2 BusinessSpecialReport 25
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Budapest Business Journal | May 18 – may 31
Brainstorming is the region’s singularity
A Hungarian project, a social brainstorming application, has won the first regional contest staged by Silicon Valley’s Singularity University with the aim of finding a new generation of startups that solve global problems with the help of technology. BBJ ANIKÓ JÓRI-MOLNÁR
What do hand hygiene, drug shortages, traffic congestion, food allergies, 3-D design and brainstorming have in common? According to the regional finalists of Singularity University’s (SU) Global Impact Competition, they are problems for which a breakthrough idea or solution could positively impact at least one million people in the region, with special emphasis on the use of exponential technologies. From a total of 54 applications from eight countries of the central, eastern and southern regions of Europe, these six ideas made it to the finals recently held in Budapest.
“We received surprisingly mature projects,” said SU regional ambassador Csaba Szabó. The international jury team, including leaders of SU, Cisco, GE Healthcare and Valley Connect, had indeed a hard time deciding. The priorities were the originality of the idea, the possibility of implementation, the ability of the technology to solve significant problems for humanity, and the capability to change the quality of life of millions in the short- or long-term. The judges selected a Hungarian team with their Be-novative project as the lucky winner. A SIX-PACK OF IDEAS The project, presented by Priszcilla Várnagy, creates a platform on the model of social media portals, where brainstorming meets crowd sourcing and games. Groups from all over the world can gather on this platform and collaborate, or rather toy around with the presented problems, then get small rewards for their contributions. “These parallel sessions are synthesized by the program and we would have a collective mindset,” said Várnagy in her presentation. She and her team have already presented their project in the Silicon Valley last year. Várnagy decided to apply to this contest to be able to go back, especially to SU, “to learn from the greatest thinkers of the world and to
find contributors and investors for our project.” Now she’ll be one of 20 students who will travel to the Valley with a $30,000 grant on a full scholarship at the university’s summer program, as well as a software license worth $10,000 from Autodesk. She might not sleep much, as CEO Rob Nail said in his introduction – the institution is commonly called “Sleepless University” because of its classes held at unusual hours. But she might also find a dream team of contacts and join the likes of previous graduates: car sharing marketplace GetAround, content application creator Appitude or space manufacturing solution Made In Space. (See box about VC investment volumes.) GO INNOVATORS GO Innovation is indisputably becoming more and more important both globally and locally, as a key element to competitiveness, especially for the region. This is clearly shown by Várnagy’s project. But besides the innovation itself, other key areas also emerged. Two finalist projects focused on health issues: Tamás Heidegger from Hungary represented Hand-inScan, a system that would revolutionize the objective evaluation of hand disinfection quality, by giving repeatable and immediate measurement of hand washing
problems in drug supply can cause major trouble, so she intends to create a multi-layer solution, beginning with a health map, and followed by supply chain tracking and an alert system. The latter would provide information about drugs people want to give or throw away, to give them to those in need. The Czech Republic’s Václav Plevka, who wants to anticipate traffic congestion by connecting different traffic control and management systems, represented environmental issues. “Our society had a recent success in transport with electric and hybrid cars, but this still doesn’t give the real freedom of travel to people as they’re stuck in congestions,” said Plevka. He proposes a traffic regulator algorithm as part of an intelligent transport system. The last applicant present was Dániel Rátai, the founder and inventor of Leonar3do, a virtual reality
project with the aim of revolutionizing education and learning. With Leonar3do, one can experience 3D virtual reality on any PC or laptop: reaching, grabbing, working or playing with objects in a 3D space. These projects are all worth continuing, and the finalists were encouraged to discover more of the technologies even if they’re not the ones to participate in the summer course of this year, said Nail. Although the number of winners per contest very much depends on the funding partners and the population, it is possible that the region could follow the example of Mexico, where, besides the two full scholarships offered, a couple of other finalists are entitled to a part of their budgets to fund the projects, he added. One way or the other, the Global Impact Competition will return to the CEE and SEE next year. ■
[ EXPERT OPINION ]
SMILESTONES JUDIT BUDAI, DR Partner Szecskay Attorneys at Law
Although during the past four years the aftermath of the economic crisis has caused a headache for the global and national economy, innovation offers a promising way out of the crisis. Thanks to a number of multinational and large local companies in Hungary, primarily in the IT, biotech, medical care and energy sectors, there is a need not only for the supply of existing goods and services but also for innovative engineering works and solutions which tremendously stimulate local entrepreneurship. However, university spin-offs, seed ventures and start-ups not only need money (for facilities, for financing R&D activity and to assemble a good team for business development and management): they also need a lot of trust, which may not be expected from financial institutions and debt financing. That is why venture capital funds and venture capital funding via equity investments is a key engine of such innovative ventures. Venture capital investors follow various financing strategies. It is widely discussed in the relevant literature that an alternative to round financing, which is more usual in Hungary, is the so-called milestone financing. In the case of round financing a financial investor makes a one-time investment, the proceeds
an alternative structure for venture capital financing
of which may be used to meet immediate financing needs by accessing the market or further markets, or for other goals. Milestone financing, however, may be more promising for both the venture and the financial investor. Milestone financing means that the investor makes investment in stages. In making an initial smaller investment, it commits itself to further investments that will be made when certain milestones are reached by the venture, e.g. when it reaches certain development stages, such as the higher clinical phases of new drug research, or it obtains market authorization for a new drug or medical device, or it reaches certain sales milestones for a new IT technology. Why can this be a more win-win situation for the entrepreneur and the financial investor? The entrepreneur may be sure that the investor finances the next development phase and the financial investor may be part of the promising business at a significantly lower pre-agreed price than other investors at the second or third round. As an example, Jeremie funding, which is an available source of venture capital financing in Hungary comprised partly from EU refundable sources and partly from local and international private investors, can serve as an example of an investor which may be involved in an innovative venture through milestone financing. This is because a Jeremie investment fund manager may invest €1.5 million in an enterprise in each 12-month period, for three consecutive years. For lawyers and other consultants, milestone financing also means a more challenging task, because a milestone-based investment program means more complex transaction structures, documentation and negotiations to try and ensure a mutual benefit to the investor and the entrepreneur.
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Photo: Todoroff Lázár / Courtesy of AmCham Hungary
through UV-marked soap under non-invasive light and digital imaging. Another contestant from Bulgaria, Bogdana Rakova, presented her Graboo project: a personal digital shopping assistant in the form of a mobile application for those suffering from food allergies. Grabova said a database of products and their ingredients, linked to a personal health profile, can safeguard people’s diets. To take it a step further, she called the attention of the audience to nutritional genomics, the field that studies how diets can also impact the behavior of genes. In the case of a not-sohealthy individual in need of drugs, several problems emerge, concerning health as well as environmental issues. Agnieszka Gaczkowska from Poland is trying to solve problems in the drug supply system and drug shortages. Gaczkowska believes that even if you have access to the best infrastructure and best staff,