Small and medium-sized enterprises play an important role in the country’s economy as they have a big influence on employment, as almost 70 percent of employed people in Slovakia work in them, and they also generate about 40 percent of GDP. They are highly flexible, as it is simpler for them to introduce changes and innovations. However, individually, such businesses do not have noticeable economic power, and this might result in insufficient attention being paid to their needs and problems. There is not a unified opinion concerning which form support for them should take although, in general, the importance of support is stressed, especially in the initial phases of a company – its start, development and survival. Critics of such support often point to the ineffective use of resources which stands in the way of natural market patterns.
It is not clear which line of argument is correct, especially as there is no relevant analysis of small and medium-sized enterprises (SMEs) concerning the dynamics of their establishment and decline, industrial structure, and other indicators connected to existing support. If any such analysis existed, it would be easier to create a system of direct or indirect support with a single goal: to increase the enterprises’ share in the growth of the added value which should then be demonstrated in the growth of qualified labour, and also living standards.
For this purpose, companies with innovative potential are necessary not only when implementing operational innovations, which undoubtedly make enterprises’ operation more effective, but also especially in terms of products, since these generate bigger profits, and, most of all, provide competitive advantage in comparison to other economic subjects. This secures their position and long-term viability on the market. For the economy it is important that as many of these subjects emerge as possible. The following words will address these companies; to be more specific, the technologically innovative companies called “start-ups”.
Although one generally associates the term start-up mainly with information and communication technology companies, whose boom became famous thanks to the popular “internet bubble”, we may include the application of innovative ideas from various technical fields and spheres here. It has turned out that the implementation of IT solutions to business plans is simpler from both a technological and a financial point of view and, perhaps also due to this, the popularity of specifically IT start-ups has been growing. These include innovations in web solutions and mobile applications, but also innovations in technical devices connected with information-communication means.
In Slovakia, an expansion in this area can be felt too. While several years ago there was just a handful of such projects, nowadays we see dozens of new ideas each year and their number continues to grow. IT start-ups belong among the best-organised communities which caused a boom of this type of company in Slovakia. It is new ideas, though, sometimes imported, which have been the impetuses for such SMEs’ mergers, and so the first projects like StartupCamp or Startup Weekend have come into existence. Until now, these kinds of projects have been active and, in a short time, they have expanded to include new members, organisers, and supporters. Currently, more initiatives such as co-working spaces at The Spot or Connect Working are emerging, where potential applicants can use rooms and support services like mentoring and contact with potential investors and clients etc.
THE SUPPORT FOR START-UPS IN SLOVAKIA
StartupCamp is a regular meeting of IT enthusiasts, giving them the opportunity to meet and establish relations with like-minded people and learn about their ideas and solutions, which they can later present to successful businessmen, mentors, and consultants. Getting feedback adds value to the experience and it is not rare for real business partnerships to form.
Startup Weekend focuses on similar activities; it is a global network of leaders and businesspeople aimed at inspiring, educating and empowering individuals, teams and communities. While StartupCamp and Startup Weekend take place several times a year, creative spaces like The Spot or Connect Coworking provide a platform for everyday use. Apart from activities related to the above-mentioned meetings, both spaces also offer services like physical headquarters of a company for clients, participation in lectures, workshops and events, contact with mentors, investors, and space for business meetings, but the crucial thing is to become a part of a community with the same or a similar orientation. All the activities mentioned are the result of efforts from mainly the private sector, but the state has started to support start-up activities ever more intensely.
As an example, Slovak Investment and Trade Development Agency’s (SARIO) development programme, called Slovenský start-up, established in 2011, can be named. Its primary goal is to enable Slovak companies to export innovative ideas abroad. This goal is fulfilled through the professional education of business subjects and a recruitment process through which a professional jury selects the best projects twice a year which then go to stay in the Mecca of the start-up idea, Silicon Valley, California. Decisive criteria are the originality of the idea, the phase of the project’s development, the line-up of the team, and the presence and position on the market. Winners receive a three-month stay in the Plug and Play Tech Center enterprise accelerator where they come into everyday contact with potential investors, mentors, and also future clients. The stay enables them to get the necessary stimuli to develop their idea, to enhance their activities in the US, or to adapt their product according to the needs of the market.
“Without going to Silicon Valley, it is difficult to imagine how a really developed business environment looks like,” one of the leading start-up coaches, Mark Tuttle said while stressing the importance of the stay. “Although the situation in Slovakia has been improving markedly, the chance to go and stay in Silicon Valley is a great opportunity to meet the elite of research and development, to experience the implementation of knowledge in practice, and effective scaling of enterprise. This whole environment has been developing for almost 45 years now, and it really offers unique opportunities for acquiring new knowledge.”
The idea behind the programme is not just to share the costs associated with a stay in the US but also to organise the training programme for the winners in which they learn fundamental information about the environment in Silicon Valley and how to modify their projects so that they can be successful on the US market.
A positive outcome is that some of the winning Slovak companies that managed to persuade investors and received financial capital, while others managed to make it to the American market and enhance the portfolio of their customers. Successful firms that went through the programme include the companies Nicereply, Work in Field, and By Square.
In general, we can say, however, that the programme makes Slovak companies look at the issue of innovative enterprise in a more realistic way when confronted with this business environment on an everyday basis. The programme is not only oriented towards winning projects but is also meant to inspire those who are potentially interested and are only considering starting a business or have a specific product but do not know where to turn to try to take it to market. For this reason, training in company development, in innovative business models, and in communication with partners, investors and clients is provided. There is a regular road show organised in selected Slovak towns, mainly in academic institutions, where the programme’s goals are presented, as well as training, lectures, and the recruitment of projects for the acceleration programme in the US.
SPIRIT OF ENTERPRISE IS NOT EVERYTHING
Prerequisites for the commercial success of a start-up are undoubtedly a good entrepreneurial mindset, a good idea and, last but not least, implementation. We often hear the opinion that people in Slovakia lack the so-called “business sense” and that when compared with more developed countries we are lagging behind. But statistics do not confirm this claim and many indicators show that we fulfil the criteria of the most developed countries.
The differences lie in how business activities are conducted and, particularly, in how companies are structured – here, more developed countries are leading the field in terms of innovation and technology sophistication. It is true that not everybody is suitable for a career in enterprise, which is associated mainly with personality qualities, but it is important to evoke and find in people an inner determination for other forms of fulfilment than just the usual employment relationship and thus boost the establishment of new enterprises.
Even in Slovakia, there are several subjects (for example Junior Achievement Slovakia) which actively impact, at the very beginning of education (in elementary and secondary schools), the mindset of young people and they present one’s own business as a way to find fulfilment in the future.
However, business sense alone is insufficient if a good idea or, in the end, its implementation, is missing. An idea can be born almost everywhere but, for innovative enterprise, it is mainly academic institutions like colleges, universities, and research institutions which are apt environments for such ideas. The classical model of the commercialisation of new knowledge is of a low level in Slovakia due to many factors. For example, there is a strong focus on basic, mainly theoretical research and a neglect of real-world application, as well as legislative conditions which still prevent the establishment of “spin-off” forms, i.e. private subjects emerging from universities and research institutions. At the same time, a developed sector of mediators between the academic sphere and private practice is missing.
Another problem is general business skills, i.e. how to conduct business. Management, marketing, product development and innovation, raising finances, and communication with clients, partners or investors are frequent weak points not just among beginners.
There is a myth that it is not easy for beginner entrepreneurs to get financing. It is true that it is complicated to get money for bad projects. In fact, it is not that complicated to get financing for a valuable product or project. But more important than financial coverage is so-called “smart money” which includes not just financing but also real help from experienced mentors,
businesspeople, or even investors who are crucial for placing a product on the global market.
This is where there is a gap in the market; the lack of experienced advisors can be seen as the key problem in developing start-up companies in Slovakia. Currently, companies like ESET, Azet, and Sygic engage in this field but the market would be able to absorb many more like them. The lack of experience, knowledge and useful contacts as the key factors negatively influencing companies is confirmed also by the poll of the Association of Young Entrepreneurs of Slovakia.
WE HAVE GOOD IDEAS, BUT WE LACK MENTORING
The market for innovative ideas in Slovakia belongs among its least developed markets, but the quality of these ideas is comparable with the most developed countries in the world. Thus, there is plenty of room for enterprise in this sphere not only for idea owners but also for related activities by consultancy, advisory or investment companies.
The fact that countries where the innovative enterprise sector is far more developed are showing an interest in and gradually getting to know the Slovak environment can be seen as proof of this.
Interest in collaboration with Slovakia by Finland or Israel suggests that the world around is aware of the importance of emerging markets’ influence and their impact on countries’ domestic environments and is carefully following this trend. It is important not just to search for existing idea owners but also to actively support the emergence of new ones and then to support them using suitable methods. This support need not automatically take the form of direct intervention. Creating a suitable environment for a company, making it possible for new ideas to be generated, enabling transparent networking and last but not least enabling wider information and education about innovative projects are just a few of the measures that should dynamise the whole process.
The term knowledge-based society should be a priority for a country like Slovakia due to its size and character, as human potential is the only true capital that Slovakia has in abundance. It is also possible that due to its geo-political situation and the development of the world economy, this trend will be the only possible way in which we will avoid the stagnation that would result in a deepening divide not only from the more developed part of the world but also from the newly developing regions.
Silvester Sališ is a project manager with SARIO
9. Dec 2012 at 0:00 | By Silvester Sališ, Special to the Spectator