Startups in Europe, or Paris v. Budapest

LeWeb Paris 2013

This article about Xavier Niel and the current LeWeb conference recently caught my attention, because to me it signals a new fight between Paris and Budapest. Which capital city will also claim the title of startup capital of Europe?

Way back in June, I sat in on a talk with the Hungarian Minister of State for Economic Strategy, Mr. Zoltán Cséfalvay. (You can watch the hour-long discussion here.) He explained that the goal of current economic policy in Hungary is to entice companies to set up shop in Budapest and other major Hungarian cities. Incubators and helpful legislation make it a low-cost environment for young businesses—not to mention that Hungarians are some of the best educated people around.

This is incredibly important to Hungary for broader political reasons. IMF and EU pressure on the nation was only recently lifted, once the budget deficit dropped below the 3% threshold; Hungary only managed to make that happen through some tricky, one-time-use maneuvers and severe austerity measures. In order to stay under that 3% threshold, the nation will have to increase its income. Expenses have already been slashed to the bare necessities.

So, in one corner, we have a nation as a whole that has been vying for position as startup-company leader—and sees the status as an only-hope kind of deal. In the other corner, we have France, already “the fifth-largest economy in the world” (according to Niel, as quoted here), trying to stay that way through the efforts of a few companies and billionaires.

plant sprouting from coins

If I had any money to bet, I’d be backing Hungary. The Central European nation has a history of producing talented science and technology innovators, whereas in Western Europe they are scrambling to train people to fill current positions. It offers lower-cost options for location, production, and staff than a Euro-based nation can. And it’s more invested in the startups’ successes, because of the immediate benefits that could have for the nation as a whole.

What do you think? Have you heard much about the Hungarian startup scene? Or the French one? Will having a “startup capital” benefit new companies?

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5 thoughts on “Startups in Europe, or Paris v. Budapest

  1. Dear Carolyn, I am a Salvadoran citizen married to a Hungarian and I moved to magnificent Budapest 2 years ago. I am an interpreter and translator (EN/FR/ES) since 1999, but of course don’t yet speak Hungarian, so finding work for me has been quite slow (trying to stay positive, though), so much so that I am regularly traveling back to El Salvador for work, instead of having interpreting assignments here in Hungary.
    Having managed my business for 15 years, what I found here is that the tax imposition in Hungary is incredibly heavy, so heavy that many people I know are closing business instead of opening new ones. I am lucky my husband is an entrepreneur so I can invoice my European customers through his company instead of having to create a new one and take on all the expenses, (after an initial study, we gave up on this project, it would have been too heavy a financial burden for us).
    I am still a newcomer, so I wouldn’t dare to make a well informed judgment at the moment. I also love this country very much, for the way it has opened its arms to me. I love living in this city, officially the most beautiful in the world in my (well-traveled, that must be said) opinion. I really make strong wishes that Hungary becomes a place where its most talented minds don’t emigrate overseas to create successful start ups, as is the situation now.
    I agree with you, I have found in this city some of the best educated people, may their government find ways to encourage them, so they stay here and help this wonderful nation grow.

    • Thank you for your thoughtful response! As far as I’ve learned, tax systems in most countries can be a shock for entrepreneurs—even here in the US, the tax burden on the self-employed is higher than that on regular employees. For tech startups in particular, though, I think the benefit of being around such intellectually curious, well educated people far outweighs the tax costs. Good luck with your own business, and learning Hungarian! Sok sikert és jó munkát 🙂

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