The number of Czech start-ups considering foreign expansion has been growing due to the expansion of digitization, automation, and the interconnectedness of individual economies. Nearly 80% of Czech start-ups plan to expand abroad, while only 22% of Czech start-ups are not considering it, at least so far.
The data comes from 150 start-up entrepreneurs who participated in the comprehensive Startup Report 2019/2020 by Keiretsu Forum.
State agency CzechInvest, which has been focusing on support for start-ups since 2011, has spotted a similar trend. “More than 70% of the start-ups we have supported within our programs have also traveled abroad with us,” Markéta Přenosilová, head of CzechInvest’s Start-up and Innovative SME Division, said.
For the vast majority of Czech start-ups, the Czech Republic is the primary place of business. At the same time, however, there is a growing number of expanding start-ups, with 30% of them doing business outside of the Czech Republic. In the past, the percentage of start-ups operating beyond the CEE region was in single digits.
“In connection with a discussion of experts, this year we included global ambitions among one of the five features defining a start-up. This feature partially distinguishes a start-up from a small or medium-sized enterprise (SME). In spite of that, expansion is one of the key issues that Czech start-ups still perceive as their major weakness,” Tereza Zyklová, executive coordinator of the Keiretsu Forum, said.
Expansion is not easy for start-ups, but it is a tremendous opportunity and a possibility to test their business. CzechInvest sent the most young innovative companies to Silicon Valley, New York, London, and Lisbon.
From 2016–19, 54% of all the startups that expanded abroad went to North America, while Europe accounted for 30% and Asia 16%. The most popular destination in North America was San Francisco, while London topped Europe and Singapore led Asia.
During the last two years, the proportion of start-ups based outside of Prague has also increased. Brno and Ostrava have significantly strengthened their position in this regard, and the development of the start-up ecosystem can be seen also in other cities.
Among other things, this is due to the rising number of regional innovation centers and programs aimed at supporting local start-ups. At the same time, local support is necessary for the further development of companies.
“If start-ups are considering expansion, they often ask questions pertaining to, for example, the kind of strategy they should choose in order to be successful, which markets they should start on, the right time to expand, how to find the right partners and how to address customers,” CzechInvest’s Přenosilová said.
CzechInvest, which has long been helping start-ups to succeed in foreign markets and to acquire necessary know-how, advises start-ups on these issues through its mentors. With its CzechAccelerator, CzechMatch and CzechDemo programs, the agency sends five start-ups abroad per month on average. In total, companies have been helped in 13 destinations.
Since 2016, CzechInvest has supported more than 100 start-ups, a number of which have repeatedly used the agency’s services. In total, over 200 start-ups have participated in the agency’s programs.
“From our experience, the start-ups that succeed are those that have not only an internationally competitive product and good sales skills, but also an experienced team that is able to overcome new challenges. At the same time, they must be persistent, accept constructive criticism, and not get discouraged immediately,” Přenosilová added.
One example shows how Czechinvest programs can benefit a new company. Retailys, a start-up offering an online platform that helps businesses sell in marketplaces around the world, traveled abroad with CzechInvest. The company took part in the three-month CzechAccelerator program in Singapore and returned there with the CzechMatch program, in connection with which it also attended the Slush Tokyo trade fair.
Retailys has established itself in Asia to such a degree that it was able to open a foreign branch. “Currently, we are able to help European companies expand into Southeast Asia and we assist Asian companies with selling their goods in Europe. Thanks to the branch in Singapore, we see that it is easier for us to penetrate other countries in the region, which we are now focusing on,” Retailys founder Petr Heller said.
The Keiretsu Forum’s Startup Report reflects the current state of the Czech start-up ecosystem from the perspective of mentors, accelerators, representatives of corporations and investors, as well as start-up entrepreneurs themselves and the public.
Data collection was carried out online in late 2019 and early 2020. The Startup Report examines, for example, profiles of start-up entrepreneurs, describes the lifecycle of start-ups, and analyses their problems and possibilities of financing.
Its objective is to provide a comprehensive picture of the Czech start-up and investor environment. In addition to the Keiretsu Forum, other players in the Czech start-up scene, including CzechInvest, also took part in the creation of the Startup Report.
To read more about CzechInvest’s activities, visit its official website.