Start-ups choose UK
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When 24-year-old Emi Gal launched Brainient in Bucharest in 2008, he knew the company would not be based in his native Romania for long.
The confines of a small domestic market and limited networks, he believed, would simply not allow him to realise his vision of creating an international company based on a platform that creates interactive elements for online video advertisements. Which is why he now lives in London.
“I realised pretty quickly that if I wanted to do anything on the big stage, I needed to move to London,” says Mr Gal.
He is not alone. Mr Gal is at the forefront of an emerging trend for young, ambitious entrepreneurs from eastern European countries to locate their start-ups in the UK.
It was once predicted that Britain’s next round of entrepreneurs would grow from the ranks of economic migrants from central European countries, such as Poland, who had already come to the UK to work. But inward investment professionals say eastern European migrants are now moving to the UK specifically to create businesses with high growth potential.
Of the six winners last year of the UK early-stage start-up competition Seedcamp, designed to encourage entrepreneurial talent in Europe, the three from outside the UK all came from eastern Europe, including Brainient.
Brainient’s “LayeredBrain” platform allows creators of internet video adverts to add interactive features for extra consumer services or revenue streams. So a car ad might, for example, include layers allowing consumers to click to order a brochure, play a related video game or book a test drive.
Mr Gal, who previously set up an online television channel in Romania that “failed miserably”, says the company was able to build the web-based platform in Romania but “we couldn’t make it work there because it’s a small market and the agencies are not up to date with the latest technologies”.
More important, he says London’s network of investors and advisers gives him access to wider European and US markets, while the innovative digital technology hub in London provides “momentum and a vibe”.
Winning €50,000 ($63,089, £41,000) in seed funding from Seedcamp and joining the global entrepreneur programme run by UK Trade and Investment, the government department charged with boosting British exports and attracting foreign investment, have helped open doors in London. Overheads have increased but, like most of the new UK-based technology companies that have originated in eastern Europe, the company maintains a technical capability in its native country that keeps costs down.
“My costs literally tripled when I moved here,” says Mr Gal, “but it has paid off. I feel I have done more in a year here than I did in three years in Romania.”
Since moving to London, he has secured further investment and is eyeing an exit from the business in three to four years.
Though there is no bias to attract entrepreneurs from eastern or central Europe, according to Alex van Someren, a dealmaker for UKTI’s global entrepreneur programme who introduced Mr Gal to one of his main investors, there is a notable pipeline of promising start-ups coming to London from countries such as Estonia, Poland, Hungary, Slovenia, Romania and Lithuania.
“It’s a natural outcome of the way Europe has evolved,” he says. “If you are in France or Germany you probably already have a good infrastructure and government support. But if you are from those countries without a support network, then you have to really sell yourself hard and network hard and it is those businesses that stand out as the ones likely to succeed.
“It is logical that the most compelling start-ups will be the ones who have fought their way out of eastern Europe. That will to survive is what you need to beat the competition.”
Some entrepreneurs are coming to the UK with a successful record in their home countries. Andrei Korobeinik founded Rate Solutions, a social networking company, in Estonia and is a member of the panel on the Estonian version of the business reality TV show Dragons’ Den. Now he is in discussions about basing his new venture in London.
Mr Korobeinik, 29, has launched CuteFund, a crowdsourced mutual fund where investors vote online to choose stocks for the fund and their votes are weighted according to the success of stocks each investor has chosen in the past. So far, a free version of the website has 10,000 users, and the company is seeking a licence to open the fund to investors.
“The UK is the financial hub, with a concentration of financial expertise and institutional investors,” he says. “It’s much more difficult to start in New York, which is further away and would be the only other option.”
Though most young incoming entrepreneurs tend to favour online technology, some are operating more traditional businesses. Tamas Forgo chose not to work in his father’s shops in Debrecen, Hungary, and instead set up Demkoin London, producing mattresses and bed insert systems with orthopaedic benefits that have won a host of design awards.
From his base in Islington, Mr Forgo, 30, is targeting clients such as clinics, hospitals and hotels and is concentrating on export markets, particularly in Canada and the Middle East, and hopes to move on to Japan. But he did not come to the UK for its networks, investors or the domestic market. For him, the defining factor was the reputational benefit that a London base offered.
“I knew straight away that I wanted to do it from this country,” he said. “I wanted to export to the rest of the world and it sounds much better if it is a UK-based company than a Hungary-based company. You cannot compare the reputation, so it was an easy decision.” Not surprisingly, his manufacturing operation remains in Hungary, from where he ships the products to clients directly.
In spite of the challenges of doing business in a foreign country, and the added costs of setting up in London, there seems to be no going back for the optimistic young entrepreneurs. As Mr Gal says: “I will definitely found my next company in London.”
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