Is Prague the Next Silicon Valley?

Is Prague the Next Silicon Valley?

Is Prague the Next Silicon Valley?

Where is the next Silicon Valley? Move over London, Berlin, Paris, and Tel Aviv. Step back Moscow, Istanbul, Helsinki, and Amsterdam. The next Silicon Valley might be Prague – one of the most beautiful cities in the world and the mecca for Central and Eastern European entrepreneurs.

According to research by boutique investment bank GP Bullhound, Europe compares well to the United States in startup success. Between 2003 and 2013, Europe produced 30 billion-dollar companies, while the United States produced 39.

Discover startups in Prague by following our Prague Startup List.

Despite Europe’s relative success, Europe has yet to tap the tech brainpower of Central and Eastern Europe. Cybersecurity companies AVAST Software and AVG Technologies (with market caps approaching $1 billion) were both founded in the Czech Republic. LogMeIn, founded in Hungary, also passed the $1 billion valuation mark. Success stories like Hungary’s Prezi and WhatsApp, co-founded by Ukrainian entrepreneur Jan Koum, illustrate the potential talent in Emerging Europe.

Last July, Facebook bought LiveRail, a video ad company co-founded by two Romanians, for reportedly over $400 million USD. In other words, Central and Eastern Europe’s startup community is growing faster than the rest of the continent.

Last July, Facebook bought LiveRail, a video ad company co-founded by two Romanians, for reportedly over $400 million USD. In other words, Central and Eastern Europe’s startup community is growing faster than the rest of the continent.

Prague's Startup Ecosystem

Prague is the perfect ground zero to bring together tech talent from the region. The Czech Republic, with almost €135 million worth of investments last year, is the second-largest private equity market in CEE, trailing only Poland, according to the European Venture Capital Association (EVCA).

There are some compelling pluses for locating in Prague. According to Expatistan, Prague's cost of living is 65% less than London's cost and 38% cheaper than Berlin's cost. Plus, the Czech Republic has relatively lightning-fast internet. The Czech Republic's average connection speed in Q1 2014 was 11.6 Mbps, according to Akamai's State of the Internet Report (United States average connection speed was 10.5 Mbps).

Talent also is cheaper and easier to obtain outside of the hyper-competitive Silicon Valley market. And, the talent in the Czech Republic is world-class, as Central and Eastern Europe are consistently ranked at the top in global educational achievement in math, science and technology. In 2013, Bloomberg reported 16 out of 24 finalists in Google’s annual Code Jam programming competition were from Central and Eastern Europe. And banks like Barclays, Deutsche Bank and Credit Suisse are increasingly sending their developer roles to countries like the Czech Republic, Hungary and Poland.

Geographically, the CEE is ideally situated for building trade links among Western Europe, the Middle East, and Asia. With English as the common denominator, entrepreneurial talent from across the region works together: “You can build up a company for much less [in CEE] than you can in the Valley or Western Europe,” said Codeanywhere CEO Ivan Burazin.

Prague’s startup ecosystem includes a few VCs, like Credo Ventures, incubator TechSquare, and university incubators like InovaCentrum at the Czech Technical University in Prague.

StartupYard is a seed accelerator for technology startups. StartupYard collaborates with Microsoft Innovation Center in Prague. StartupYard focuses on big data and mobile application startups.

DataFox Watchlist: StartupYard Accelerator 2014

Wayra is a startup incubator with events in 11 countries across Latin America and Europe. Wayra is trying to achieve a significant impact on the economy of the countries where it operates. Wayra focuses on  telecommunications, mobile, and ecommerce startups.

Co-working spaces Locus Workspace, Hub Prague, C3 Cowork, Node5 and Deskspace are popping up across the city and gatherings of entrepreneurs occur routinely, including Startup Sauna, Startup Rally, Startup Weekend Prague and Startup Summit Prague 2014.

Prague Startups Open Up Jobs For Top Tech Grads

The hunger for innovation and Western style success is palpable. Young men and women are graduating into sluggish economies, determined to make something happen for themselves. Google recognized the potential and launched the New Europe 100 project to highlight individuals from Central and Eastern Europe who are changing the world. They announced the opening of a Google Campus in Krakow, Poland last June. U.S. networking giant Cisco, known for an aggressive acquisition strategy, set up an entrepreneurs-in-residence program for CEE companies.

Neelie Kroes, Vice-President of the European Commission, has created The Startup Europe Leaders Club — an independent group of tech company founders who provide guidance on strengthening the business environment for web entrepreneurs in Europe. After the recent anti-immigration referendum in the European Union elections, EU country leaders have vowed to focus on job creation – exactly what startups are made for.

The JEREMIE program, developed in cooperation with the European Commission, offers CEE countries such as Hungary and Bulgaria the opportunity to finance startups by means of equity, loans or guarantees. “If you compare to Israel, it’s quite a similar story – that ecosystem was 25 years in the making,” noted Maxim Guzvits, founding Principal at the Eleven Accelerator Venture Fund, the largest accelerator program in the CEE region. In Israel, government-run funds were used to kickstart support for startups, and then first successes paved the way for private funding.

The region is growing its own media, like TechCrunch Prague, Bitspiration (the latest tech and startup news from Poland), and Netokracija, news from the CEE with a focus on Croatia and Slovenia.

Lack Of Funding Slowing Down Prague Startups

The biggest challenge isn’t talent – it’s funding. Lower investment rates continue to dog European start-ups, as they are unable to access capital as freely as their U.S. counterparts. Europe accounts for only 15% of global VC activity. In 2014, European VC investment totaled more than $6 billion, almost $1 billion more than in 2013, yet still less than a third of what was invested in the U.S.

The European Commission is committing €90 million to Open and Disruptive Innovation over the next 12 months. Moscow-based Runa Capital is set to invest up to $200 million in European startups, with its geographic focus shifting to Central and Eastern Europe. U.S tech investors have an opportunity to diversify their portfolios and strengthen their global potential by investing in the glittering Bohemian capital of Prague.

Prague Startups

Prague is home to well-known startups like Socialbakers, AVAST Software, JetBrains, BellaDati, ZOOM International, Webnode, and, upstarts like Liftago and Click2Stream, and ones to watch UpTaxi and Comprimato (Brno).

Discover startups in Prague by following our Prague Startup List.