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Technologická Inkubace

Ninety percent of startup founders are men

31.10. 2024
line-arrow Ninety percent of startup founders are men

Do the Czechs have the necessary entrepreneurship, or are we still a nation of employees? This is what CzechInvest, the agency for promoting entrepreneurship and investment, has been trying to find out for a long time. Michal Urban, Director of the Entrepreneurial Environment Division, explains how to find out the necessary data, why we need to change mindsets and school curricula, or what are the pitfalls of the Czech entrepreneurial environment and why we need more innovative startups.

This article was adapted from www.e15.cz.

How much do Czechs want to do business?

We don’t know this for sure because we lack the necessary data. So, first of all, we need to distinguish the meaning of the words entrepreneurship and entrepreneurship. Entrepreneurship is when an enterprising person implements his or her idea and starts his or her own business. But for us, entrepreneurship itself is also very important. Entrepreneurial people don’t necessarily have to become entrepreneurs; we generally want them in all sorts of employment positions. They have a number of important qualities, such as a willingness to take risks, perseverance or the ability to see opportunity where others see obstacles.

Where can I get data on entrepreneurship?

Crucially, it is involved in the so-called Global Entrepreneurship Monitor, the world’s largest study on entrepreneurship and entrepreneurship, which provides key data and analysis that is used by international organisations such as the OECD, the World Economic Forum and the European Commission. We do have some data, for example from the Ministry of Education or even from CzechInvest’s startup programmes, but we lack a comprehensive view and continuous data collection. This would offer not only a comparison with other countries, but also more detailed information about our development over time.

Why aren’t we in the program yet?

At this point, there is only one obstacle, and that is securing funding. We are talking about three to four million crowns a year. If we take into account the fact that the state will obtain valuable data, which it can then exploit in many ways, this is not an exorbitant amount from my point of view. This is something that CzechInvest is now trying to explain a lot. In October, we held a conference on this, where the whole expert community agreed that we need such data. It is clear that the state ministries are willing to address this. But the downside is that entrepreneurship is a very inter-ministerial topic. Intuitively, it falls under the Ministry of Industry and Trade, because it is about entrepreneurship, but at the same time the Ministry of Education also has a big part in it, and then the Ministry of Labour and Social Affairs and other institutions with partial topics.

And can’t we derive at least some information about entrepreneurship from the data we have? For example, how many more or fewer entrepreneurs and companies are growing or shrinking?

A lot always depends on interpretation, statistics is a numbers game. If you look at a simple phenomenon, such as how many tradesmen have disappeared in a year, it may not tell us anything about the current situation. The fact that we see a decline, for example, does not mean that active entrepreneurs are disappearing. There may just have been a legislative change that corrected the outdated status of the register. But it will be written into the numbers. That is why it is important to look at the data comprehensively, taking into account demographic curves and other contexts.

Is that what happened last year, when the number of sole traders fell the most in the last 30 years?

Yes, it was mainly related to the mandatory data boxes. A lot of inactive registered tradesmen quit rather than be subject to the new obligation. So there has been some “cleansing of the system”. But there were certainly other influences. The covid situation or the war in Ukraine and the related increase in energy prices played a role. However, CzechInvest does not focus so much on individual tradesmen, our activities are mainly directed towards start-ups, small and medium-sized enterprises, or large investors. Our area is mainly companies with innovative potential.

After all, if we look at the relevant data, what does it tell us about business in the Czech Republic? For example, is the number of people going into business and starting a company growing?

I wouldn’t say there’s any dramatic change. I’m sure it has to do with the majority mental attitude of the Czechs. We don’t usually think about starting a business after school, we are more set on getting out of school and looking for a job as an employee. We don’t see any major waves and fluctuations, nor do we see people starting businesses in a big way. But we can see some differences when we look at the different stages of a person’s life. For example, young people under 25 or women on maternity leave, where the proportion is rising a little.

Are more women going into business in general today?

If we compare this with neighbouring countries, the potential of women in the Czech Republic is unfortunately not being used as much as it could be. We see this directly in our programmes. For example, within the Technology Incubation programme, we register hundreds of start-ups and almost ninety percent of them are founded by men. So we see a huge disparity – and it’s certainly not that women are less innovative. The problem is much deeper than that, and as a society we have a huge debt here.

You mentioned that you are mainly involved in companies with innovative potential. Why do we need more companies like that? What are the effects on the Czech economy?

The problem of the Czech economy is that most of the existing Czech companies are involved in subcontracting chains. They are not the ones who create the final product, so they have no influence on the final price and are not in direct contact with the customer. This is something we need to change. The goal is ideally to have my own product that goes to the end customer and where I have the highest margin. For that situation to happen, we need to transform the current economic model. And we also need more companies that are really innovative and that are drivers in their industry. Because if that doesn’t happen, the drivers will be elsewhere, and we will be supplying them with individual components on the cheap.

What are the most common obstacles faced by start-up entrepreneurs in the Czech Republic?

One of the biggest obstacles is the general setting of Czech society. Already in schools, we focus much more on what someone cannot do – and we take that with us into the workplace. We point to those who have failed at something. This is different in more entrepreneurial countries with a greater entrepreneurial tradition. Successful startups from these countries often say that they didn’t make it until their third or fourth try. In Israel, they say that anyone who hasn’t failed by 30 has wasted their time and didn’t try hard enough. We lack this set-up and, unfortunately, it is also reflected in the support for entrepreneurship. We all know that entrepreneurship is inherently risky. At the beginning, you never know if it will succeed. But some support programmes for start-ups are set up in such a way that it simply has to succeed. If something doesn’t work out, you can safely return the money as a non-deductible expense. That’s completely against logic.

Financial support aside, what is the environment for the creation and operation of new companies in the Czech Republic?

I would say that one of the problems is lack of awareness. Again, this starts in schools, where we do not address this issue at all. And then when an adult decides to go into business, it is not easy to find out all the information. In general, companies then complain a lot about more bureaucracy. It takes a little longer just to set up a company here than elsewhere abroad. But, not to be negative, there is certainly an effort to improve things and address the situation. A lot of it has to do with, for example, digitisation and further simplification of processes. An entrepreneur’s portal is being set up, and the government has approved a package of measures for entrepreneurs that should help to manage the administrative burden. There are definitely a lot of things happening here, it just could be a bit faster. We are still a little behind compared to other countries that we want to compare ourselves with.

What about the possibilities of supporting entrepreneurship and entrepreneurial activities at the non-state level? What is CzechInvest doing in these areas?

CzechInvest has a wide range of activities, including support for entrepreneurship among students and services for start-ups, SMEs and large investors. Taking it one step at a time, as part of the National Recovery Plan, we are now implementing a major project to promote entrepreneurship. We are trying to get the whole issue into the education process, so we are working with the Ministry of Education and other ministries. The aim is to turn the Czech mindset around, but of course this is a long run.

That’s why we have “faster activities”. We are currently the largest agency supporting startups in the Czech Republic. Since 2011, we have supported almost seven hundred startups. We have a number of programmes, either to turn an idea into a startup or to further develop the company or expand it abroad. When it comes to supporting small and medium-sized enterprises, it is mainly in the regions. The aim is to raise awareness and to consult companies individually on the things that are “burning” them at the moment. We visit several hundred companies every year, we have extensive feedback and we are able to analyse the situation in companies and pass it on – for example to the relevant ministries.

Last but not least, we have big investors here. These are often foreign companies that we have helped to settle in the Czech Republic or, on the contrary, Czech companies with whom we have dealt with their expansion. As part of our aftercare services, we then help them with a wide range of issues, such as employment, visa policy and so on.

What advice would you give now to enterprising people who have a business idea and would like to implement it?

If it is a very innovative idea, I would definitely recommend them to contact CzechInvest. The aforementioned Technology Incubation programme does not only deal with the part when the startup actually exists, but it also focuses on the pre-incubation phase. This means that before you even start a company, we will go through your idea with you, talk about the business model and advise you on how best to proceed to make the implementation successful. I would say that’s where our program is unique.

Michal Urban
Michal Urban works at the CzechInvest agency as Director of the Business Environment Division, where he is responsible for the activities of regional offices, business localization, brownfields, digitization of internal data and the creation of a single data warehouse. He was the manager of a European project in which CzechInvest is mapping the state of the local economy and, based on the data obtained, is creating its own comprehensive indicators of territorial assessment and data models for planning territorial development. Based on this data, his team prepares a range of services, activities and tools for companies and municipalities.

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