companies, many relatively successful, and a number of failures,” says Dlouhý. “The Czech approach produces only a few relatively successful firms and many failures.”

Markus Dettenhofer, a Californian who is now director of the Central European Technology Institute (CEITEC) in Brno, Southern Moravia, isn’t quite so sure. “The biggest obstacle is risk aversion,” he says. “This has to do with culture, society, family.” After so much upheaval, “the most important goal is to have a quiet place to live. And if young people have a new idea, they are afraid to make the second step – to commercialize it.”

The CEITEC attempts to overcome this by connecting students with varying skills at informal workshops. The inspiration for a new project comes from Cracow, where Dettenhofer met a lively community of innovators launching startups with the help of an incubator center at Jagiellonian University. This “allows them to take risks in a safe place,” he says.

It’s the culture, stupid

© Vectary

The Slovak startup Vectary is developing an easy-to-use 3D modeling tool for designers, creators and manufacturers (Vectary’s interface is pictured above). It is one of the most promising tech startups in the CEE region.

Cultural aspects are a key element in the innovation process, agrees Veronika Pistyur, head of Bridge Budapest, an NGO founded by Hungarian startups to support the creation of new ones. “We say often that the lack of resources automatically makes Hungarians more creative. I don’t think that’s always true,” says Pistyur, who doesn’t see much sense in comparing East and West. A big part of the success in Hungary can be attributed to good science and math education, she says, but cautions that many young Hungarians lack energy and vision.

“This generation is ready to bring changes to people’s lives, but they still have the attitudes of the previous generation, cynicism and defeatism among others,” she says. “Nine out of ten young people think that it is only connections that count, not ambition.”

With companies like NNG, Prezi or Ustream, a thriving IT community and a lively startup blog called Silicon Goulash, Budapest is one of the innovation hotspots in Central Europe. Most funding, however, still comes from the state or the EU, rather than the private sector.

East of Silicon Valley

A recent EU innovation scoreboard ranked Austria an “Innovation Follower,” just above average, while CEE countries were “Moderate Innovators”, with Estonia and the Czech Republic leading the group.

Fair or not, this shows that Central Europeans do not need to look West for a role model. As the home of Skype, the most successful European tech start-up, Estonia excels at combining state and private money, energy and ideas. As a result, it could become the second most productive EU country and join the global Top Five by 2050, says French think tank CEPII.

Google Campus Warsaw
© Google

“I see Estonia as a clear leader in innovation at every level,” says Rafał Plutecki, head of the recently opened Google Campus Warsaw, “with high government participation complemented by a private sector able to generate disruptive technologies.” Google hopes the Warsaw campus will concentrate the innovative potential of Central Europe – and the pace is quickening, as the rest of the region catches up. He points to Ukraine, where the geopolitical situation forces local entrepreneurs to launch globally.

Michal Koor, co-founder of the Slovak startup Vectary and a participant of this year’s Pioneers Festival, reiterates what Estonians learned a couple of years ago – that companies from small countries must think big; for online projects particularly, the size of a country matters little during the innovation process. In Slovakia with a domestic market of 5.4 million,” says Koor, “the only possibility is the global market.”

Rage against the watering can

But politicians usually think locally and short term – often trying to distribute funds equally to a large -number of applicants regardless of results. This may be a remnant of socialist thinking: For instance, in the Czech Republic, government funding programs evaluate output in the sciences according to quantity, not quality. Therefore, money for research and development is spread around widely, not concentrated on projects that have proved themselves in a competitive environment.

Similarly, universities rarely connect theory and practice. “Students do not see innovators as role models, and professors see commercially viable work as dirty,” says Dettenhofer. “They do not want to have anything to do with the practical application of their research.”

So far, the biggest motivation for young innovators – and food for thought for politicians – comes from successful projects that went global from Prague or Budapest, like Ustream.

“What Ustream has achieved is the biggest Hungarian startup success ever. Co-founder Gyula Fehér and his team have become role models in this country, alongside Prezi, LogMeIn and NNG,” says Veronika Pistyur. “Many young wannabe-entrepreneurs see this as a milestone. It strengthened their belief that the hard work was worth it – and that you can make it, even from a small country in the heart of Europe.”