Czech initiatives lack healthy self-esteem, says fund chief UP21, Vítek Subert



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What was the impetus to start the UP21 incubator?

We felt like something was missing in the Czech Republic. At the same time, similar incubators operate extensively abroad, especially in Silicon Valley. That is why we try to tune in what is transferable to the Czech Republic. We see that there are many startups who are not quite ready to put money into them because they still need to work. Because of this, we have rejected them before.

Are there enough market ideas?

Of course, there will never be many of them. But we are not in a situation where ideas are not at all, as is often the case. This is due to the fact that investors want to put money into the already running business. We are no exception. But pre-seed investments can not be made, you are the one who will provide the money in the beginning.

How many start-ups have UP21 hands in the last four years?

There are about 1300 start-ups, personally we find about seven hundred candidates. We have eighteen companies in our portfolio. However, when we compare these numbers with investors in developed markets, we are at approximately the same rate as that initiated by cooperation.


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Even so, there is a very low probability of getting an investment. What has to be an extra start-up to attract you?

We always look at two criteria and give half the weight. We wonder if the idea has a chance to break the market and if there is a potential customer base. And it certainly does not have to be a unique new idea, I do not believe anyone comes and finds something absolutely crucial, it can happen every two years. Instead, I believe a company will discover a segment that is the same for decades and has an idea of ​​how to upset and modify it. Such a product is ideal. At the same time, we want it to grow to other markets. But we are not necessarily speaking of global expansion but of growth in the Central European region because the Czech market is very small. Another criterion is the founders and the team as such. We see if they have enough vision and humility to consult them.

So do startups know how to properly handle money?

Most will focus on the product. That's why we want to communicate with them every day. They should understand that it is important to look at other disciplines, but we certainly do not want to tell anyone how to run a business. If they understand this in the beginning, it's good. We are here to prevent any money from investing in the product. J

Is it advantageous if you apply for an investment by a person who in the past had start-ups even without success?

If the founder is sane, it is certainly an advantage. He went through the mistakes that made the previous project unsuccessful.

How important is your revenue in evaluating start-up success?

During the first year of business, revenue should not be the most important, but a certain trajectory should work. Start-ups should be evaluated based on how quickly your customer base grows and whether customers are relevant to the segment.

Can you tell when to make a profit?

We generally say that operating profit should be a good start around the third or fourth year. However, it is clear that for companies with a technologically demanding product, profits may not come for the next fifteen years, but this is a different kind of investment.

How are Czech ideas compared to the Central European region?

I think we're doing fairly well. But it is true that I am very optimistic about this, we have many people capable of the technology segment. For example, when we compare our situation with Poland, we are definitely more successful. And I'd say we're the strongest in the area. But compared to Western markets, we are certainly lacking in the healthy self-esteem we commonly see in the US or Germany. So when our start-ups present their ideas abroad, they shrink in front of the public, achieving worse results in big markets than at home.


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However, most start-ups see Germany as their destination. What do they have to do when they decide to go to such a market?

Above all, think carefully about entering such a market and whether they will be accepted. Although the market is innovative, Germans are relatively nationalistic and analyze where the source comes from. It is also important to calculate the cost, because the establishment of a company in Germany is several times more expensive than in the Czech Republic. At the same time, it is necessary to look at the business partners who will be responsible for product sales. Working on such an expansion should be at least a year ahead, ideally in cooperation with at least one German investor. Thanks to this, the start-up will gain more trust and a better network of contacts, which is often overlooked in the Czech Republic.

One of its companies, Shipvio, has now entered into a joint venture with Saudi investors. Is this an unusual way to start?

Yes, very specific. The joint venture was only accepted because Saudi Arabia is a completely different market, while the agreement applies to the entire Middle East region. If we did not accept this form, we could not establish a law firm in the country. That's why start-ups from abroad are almost non-existent in the country, we are the first in Central and Eastern Europe, perhaps the tenth in the world, including companies like Uber.

Are there other countries that are not discovered for start-ups?

They all still want to conquer the United States, but it's an incredibly heavy market, and most companies break their necks. The East, that is, the Arab countries, Malaysia or Korea, is still underestimated. I am also surprised that the countries of the South, such as Italy or Spain, are neglected. These are big markets with a weak startup community.

Is Silicon Valley still unshakable?

Yes it is. I spend about eight weeks a year every year, and I see that way of thinking, financial and intellectual training is miles away from us but also from the rest of the US. When I asked investors what another city they would choose to do in the US, they could not say that clearly. The situation in California is not replicable elsewhere in the US, much less in Europe.


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Should the state invest in new businesses?

State investment should come mainly to academia and industry, which is not appealing to private investors like pharmacists. I can not imagine being an equal partner to the funds that make the investment. The state can invest through funds, but I do not think it is appropriate to be a direct investor.

However, there is a link with the universities of our country …

Instead, we did not and went back to the US again. Universities like Berkeley or Stanford have a sophisticated system of how start-ups can emerge within them. There is something in the universities working with us, but the system is not uniform. And unlike the US, this system is in the hands of the state. Spin-offs, therefore, have no reason to stay in school and address private investors. Which is not good especially because many academic topics have their place in universities.

Do you feel the pressure to fight for start-ups in the Czech market in the current economic situation?

Yes, clearly for good companies. Money is more than ideas, but that's good. Although the fact that often in the quest for start-ups there are exorbitant sums for companies that do not have good ideas, this is also true for the Czech market. At the same time, a nonsensical spiral is spinning, so we try to stay sober on how much we put into the company. But it is also due to the fact that our market is relatively young and investors need to create history and referrals. We also had to invest in riskier projects in the beginning, as was the case with Shipvia. We are thirty years since the revolution, but this is an economically short time.

Do not worry that the scenario of startups with the expected crisis will decrease?

Instead, it will be cleaned. So the average and below-average start-ups may not get the money, but good ideas will always be money. For example, companies can start using early ideas for research, which could bring both worlds together.

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