Jakob Gajšek. The connoisseur of the startup ecosystem that, even if you don't know him yet, you will recognize for the fine tartan pattern, to which he swears when it comes to fashion. Otherwise he is one of the founding members of the ABC Accelerator and recently took over as the director of the Ljubljana University Incubator (LUI), which is co-creating the entrepreneurship environment, mostly by helping startups in the earliest stages. In a conversation with Start:up Slovenia, Jakob is, amongst other things, also talking about why now is peculiar point zero of the Slovenian startup ecosystem, about the biggest challenges of Slovenian startups, and about why it might be better if there weren't too much investor money.
"What's very interesting is that the ecosystem started maturing. We are seeing the first results, also from the aspect of exits, last year that was Outfit7, Zemanta and some others, recently that was Bitstamp and suddenly there were results, which is otherwise most difficult to achieve. And when you have results, you simultaneously also have proof that the thing is working. And I really like that, at this moment I am very optimistic about what's happening in the ecosystem. The ecosystem is maturing from the perspective of companies that have originated from it. Quite a few changes also happened in the support environment, in ABC, LUI, Technology Park Ljubljana … there are also rumours of a new investment fund. Right now is a peculiar point zero and I see that as a very good opportunity for the entire ecosystem to make a few steps forward."
Is this also an opportunity to set up certain things more optimally than they were so far?
"Absolutely. I always believe that more collaboration is better. There is quite a bit of collaboration at the level of individual ecosystems and at the level of the entire country, so more collaboration and strengthening Slovenia as a location where a foreigner could come to create a startup is great. ABC has done a lot, so has PODIM …"
Are there any general trends that are appearing in the community, maybe at home, in the region, globally?
"I hope that exits are a trend, but from the aspect of tech trends … these are quite clear globally, mostly artificial intelligence, there is a lot of talk about it, as well as ICT, life science and food, biotechnology, medtech … There is relatively little talk about this in Slovenia, but globally it's a very interesting trend. A different support ecosystem is necessary, because it's developed differently, but it is a trend, because the technologies have gotten a lot cheaper, everything related to genetics is very hot globally, also here and in the region. However, I am noticing that startups like working on derivative things a bit too much. They look at what is already successful elsewhere and make a version of it. I would like to see more breakthrough ideas. Yes, before they start with serious work, they should look at what is most sensible, what is most invested in, where the markets are growing most … also what the timing is right for. In Slovenia, startups like to forget about the timing, and compared to global trends, we aren't the most synchronized."
"Good question, but I don't know if the two are connected. I'd sooner think that fewer startups are better, because those who tackle a startup know why they did. Not because they should tackle it, but because they want to."
What are the biggest challenges for startups today? Is it building a team, maybe finding the first investor or investor in general, maybe finding the first (right) customer? But also – have these challenges changed recently?
"When we speak of Slovenia, not knowing how to sell is still hurting us, or if we do know how to sell, we don't know how to sell to the most interesting markets. That is a general problem we have and will continue to have for quite some time. This knowledge develops in practice. Before the startup scene, there were no companies that would sell to the US. So that knowledge needed to be built from nothing. And we are still in such an early stage that it is not a lot better than it was at the beginning. It is better, but not entirely different than it was. The second part is access to capital, but that is a problem that all startups think they have, but I myself strongly believe that if you are good and interesting enough and if you are doing the right thing, then capital is not a problem. Maybe even Slovenian capital isn't a problem."
And yet – capital isn't in abundance here …
"We are definitely far from having a lot of capital, we do have a capital gap, but if we had "killer" startups, then capital would also find us. Startups think this is an external enemy that can be blamed most easily, but that is understandable, because the startup journey is very difficult and startups can be very lonely on this journey, so it's often easier that way. But I am strongly convinced that it isn't important where the startup comes from and that it's possible to gain investments, but only if the startup is really good enough. That makes sense, because the startup experiences this acutely. If you are without money, you know this. But I think it's better this way as opposed to what it it's like in Poland, where there is too much investment money. Because that then means that startups start negotiating with investors – far from saying that they shouldn't, they must – but they tell an investor, if they know that he has money that he needs to spend, that "if you don't give it, someone else will". And that can have a vastly different effect from the one expected. It would help a lot if there were more capital in Slovenia, especially because then startups would come here from abroad, since they come to wherever investments are. Capital plays an incredibly important role and what we have now isn't the best from the aspect of building an ecosystem in the long term. From the aspect of development, the Slovenian ecosystem is definitely the most developed in former Yugoslavia, and probably also in Southeast Europe, but it's also one of the most developed in Central and Eastern Europe in general. From the aspect of capital, we are at the end of the line. This opportunity hasn't been completely spent yet."
"What the Slovene Enterprise Fund is doing, with co-investments for private investors, is definitely a step in the right direction. Because that will be the reason why a foreign or even Slovenian investor will invest here more. But the fact is that as a jurisdiction, we are still not nice for startups. Things are moving to the better, but we are far from being startup-friendly and it isn't the easiest thing in the world for a foreigner to open a company here. We shouldn't fall asleep on our laurels. The startup ecosystem as a whole is moving so fast that every time you catch your breath because you've done something, they start overtaking you. And I think that a problem is also trying to create a capital market for investments in later-stage startups. These are definitely safer investments but by definition, a Slovenian investor that would invest into companies in advanced stages is competing with investors from Berlin, London, Silicon Valley … and that is incredibly difficult.
In the entire region, definitely across Yugoslavia and further, there is a lack of this capital in reality. I think that there is not a big lack of bigger investments, the startups that are truly good find capital, but abroad. But they also won't look for it here. Because really – why would they take an investment by a Slovenian fund if they can get an investment from a fund that's on the market to which they wish to expand and that has strong connections in the industry. So, at this moment, what's most important is what we can do about supporting startups in the very very early stage, because that just needs to happen and such things rarely work from top to bottom. These things need to happen by themselves. Which might be counter-intuitive, but I speak from experience. You can't force an ecosystem, the only thing you can do is to create a critical mass of people, companies or whatever, and things start to happen by themselves."
But the fact that there is a gap, maybe even a more lasting absence of schemes that we knew, isn't that problematic?
"There were no serious institutional funds, there were, for example, Silicon Gardens as an angel fund, and Fil Rouge … Investments in the amount of several hundred thousand euros are difficult to obtain in Slovenia and the annual ecosystem analysis shows that for this stage, there are so many foreign investments in Slovenia that it's a truly positive sign in a way but at the same time, from the local aspect, a missed opportunity."
The problem of lack of staff in entrepreneurship continues, is it maybe even increasing or lessening?
"The lack of staff is bad, and it will be even worse. Because we have incredibly few of certain staff, namely of the people who truly excel at sales, marketing on Western markets, people who have truly strong experience in product development and design, with the user in the middle, there are few such people. There were quite a few technical staff so far, but even this started changing, the crypto-flood also increased development prices and took quite a few developers. There is little of the staff that is very needed. But in its own way, that is a mark of a slightly more adult, healthy ecosystem. Because an ecosystem where there is a lot of staff means that they can't be employed. And it shows a broader trend, from building products for foreign companies to having our own companies that, even if they aren't in Slovenia, develop products here with our knowledge and employ people here. A lack of staff consequently brings higher salaries, meaning that an additional person will stay here and another capable one will come."
In the future, what will be the key direction of the LUI?
"In reality, the LUI is setting up a new programme, a new way of working, a new strategy. We are very open to collaboration with everyone who is close to entrepreneurship. We very much believe in startups when they are completely at the beginning and we strongly believe that help is worth most when you have nothing and when no one believes in you. We want to be here at the moment when this help is worth most and help truly anyone who wishes to become an entrepreneur and has a lot of potential. We strongly believe that the foundation of the ecosystem is width: if you look at the startup ecosystem as a pyramid where at the bottom, there are those who are at the very beginning and whom there is most of, and at the top there are unicorns, a wider pyramid at the bottom also means that its top will be higher."
Jakob Gajšek: "At this moment, I am very optimistic about what's happening in the ecosystem."
I hope that exits are a trend
In which stage, but also in what state, is the Slovenian startup ecosystem at this moment?"What's very interesting is that the ecosystem started maturing. We are seeing the first results, also from the aspect of exits, last year that was Outfit7, Zemanta and some others, recently that was Bitstamp and suddenly there were results, which is otherwise most difficult to achieve. And when you have results, you simultaneously also have proof that the thing is working. And I really like that, at this moment I am very optimistic about what's happening in the ecosystem. The ecosystem is maturing from the perspective of companies that have originated from it. Quite a few changes also happened in the support environment, in ABC, LUI, Technology Park Ljubljana … there are also rumours of a new investment fund. Right now is a peculiar point zero and I see that as a very good opportunity for the entire ecosystem to make a few steps forward."
Is this also an opportunity to set up certain things more optimally than they were so far?
"Absolutely. I always believe that more collaboration is better. There is quite a bit of collaboration at the level of individual ecosystems and at the level of the entire country, so more collaboration and strengthening Slovenia as a location where a foreigner could come to create a startup is great. ABC has done a lot, so has PODIM …"
Are there any general trends that are appearing in the community, maybe at home, in the region, globally?
"I hope that exits are a trend, but from the aspect of tech trends … these are quite clear globally, mostly artificial intelligence, there is a lot of talk about it, as well as ICT, life science and food, biotechnology, medtech … There is relatively little talk about this in Slovenia, but globally it's a very interesting trend. A different support ecosystem is necessary, because it's developed differently, but it is a trend, because the technologies have gotten a lot cheaper, everything related to genetics is very hot globally, also here and in the region. However, I am noticing that startups like working on derivative things a bit too much. They look at what is already successful elsewhere and make a version of it. I would like to see more breakthrough ideas. Yes, before they start with serious work, they should look at what is most sensible, what is most invested in, where the markets are growing most … also what the timing is right for. In Slovenia, startups like to forget about the timing, and compared to global trends, we aren't the most synchronized."
Not knowing how to sell is hurting us
The scene is otherwise somewhat calming down, fewer startups can be detected, might that be connected to what you listed?"Good question, but I don't know if the two are connected. I'd sooner think that fewer startups are better, because those who tackle a startup know why they did. Not because they should tackle it, but because they want to."
What are the biggest challenges for startups today? Is it building a team, maybe finding the first investor or investor in general, maybe finding the first (right) customer? But also – have these challenges changed recently?
"When we speak of Slovenia, not knowing how to sell is still hurting us, or if we do know how to sell, we don't know how to sell to the most interesting markets. That is a general problem we have and will continue to have for quite some time. This knowledge develops in practice. Before the startup scene, there were no companies that would sell to the US. So that knowledge needed to be built from nothing. And we are still in such an early stage that it is not a lot better than it was at the beginning. It is better, but not entirely different than it was. The second part is access to capital, but that is a problem that all startups think they have, but I myself strongly believe that if you are good and interesting enough and if you are doing the right thing, then capital is not a problem. Maybe even Slovenian capital isn't a problem."
And yet – capital isn't in abundance here …
"We are definitely far from having a lot of capital, we do have a capital gap, but if we had "killer" startups, then capital would also find us. Startups think this is an external enemy that can be blamed most easily, but that is understandable, because the startup journey is very difficult and startups can be very lonely on this journey, so it's often easier that way. But I am strongly convinced that it isn't important where the startup comes from and that it's possible to gain investments, but only if the startup is really good enough. That makes sense, because the startup experiences this acutely. If you are without money, you know this. But I think it's better this way as opposed to what it it's like in Poland, where there is too much investment money. Because that then means that startups start negotiating with investors – far from saying that they shouldn't, they must – but they tell an investor, if they know that he has money that he needs to spend, that "if you don't give it, someone else will". And that can have a vastly different effect from the one expected. It would help a lot if there were more capital in Slovenia, especially because then startups would come here from abroad, since they come to wherever investments are. Capital plays an incredibly important role and what we have now isn't the best from the aspect of building an ecosystem in the long term. From the aspect of development, the Slovenian ecosystem is definitely the most developed in former Yugoslavia, and probably also in Southeast Europe, but it's also one of the most developed in Central and Eastern Europe in general. From the aspect of capital, we are at the end of the line. This opportunity hasn't been completely spent yet."
You can't force the ecosystem
So then what can we do to start competing with stories, such as Poland and Croatia, where there is a huge fund with 40 million euros of capital?"What the Slovene Enterprise Fund is doing, with co-investments for private investors, is definitely a step in the right direction. Because that will be the reason why a foreign or even Slovenian investor will invest here more. But the fact is that as a jurisdiction, we are still not nice for startups. Things are moving to the better, but we are far from being startup-friendly and it isn't the easiest thing in the world for a foreigner to open a company here. We shouldn't fall asleep on our laurels. The startup ecosystem as a whole is moving so fast that every time you catch your breath because you've done something, they start overtaking you. And I think that a problem is also trying to create a capital market for investments in later-stage startups. These are definitely safer investments but by definition, a Slovenian investor that would invest into companies in advanced stages is competing with investors from Berlin, London, Silicon Valley … and that is incredibly difficult.
In the entire region, definitely across Yugoslavia and further, there is a lack of this capital in reality. I think that there is not a big lack of bigger investments, the startups that are truly good find capital, but abroad. But they also won't look for it here. Because really – why would they take an investment by a Slovenian fund if they can get an investment from a fund that's on the market to which they wish to expand and that has strong connections in the industry. So, at this moment, what's most important is what we can do about supporting startups in the very very early stage, because that just needs to happen and such things rarely work from top to bottom. These things need to happen by themselves. Which might be counter-intuitive, but I speak from experience. You can't force an ecosystem, the only thing you can do is to create a critical mass of people, companies or whatever, and things start to happen by themselves."
But the fact that there is a gap, maybe even a more lasting absence of schemes that we knew, isn't that problematic?
"There were no serious institutional funds, there were, for example, Silicon Gardens as an angel fund, and Fil Rouge … Investments in the amount of several hundred thousand euros are difficult to obtain in Slovenia and the annual ecosystem analysis shows that for this stage, there are so many foreign investments in Slovenia that it's a truly positive sign in a way but at the same time, from the local aspect, a missed opportunity."
The problem of lack of staff in entrepreneurship continues, is it maybe even increasing or lessening?
"The lack of staff is bad, and it will be even worse. Because we have incredibly few of certain staff, namely of the people who truly excel at sales, marketing on Western markets, people who have truly strong experience in product development and design, with the user in the middle, there are few such people. There were quite a few technical staff so far, but even this started changing, the crypto-flood also increased development prices and took quite a few developers. There is little of the staff that is very needed. But in its own way, that is a mark of a slightly more adult, healthy ecosystem. Because an ecosystem where there is a lot of staff means that they can't be employed. And it shows a broader trend, from building products for foreign companies to having our own companies that, even if they aren't in Slovenia, develop products here with our knowledge and employ people here. A lack of staff consequently brings higher salaries, meaning that an additional person will stay here and another capable one will come."
In the future, what will be the key direction of the LUI?
"In reality, the LUI is setting up a new programme, a new way of working, a new strategy. We are very open to collaboration with everyone who is close to entrepreneurship. We very much believe in startups when they are completely at the beginning and we strongly believe that help is worth most when you have nothing and when no one believes in you. We want to be here at the moment when this help is worth most and help truly anyone who wishes to become an entrepreneur and has a lot of potential. We strongly believe that the foundation of the ecosystem is width: if you look at the startup ecosystem as a pyramid where at the bottom, there are those who are at the very beginning and whom there is most of, and at the top there are unicorns, a wider pyramid at the bottom also means that its top will be higher."
Tags
Jakob Gajšek
LUI
Ljubljana University Incubator
Startup ecosystem
