Brno’s “dynamic startup scene” on the charge

From cyber security giant Avg Technologies to burgeoning rental platform Flatio, the startup scene in the often-overlooked Czech city of Brno currently has a spring in its step.

The size and range of the startup ecosystem in Brno, the Czech Republic’s second biggest city, was on display at the recent Velvet Innovation conference.

The annual conference brings together startup luminaries from the South Moravia region, the region Brno sits in.

This year the agenda included panel discussions on healthtech, fintech, women in tech; along with talks from successful founders in the region; and podcasts and live pitches.

Headlining the half-day conference, which took place at the Hotel Passage, a former metropolitan palace, was John Elkington, the sustainability expert and conference veteran, who gave a speech on “sustainability supercharging innovation”.

Runecast Solutions

One of the speakers at the conference was Stanimir Markov, the co-founder of Runecast Solutions, the AI-powered security and compliance startup, which was snapped up by Dynatrace, the global tech firm, earlier this year.

The co-founder of the Brno-founded startup talked through the “emotional” sale process to Dynatrace, which was founded in Linz, Austria.

He said he had long-known the startup would be sold or go public at some point in the future.

Markov said Runecast Solutions was sold for several reasons, not just financial but also that the acquirer had a similar story to Runecast Solutions.

He said that interest in buying the startup came during a 2023 funding round, when it was reporting recurring revenues of around €5m, at a point when the startup began to be noticed by acquirers.

Markov also spoke about his choice not to use an investment bank to oversee the sale, saying he thought it would delay the sale.

Furthermore, Markov said he thought he could negotiate a better price independently, without the investment bank.

He said he was mindful of facing post-sale depression, saying “a lot of founders when they get acquired, this might sound strange, but they get depression”.

Markov still works for Dynatrace but says it is a “very big switch” selling a startup.

JIC Innovation agency

The conference was hosted by the JIC Innovation agency, a key cog in the ecosystem. Jana Pokorná, an executive with the public-purpose-driven startup advisory firm, explained its role in the Brno startup scene. She explained that the JIC, which was set up in 2003, provides grants, investments, contacts and consultation services.

In short, it acts as a liaison between all players in the south Moravian innovation economy including startups, corporations, SMEs, universities, students and regional government. In the two decades since its inception, the JIC has grown into a multinational enterprise with dozens of employees and has helped more than 1,500 firms, creating more than 3,0000 jobs, Pokorná says.

Today, the JIC, whose main office is located in The Brno University of Technology, provides more than 100 companies with its services every year.

She said:

“Today the JIC is a key player not just at the regional level but at the national level too.”

Michal Vesel, the JIC’s chief marketing officer, said that “the mission to create global successful startups takes time” but one thing he would like to see is more overseas VC funding for later-stage startups in Brno.

The JIC venture arm

Radim Kocourek, the boss of JIC’s venture arm, believes there is a healthy cycle of reinvestment in the region from successful founders.

He said:

“Notably, many founders from these exited companies are reinvesting their gains as business angels, thereby fostering a robust cycle of innovation and entrepreneurship.”

He added:

“If there’s one thing I’d like to see change for startups in the region, it would be improvements in legislation around startup investment tax incentives.

“A model similar to what’s in place in Great Britain could significantly boost early-stage investments.”

Flatio

One of the recent shining lights of the Brno startup scene is online rental startup Flatio, whose first-floor offices overlook a beautiful sloping square in Brno.

It was co-founded in 2015 by the larger-than-life Radim Rezek and is focused on the mid-term rental market, primarily monthly stays.

Unlike traveller-focused Airbnb, Flavio’s customers are “digital nomads” and it has a broader customer demographic including remote workers, students and those wanting somewhere to stay during house renovations or medical treatment.

Currently, Flatio has more than 17,000 listings across 60 cities in 17 countries including countries such as its home market, Portugal, Spain, Greece, Montenegro, Thailand and Croatia, where it has recently acquired a rival business.

“Definitely on our radar is the UK,” added Rezek.

The 25-strong startup, whose staff are dotted around Europe, does not charge a deposit and payments are managed through the Flatio app. Its revenues are around €1.3m a year and it is profitable.

On competing against Airbnb, he says there have been shifts away from Airbnb to Flatio with longer stay rentals, as he says it’s a cheaper offering.

He said:

“We see a lot of landlords who tend to start cooperating with us because they don’t want to cooperate with Airbnb.

“Tenants prefer Flatio because we have the lease agreement, so is easier for them to ask for a Visa when they are relocating to a new market.”

That said, he added:

“I am seeing it is hard for the small players to succeed because of how financially intense is the business because of the product. Airbnb spent half a billion dollars on IT, we spent half a million euros on IT.”

Flatio is now looking to raise €5m targeting international, strategic investors to “speed up and expand more quickly across the markets”.

He says: “They can help us leverage their network and help us to grow.”

Brno: some facts and figs

Brno has been dubbed the Silicon Valley of Central Europe, rivalling other European tech hubs like Silicon Dresden, Hamburg and Oslo.

Marketa Lörinczy, CEO Phonexia, the speech recognition software startup, says:

“The best thing about being located in Brno is the dynamic startup scene and the presence of prestigious universities, which create a rich pool of talented professionals and foster innovation. 

“Brno’s thriving tech ecosystem and strategic location attract a diverse mix of companies leveraging this unique position.

“A small downside, though never a deal-breaker, is that Brno may not always be recognised as readily as Prague when working with Brno’s strategic location, nestled between Prague, Vienna, and Bratislava, coupled with a network of universities and research institutions, means the city is teeming with startups.”

Ambitious startups of varying hues are the norm in Brno: engineers working on rockets and satellites destined for the moon sit cheek-by-jowl with multi-million-pound funded deep tech, cyber security, biotech, gaming and semi-conductor startups, luring in local entrepreneurs and international companies alike.

One little-known fact is that South Moravia is also a leading microscope imaging tech hotspot, with one in three electron microscopes in the world emanating from the area.

Another juicy fact is that 40 per cent of the global market for antivirus protections is driven by development centres based in Brno and its environs.

Over 30,000 IT engineers now work in the South Moravian region, along with nearly a thousand game developers while Honeywell, SAP, SAAB, Siemens and IBM have research centres and subsidiaries in the region.

The Brno University of Technology, one of four universities in Brno, with 60,000 students in total, is the second-largest technical/engineering university in the Czech Republic and one of the leading educational, scientific and research institutions in Central Europe.

Some success stories

Brno might lack the razzle-dazzle of London, Berlin or Paris, but it has had its fair share of successes.

One luminous startup emerging from Brno is cyber outfit AVG Technologies, founded in 1990, which went public on the NYSE in 2012, and was snapped up by software giant Avast for $1.3bn in 2016.

Another is Brno-born global flight search engine and online travel agency Kiwi.com, still headquartered in South Moravia, now valued at €750m, which General Atlantic is a major shareholder.

Kiwi.com has attracted managers from around the world to Brno, and is largely seen as moving the ecosystem forward.

Also on the investor radar will be electron microscope producer Tescan, valued at €272m and Tatum Technology, the blockchain firm valued at €226m.

IMAGE: PIXABAY