Budapest Letters #51
🤖 Programming note: Budapest Letters will be less frequent in the coming months - as you have probably noticed - due to a startup project I am helping with; so no more weekly newsletters for the foresseeable future. But. But. But.
I am not going AWOL 😀 I can promise you that I will not go silent and you will get freshly doses of 🔥 CEE startup and small business news. Just not weekly.
Also, as promised, I will send out a survey sometime during this summer which I would be grateful if you could fill in so when Budapest Letters resumes with weekly drops, it can be even better, fresher and more interesting than it ever was.
👋🏻 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 #51, 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 🙏🏻
Cheers, Aron
📢 TL;DR
Top stories this week: ✍🏻 A new EU legislation impose gender quotas on large European corporations ensuring that at least 40% of their board seats go to women by 2026 ✍🏻 Fonoa, Kontent.ai, Lightyear, Better Stack and Solarstone raised 💶 ✍🏻 Romania’s Braava Angels aims to revolutionize how VCs and business investors approach women entrepreneurs ✍🏻 The Hungarian Government approved a law that might strangle lots of local small businesses
🔥 Story of the Week
Honestly, I have no idea how did I miss this news. Long story short, the European Parliament and the EU Council agreed to impose gender quotas to ensure that at least 40 per cent of board seats will go to women at large 🇪🇺 companies by 2026.
In a bit more detail, as per euronews.next, the legislation:
(…) requires listed companies in all 27 EU member states to have women take up at least 40 per cent of non-executive board seats or 33 per cent of all board director roles by mid-2026. Companies could be fined for failing to hire enough women on their boards and see director appointments cancelled for non-compliance with the law. (…)
Just for context, the proposal for this law was first published back in 2012. Yep, a decade ago. Pure EU effectiveness and crazy legislative speed, if you ask me 🤣
But anyhow, at least we now have a regulation that targets something meaningful and not, for example, the precise measurements of bananas. Why so? Because the related EU boardroom numbers are grim. In 2021, women occupied ca. 30% of board positions across the EU, but this showed wide varieties: from 🇫🇷, being the only member state already meeting the approved quota with 45% (btw, thanks to a quota it introduced in 2017) to 🇭🇺, 🇪🇪 and 🇨🇾, all with less than 10 per cent.
So major progress needed from most member states, especially the ones within CEE but it is one that is absolutely crucial. Not just economically, but socially.
Show Me Da 💶
👏🏻 Fonoa, a fintech startup from 🇮🇪 with 🇭🇷 founders, received €59M led by Coatue (🇺🇸), a hedge fund heavyweight, with participation from other investors, including Index Ventures, OMERS Ventures and FJ Labs. The startup, that operates a tax automation platform that helps users comply with tax requirements globally, will use the fresh funding to scale internationally and fine-tune its product.
👏🏻 Kontent.ai, a content management storage startup from 🇨🇿, bagged ca. €39M from Expedition Growth Capital (🇬🇧). A former spin-off of Kentico, the company provides a CMS platform for its clients with which they are able to unify, organize and manage all of their business content in one cloud-based system. The startup aims to use its first outside financing for global expansion and team growth.
👏🏻 Lightyear, a fintech startup from 🇬🇧 with 🇪🇪 founders, nabbed ca. €24.5M led by Lightspeed Ventures (🇺🇸), with participation from existing and new investors, among them both VC firms (e.g. Taavet+Sten, Mosaic Ventures) and business angels. The startup, that operates a truly commission free investment app for retail investors, will use the fresh raise to establish itself in 19 🇪🇺 markets.
👏🏻 Better Stack, a developer tool startup from 🇨🇿, snatched €18.2M led by Creandum (🇸🇪), with participation from several other VCs (e.g. locals Credo and Kaya), business angels and fellow startup operators (e.g. Ryan Petersen, founder of Flexport). The startup, that offers developers an observability stack with Figma-like collaboration possibilities, will use the fresh raise to scale faster.
👏🏻 Solarstone, a solar panel maker from 🇪🇪, received €10M led by Biofuel, a local asset manager with a very intriguing name for a finance firm. The startup, that develops building-integrated solar panels, will use the fresh raise to boost production capacity, enter new markets and increase headcount.
👏🏻 Additional investment news that you should know about:
Preply, an edtech platform from 🇺🇦, raised ca. €49M led by US VC fund Owl Ventures: more via Tech.eu
Elinta Charge, an EV charger station manufacturer from 🇪🇪, bagged €7M from Poland’s AVIA Capital and Lithuania’s LitCapital: more via MamStartup
Talkie.ai, a customer service automation startup from 🇵🇱, snatched ca. €2.5M from a group of Polish-Austrian VCs: more via AIN.capital
SmokeD, a fire detection software startup from 🇵🇱, received ca. €2.4M from EEC Ventures, a local VC fund; more via MamStartup
Bitskout, a data automation startup from 🇪🇪, netted €500k led by Polish VC firm SMOK Ventures: more via MarTech Series
Staffly, an HR tech startup from 🇵🇱, received €415k led by US VC fund Freya Capital: more via MamStartup
Presto Ventures, a VC firm from 🇨🇿, announced the launch of its new, €30M fund to support startups across the CEE region: more via Tech.eu
Infobip, a cloud communication startup from 🇭🇷, acquired Netokracija, one of the most prominent tech and business publications in South East Europe (especially in its native Serbia and neighboring Croatia); more via Tech.eu
🥂 to all founders and teams on the fresh raises!
🚨 Startup Alert
This week’s alert is not an a startup, as it is normally, but on Braava Angels, a female angel investor community from 🇷🇴, founded and led by Ilinca Paun.
I recently came across Braava thanks to an insightful interview with Ilinca by The Recursive which is just packed with important takeaways, such as these:
(…) Research shows that post-investment, women perform 63% better for main indicators than men. At the same time, they get under 5% of the global investment, going to 10% for mixed teams (…)
(…) women need an investment process that is not available in the current VC world. A guided investment readiness process for pitching to investors, one filled with ideas and positive reinforcement (…)
(…) Lots of tools for educating women in tech are available, but they are too technical. The scope is not being able to learn how to code, but how to build a business enabled by tech and how to understand and develop its architecture (…)
(…) women find it more natural to underpromise and overachieve and even if this is a fact in all companies according to studies, the VC world did not adapt to females entering this industry. And building a tailored system is our mission (…)
While I believe that in the long run meaningful change can only come if the VC industry as a whole transforms (e.g. by quitting its focus on investing in startups mostly run by upper middle class white male founders), the likes of Braava Angels and other similar female lead organizations ( e.g. Lumus Collective, Female Founders, Women | Business | Angels) can certainly lead this process.
They can show the industry how to do it properly, and also show that it is meaningful, not just because women underpin our socities but because they are as good as men in business. Maybe different in skills and approach but as good.
I do hope that this change will come. And soon, preferably. We could all benefit.
🧠 Food
Sad news from 🇭🇺 as the central government proposed and in roughly a week (with limited public consultation, as the swiftness suggests) passed a new law that basically destroys the so-called Itemized Tax for Small Businesses (KATA) in its current form. The changes, that will come into effect already from September, will have a negative impact on ca. 430k sole entrepreneurs and small businesses.
How so?
Businesses are in a middle of a tax year. They planned, ideated and budget their whole year according to KATA tax rules but now they need to fully re-plan. Can they do it? Some, probably. But many will most likely fail.
With the fresh changes, only those businesses will be able to use KATA and issue invoices that provide services to individuals, hence B2B will suffer.
Those businesses that in the end will comply with the new rules might increase prices. First of all, because KATA was a very simple tax regime so there was no need to pay for an accountant. Now they will have to. And secondly, up until now they had lower tax rates which will go up.
What might be the end result of all this? Rising prices for regular customers whom, as we see everywhere in Europe, already pay more for everything (soaring food, gas and electricity prices thanks to inflation, rising interest rates, etc.) so more financial burden on them. More complex tax rules and higher tax rates for businesses could mean more tax avoidance, much less competitiveness and innovation, lack of willingness to start companies and less trust in authorities which, when added all up, could make the local economy much less robust.
Sure, the governments main argument for the changes are not totally bogus. Some companies were really misusing KATA in order to lower their tax rates without merit; for example, by making their employees act like quasi independent contractors and use KATA, whereas in real-life, they were full-time employees.
But on the one hand, many experts argue that while true, the majority of business were in fact law-abiding KATA users. And on the other hand, many investigative articles in the past 2 weeks pointed out that the most prominent adopter of this shady method were non other than the government and its affiliate organizations.
Anyhow. Changes were made. Businesses need to adapt. Citizens and the local economy might suffer. But it is true that the government, at least, might bag a bit more tax revenue for a few months; which is an outcome that they seem to prefer.
Personally though, I do not get it. This government was the one that created KATA and thanks to it they were the ones that managed, after years and years of stalemate, to shrink the grey economy. But now they might be the ones to grow it back again. I am clueless as to why they did this. So I just hope that there is a masterplan, a new additional tax in the making that solve the current turmoil.
Because if there will be no such move, from visible progress we will go backwards 😭