Budapest Letters #20
π Hi All! Great to have you back. This is Budapest Letters, my newsletter covering startup and small business stories from the CEE region, or interesting developments that might have something to do with this part of Europe. Hope you will enjoy it!
Before we jump into edition #20, big shout out to our new subscribers, good to have you here. And one more thing before we roll, if you like what you read, subscribe + share π
Cheers, Aron
π’ TL;DR
Top stories this week: βοΈ Revolut Bank launched in Hungary and Austria, after already being active in several CEE countries βοΈ PVcase, Kinderpedia and Wasp raised π΅ βοΈ Pipelinepharma is revolutionizing deal-making in pharmaceuticals βοΈ EarlyBird VC is seeking to vitalize the European university spin off market
π₯ Story of the Week
Earlier this year Revolut, a leading global financial platform (or for some, a classic digital challenger bank), announced that it has extended Revolut Bank (RB), its regulated banking service, across the wider CEE region; RB was launched in Poland and Lithuania in late 2020, and back in March this year, it opened up shop in an 10 additional countries, incl. in Slovakia, Romania, Bulgaria and Slovenia.
But the expansion is not over, Revolut has just announced that it launched RB in Hungary and Austria as well, two notoriously uncompetitive markets.
Promising stuff, I tell you that.
Nonetheless, two things will be worth paying attention to. Firstly, how consumers (quite traditional in both countries) will react to the opportunity that from now on, Revolut is basically a legit banking operator that protects deposits; in the past, most surveys showed that consumers use Revolut only for travelling, with limited amounts, not as a primary account. But this might change. And secondly, it will be intriguing to see how local incumbents, not prone to innovation or used to disruption, will react to a global digital challenger that is hiper aggressive.
π§ Personal take: I think Revolut Bank will grow a visible customer base in both ππΊ and π¦πΉ, building on the existing Revolut user base, but this will not pose a P&L threat to incumbents in the private individual sector. At least not in the next 1-3 year period. But when it comes to MSE banking, via its Revolut Business service, that is also available in most of the countries above, that is a different game.
Here I feel, if Revolut would make a serious push, the equation could look different. MSE clients are traditionally underserved and misunderstood by banks. A bit like the youth segment. But in contrast to youngsters, small businesses pay good money to incumbents. Stats might vary of course, but in most cases, 20-40% of Retail banking revenues are generated by the MSE segment across the region.
So long story short, if I would be Revolut, I would up my game on business customers and just let it play out organically on the private side. Because while large user numbers look great on paper, revenue generating customers sound even better. And history tells us, this could come easier from businesses.
Show Me Da πΆ
π PVcase, a solar tech startup from π±πΉ, received ca. β¬20M, led by Elephant VC, with participation from Contrarian Ventures and Practica Capital, two existing investors. The startup, which developed a solar engineering software that lets users design utility-scale photovoltaic plants 30 times faster, will use the fresh funding for international expansion, chiefly in the US, where it is already active.
π Kinderpedia, an edutech platform from π·π΄, bagged β¬1.8M, led by Early Game Ventures, a local VC firm. The company, that offers education management and communication solutions to schools and kindergartens, will use the newly raised sum to grow its user base and enter new markets; if some of you recall Twigsee from π¨πΏ (BL edition #16), well, this is a very similar solution.
π Wasp, a low-code software startup from ππ·, nabbed β¬1.3M, led by Lunar Ventures, a German VC firm. The startup, that enables developers to use a simple configuration language for building enterprise web apps with less code and curated best practices, is also a Y combinator entrant this year.
Congrats to all teams!
π¨ Startup Alert
This weekβs alert is on Pipelinepharma from π±πΉ, a health tech startup that operates a B2B marketplace for pharmaceutical products (i.e. connecting manufacturers with distributors, directly and digitally). According to the company, up until now its platform β that lists 60k pharma products from 1k+ qualified manufacturers β supported roughly β¬200M worth of deals.
Pretty impressive figure, especially if one adds that this volume was made via 30 countries, across 5 continents. But what is more is that Pipelinepharmaβs growth potential is massive: for one, given the size of the total addressable market for generic drugs (ca. β¬300 billion); and for another, and more importantly, the fact that most deal-making in this space is still offline (e.g. pharma trade shows).
So probably no surprise that the startup, since delivering its first deals on the platform, invited strong interest from VCs, and two of them, Practica Capital and Iron Wolf Capital bets big on Pipeline; a β¬1.3M fresh investment round was led by Practica, with participation from Iron Wolf, providing ca. 90% of total funding.
π§ Food
Based on EarlyBird Ventures estimate, around three-quarters of the innovations developed by European universities are not realized as businesses (i.e. startups).
This is a huge waste of money and talent. Not just for universities and potential founders, but for the EU as a whole; just look at the US where universities have strong ties with VC money and the local startup ecosystems. But this practice, as far as Earlybirdβs commitment, might change for the better.
The well-known German VC firm, that backed for example π·π΄ unicorn UiPath early, aims to use its new β¬75m fund (UNI-X) to help universities spin out (ca. 40) viable businesses with huge growth potential. Considering that several top global universities (with strong tech programs and research communities) are European, the task seems doable. Although it is true that the majority of VC-backed European unicorns (116 and counting), only a handful have university roots.
Will we see a European university spin off boom? I certainly hope so.