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Hungary

Hungary

3. Employment & Entrepreneurship

3.9 Start-up funding for young entrepreneurs

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  1. Access to information
  2. Access to capital

Access to information

 

Young Entrepreneurs Association Hungary (FIVOSZ)

One of the most significant advocates of start-up supporters is the above already mentioned Young Entrepreneurs Association Hungary [Fiatal Vállalkozók Országos Szövetsége (referred hereinafter to as FIVOSZ)], which gives information about both state and private opportunities on its website.

Design Terminal

The main coordinator of public opportunities is Design Terminal, a non-profit organisation, which deals with business and cultural talent management. Its operations are financed by state grants and company partnerships. State grants are provided by the form of a public service contract signed with the Ministry of Human Capacities (Emberi Erőforrások Minisztériuma) of the Government of Hungary. As such, Design Terminal has a regular reporting obligation, including the submission of annual, and project-based financial statements.

'Under [their] commitment for public service, Design Terminal performs various activities related to the field of business and cultural talent management, entrepreneurial ecosystem development and international benchmark adoption. [Their] services are competition-based and free-of-charge with a strong focus on inclusivity and social cohesion.' (Design Terminal)

Startup Leadership & Management

Another private opportunity worth mentioning is the meet-up sequent called Startup Leadership & Management, which entails workshops organised on a regular basis about the challenges of the start-up world and possible solutions. A new initiative is the 'MVM Edison Light Up!' (MVM Magyar Villamos Művek Zrt. Edison - Light Up!) innovation tender and start-up contest for supporting start-ups. 'In the framework of the tender, the aim is to seek and support such plans about energetic, energy-intelligent, and creative innovations that have a significant social and economic impact. The tender helps the implementation of projects within an incubator programme. 

 

Access to capital

 

Design Terminal

Design Terminal offers an incubator programme for start-ups. 'The aim of the programme is to support the most innovative Hungarian enterprises enter into the international market, and to help the birth of new Hungarian success stories. During the six-month-long programme, the companies improve in the field of business model, organisational development, legal background, and marketing, and prepare for receiving their first investor.

The Design Terminal with the partnership of the Hungarian National Trading House [legal successor from November 2018: HEPA Hungarian Export Promotion Agency Nonprofit Private Company Limited by Shares (Magyar Exportfejlesztési Ügynökség)] sends its mentored enterprises to at least one important international exhibition or fair. The programme is based on selection but completely free of charge for the chosen companies. Moreover, the participants receive mentorship fee, which allows them to focus solely on their starting enterprises.'

Youth entrepreneurship programme (EDIOP 5.2.2, 5.2.3, 5.1.9 and 5.2.7, 'Start a Business at Home, Youngster!' and CCHOP 8.3.1)

The aim of the measure is to prepare young people, aged 18-25 and registered unemployed aged 25-30 interested in business and planning to start a new individual or micro enterprise to start their own enterprise and to offer them non-refundable financial support to cover their initial costs. The organisations implementing the programme are

Within the programme, the organisations provide young people with a training, where they can obtain the required competencies and knowledge on how to become an entrepreneur, on the operation of a business. They can also receive assistance in preparing a business plan, advice and mentoring (EDIOP 5.2.2, 5.1.9 and 'Start a Business at Home, Youngster!').

Young people who successfully completed the training and have an approved business plan may submit an application for support of up to HUF 3 million (about EUR 9 594) (EDIOP 5.2.3, EDIOP 5.2.7 and CCHOP 8.3.1), in the form of non-repayable support, to launch their business and to supplement the funding of their costs associated with the start of the operation, with 10% own funds. (In the case of the programme EDIOP 5.2.7 own funds are not required.) Support is provided for the establishment of approximately 6 600 new enterprises within the framework of the programme until 2021.

'Enter the market!' programme ('Lépj piacra!')

The 'Enter the market!' programme ('Lépj piacra!' program) is implemented by the National Employment Public Non-Profit Limited Association (Országos Foglalkoztatási Alapítvány Nkft, OFA) and supports the business creation of young people under 35 (people between 25-30 without a tertiary education and people between 30-35 with tertiary education) in two stages, following the same method as the above- mentioned Youth entrepreneurship programmes.

The programme provides e-learning to help the participants in acquiring knowledge about how to become an entrepreneur and how to operate a business. They can also receive assistance in preparing a business plan, advice and mentoring. In the second phase, those who successfully completed the training and have an approved business plan can submit their application for a maximum HUF 2 million (about EUR 6 396) non-repayable support, with 20% own resources. The total budget of the programme is HUF 479 million (about EUR 1.53 million) funded by national funds.

National Research, Development and Innovation Office

The mission of the National Research, Development and Innovation Office (Nemzeti Kutatási, Fejlesztési és Innovációs Hivatal) is to 'create stable institutional framework for the governmental coordination of the national research, development and innovation ecosystem, provide predictable funding and implements an efficient and transparent use of available resources.'

'The Innovation Ecosystem (ÖKO_16) call, which aims to strengthen the environment promoting the foundation, mentoring and training of startup businesses, is now open for applicants from the Central Hungary region with existing or newly planned business incubators.

The funding programme has a budget of HUF 1.5 billion (about EUR 4.8 million) from the National Research, Development and Innovation Fund. Incubators can apply for non-refundable support of HUF 300 million to 500 million (about EUR 1 million to 1.6 million).

Awarded incubators will use the received funds to announce calls for proposals to facilitate the development, training and market entry of startups, whereas the winning start-ups will be able to call the funds awarded on a commercial basis directly from the incubators.

Incubators decide at their own discretion on the selection and reasonable funding of start-up projects. No more than 20% of the funds awarded to incubators can be spent on their own operation costs, and at least 80% has to be spent on financing start-ups. Applicants are required to have their own equity accounting for at least 20% of the requested amount.

This new call completes the existing competitive project funding system aimed at establishing, strengthening and developing innovative start-up businesses. The strengthening communities of incubators enable the identification and development of promising innovative ideas across Hungary, including now also the Central Hungary Region.

The Innovation Ecosystem (EDIOP-2.1.5-15) call opened in December 2015 with a budget of HUF 5 billion (EUR 16.2 million) has become available with a similar objectives but only for the areas outside Central Hungary. On the basis of the complex set of criteria, including the business plan and the plan relating to building and developing the local start-up ecosystem, eight project proposals out of those 48 submitted have received the endorsing RDI policy opinion of the National Research, Development and Innovation Office in August 2016, enabling applicants to submit their project proposals to the Managing Authority of the call.'

Hiventures

One of the biggest funding organisations is Hiventures. In 2016 it was appointed as the State Venture Capital Fund.

'Professionally supervised and supported by the National Research, Development and Innovation Office and the Hungarian Development Bank Plc. (HDB), [their] aim is to invest in and support pre-seed, seed and growth-stage companies through [their] venture capital programs, thus helping pre-established or young,  R+D+I focused companies on succeeding.'

The Fund is financed by EU and by state sources (the latter allows them to support projects in Central-Hungary too). It has three investment constructions: the PreSeed investment (incubation) program (inkubációs befektetési program)

'supports micro-enterprises with research, development and innovation activities, where the product or service idea already exists, but the final concept development and business content is yet to discover and evolve. The investment time horizon is one year.' The other programs are targeting already developed projects: the Seed investment program provides extra capital mainly for entering the market, whereas the Growth investment program supports entering international markets.

Széchenyi Venture Capital Fund

This fund (az alap) is less important in terms of start-ups because it has a much wider portfolio: '12% of the portfolio of companies is less than one-year-old, 35% is between two and five years.'

'The Széchenyi Venture Capital Fund (or SZTA) is managed by the 100% state-owned Széchenyi Venture Capital Fund Management Zrt. It is the first capital fund in Hungary that has been licenced by the European Commission on an individual basis to implement its large-scale small enterprise capital investment programme (SA.32825 Regional Capital Investment Fund Programme).'

Budapest Enterprise Agency Public Foundation

Other important initiatives in Budapest are coordinated by the Budapest Enterprise Agency Public Foundation (Budapesti Vállalkozásfejlesztési Közalapítvány).

'The two pillars of the activity of the Agency are innovative SME development and non-profit microfinancing. BEA is one of the few European SME development organizations that provide both low-amount (below 32 000 EUR) financial services for micro entrepreneurs and non-financial, business development services to SMEs. Women and young entrepreneurs are emphasized target groups of the services of the BEA.'

Foundation for Small Enterprise Economic Development (SEED)

The Foundation for Small Enterprise Economic Development [Kisvállalkozás-Fejlesztési Alapítvány (SEED alapítvány)] supports the competitiveness of small enterprises by the development of entrepreneurial knowledge, by the reinforcement of the non-profit sector, and by pursuing activities in the field of equal treatment.

Fostering private investments

The government is fostering private investments in start-ups: investing to 'early phase enterprises' from 2017 enables investors to receive one quarter of their money over a period of four years in the form of tax-refund. (Új adócsökkentő kedvezmények 2017-ben)