A little over a hundred years ago, Vienna was known as the ‘Golden Apple’, the beautiful heart of the Austro-Hungarian Empire. Today it is still a city rich in culture and economically strong. But to many tech investors it is still a backwater, left behind by its illustrious, linguistic cousins in Germany.
Florian Kandler is trying to change that. Since 2015 the entrepreneur and startup enthusiast has penned the Austria Startup Report, a compendium of the local scene. Kandler has history when it comes to startups: he has founded three, raising over €3 million ($3.19m) in the process and spending over six months working in Silicon Valley.
The difference in mentality between the two locations, he tells Red Herring, is the biggest thing stopping Austria from becoming a formidable entrepreneurial hub.
“In Austria everyone thinks small,” says Kandler. “Thinking big means going to Germany.” That mindset–incompatible with the rapacious world of globalized technology–goes back a long way.
“America is made up of descendants who packed up their sh•t and made a new life for themselves,” he adds. “Two thirds of Austrians have a heritage of working for the (Austro-Hungarian) Emperor. Societies change only gradually.”
Now, arguably, Austria’s ‘Emperor Mentality’ is on the slide. Young entrepreneurs exiting the country’s robust education system are increasingly choosing to build their own businesses. Public research and development expenditure has grown significantly in the past year. Austria now ranks third in the EU, behind Finland and Sweden, in terms of research intensity.
Its potential, geographically, is big: Vienna is the second-largest German speaking city on earth, behind Berlin. The Vienna-Bratislava metropolitan region, which encompasses the Austrian and Slovak capitals, is home to over three million people. Prague, the Czech Republic’s tech-happy capital, is just a short train or flight away, as are Budapest, Zagreb and several other central European hubs. Barely anything in Europe is over three hours away by air.
As home to almost a quarter of Austria’s population, Vienna is the most popular place to found a tech company. But one of the big advantages of the country’s scene is that its luminaries are not limited to a single location. Graz, Linz and Hagenberg all have their own exciting ecosystems.
The country’s government has taken note: In 2015 it handed out €289m ($307m) to 3,715 startups. Taxes have been simplified. Last July the government launched a startup program worth €185m ($197m) over three years. Among the things federal science, research and economy minister Reinhold Mitterlehner said he wanted to imbue in entrants, was “an entrepreneurial spirit.”
That spirit is gathering pace. In August 2015 sporting giant Adidas bought fitness app Runtastic for €225m ($240m). Kandler’s most recent report chronicled 67 deals above €250,000 ($266,000). Some of the more interesting include Byrd, a shipping company, which secured €370,000 ($393,000) in seed funding last summer, and eSports platform pwnwin, which gets over a million views per month and won a recent €330,000 ($351,000) seed round.
Benjamin Schwärzler is CEO of Tablet Solutions, a Vienna-based firm that provides WorkHeld (‘Work Hero’ in English), software that supports industrial field work. Schwärzler, who founded the company in 2011, says that Austria’s tech ecosystem “does not hinder, but I also do not think it helps that much…I think it helps established companies more than startups.”
He adds that Austria’s well-set corporate landscape makes it tougher for startups to scale, as multinationals, rather than enlist young companies for IT work, can pay well for an in-house development team.
The biggest gripe for local entrepreneurs, however, is not that they can get their companies off the ground. Rather it’s that beyond seed funding, there is not a lot for Austrian startups to feed on. “We have a lot of angel investors, but the problem we have is the follow-up funding,” Kandler says. “There are only one or two addresses where you can knock on their doors.”
Many simply head abroad–to Germany, whose language barrier is zero–or even further afield to the US. Again, adds Kandler, that is an issue of mindset. He has made it a goal to help young Austrian tech professionals experience stateside, to overcome the Emperor Mentality.
“The problem with having a small ecosystem is that if you’re only marginally above average on a global level, you could be a local hero,” he says. “And if you sleep on the job, someone is going to steal your lunch.”
If Austria’s startups can stake away and win bigger funding rounds, that will encourage more A- and B-round funding into the local market. If that happens, argues Kandler, then even judging by the current size of Austria’s tech landscape, “we can double or triple that.
“We need to see how the Champions League of the startup world is working, and do that,” he says, referring to Europe’s top soccer tournament. “I thought I was on the top floor of the building but there are a hundred more floors above me. Let’s not get complacent.”