351
VENTURE CAPITAL IN HUNGARIAN ACADEMIC SPIN-OFFS
Becsky-Nagy Pa ícia 1
Facul y o Applied Economics and Ru al De elopmen o he Uni e si y in Deb ecen,
Hunga y
Abs ac : As pa o a esea ch abou Hunga ian academic s a -ups, I made a
su ey examining pa o he answe s o a long ques ionnai e c ea ed o he whole
esea ch illed in by academic spin-o s o mos impo an Hunga ian uni e si ies.
The s udy is s uc u ed as ollows. Fi s I will p esen he mos impo an ope a ional
in o ma ion on uni e si y spin-o companies aking pa in he esea ch. Then I will
gi e an insigh o he de ails o inancing spin-o s, ho oughly analyzing he
ins i u ional and he non-ins i u ional en u e capi al and he ole o unding
oppo uni ies – applica ions. I examine which inancing sou ces domina e in
academic spin-o companies, wha a e he expe iences o he spin-o s in he iel o
he h ee inancial sou ces men ioned be o e, in o de o be able o answe how
would wha kind o changes would be needed o subse e en u e capi al inancing
Hunga ian spin o s, wi h high g ow h po en ional. The s udy ends wi h a summa y.
JEL classi ica ion: G24, en u e capi al
1. In oduc ion
The goal o ou esea ch was o assess, ge o know as widely as possible he
pionee ing na ional uni e si y spin-o companies. As a i s s ep, based on he
de ini ions ound in he p o essional li e a u e we c ea ed ou own de ini ion, which
we used h oughou he assessmen . Du ing he esea ch we conside ed companies
o ounde s who ha e de eloped echnologies o c ea ed esea ch esul s h ough
hei uni e si y wo k and u ilized hese wi hin hem – as spin-o companies. The
de e mina ion ollows he na owe in e p e a ions. The esea che had o be a
uni e si y associa e in he momen o company ounda ion, howe e i was no
expec ed om hem o gi e up hei academic ca ee s. Mo eo e , we did no expec
om he pa en -uni e si y o ha e a o mal connec ion (owne ship o con ac ual)
wi h he company. Conce ning he imma e ial means passed o he spin-o
companies we also applied limi a ions: i had o be he passing o an in ellec ual
p ope y based on some kind o new echnology and/o a codi ied knowledge. The
pa en ins i u ion had o be a s a e uni e si y.2
The assessmen s we e aking place in ou la ge uni e si y ci ies, in Budapes ,
Deb ecen, Pécs and Szeged. The e is no a ailable in eg a ed da abase, s a is ics
on he na ional spin-o companies, which made he esea ch di icul , he e o e as a
second s ep we de eloped a da abase. To iden i y po en ial uni e si y spin-o
companies he esea che s pa icipa ing in he esea ch used hei own pe sonal
con ac sys ems, he uni e si y echnology- ans e o ices, as well as in e ne
sou ces. Du ing he implemen a ion we succeeded in iden i ying 80 uni e si y spin-
1 assis an p o esso , Facul y o Applied Economics and Ru al De elopmen o he Uni e si y
in Deb ecen
2 In wo cases he pa en ins i u ion independen ly o oge he wi h he uni e si y, bu i was
an academic esea ch ins i u e.
352
o companies, and hal o hem, 40 companies we success ully in ol ed in he
pe sonal que ies. Acco ding o ou es ima ions, we succeeded in iden i ying hal o
he na ional uni e si y spin-o companies in line wi h ou de ini ion. We laye ed he
sample based on he geog aphic loca ions o he companies’ eal ac i i ies, 40% o
he que ies a e loca ed in Budapes , while 20%-20% o he p o incial ci ies.
Du ing he esea ch we implemen ed a ques ionnai e-based pe sonal que y. The
hi d s ep examined he composed ques ionnai es, beside he companies’ basic
in o ma ion (company name, headqua e s, yea o ounda ion, sec o o ac i i y,
knowledge-in ensi e indus y, in o ma ion om annual epo s), also he inno a i e
ac i i ies and in ellec ual po olio, he ounde esea che as a pe son, his/he
mo i a ions, social capi al, and he companies’ connec ion and coope a ion wi h he
pa en -ins i u ion. Mo eo e , in o ma ion on he companies’ unc ioning, g ow h,
pe o mance and inancing we e also subjec s o de ailed analysis. Fo he
uppe mos accu acy we ied o make he pe sonal in e iews wi h he ounde
uni e si y esea che s in all cases, he que ies las ed o 45-60 minu es in a e age.
He eina e we will p esen he main empi ical esul s om 38 illed ques ionnai es3.
2. The Hunga ian uni e si y spin-o companies’ ac i i ies
The Figu e 1 shows he numbe o Hunga ian spin-o companies pa icipa ing in he
assessmen by he yea o ounda ion and knowledge-in ensi e ac i i y sec o s. As
indica ed on he diag am, mo e han hal o he companies pa icipa ing in ou
esea ch we e ounded be ween 2006 and 2008, igh be o e he ou bu s o he
global economic c isis, mainly in he ield o in o ma ion communica ion echnologies
and bio echnology. Un il 2003 uni e si y spin-o companies we e ounded solely in
he ields o bio echnology and pha maceu ical indus y, medical science and
diagnosis, as well as in o ma ion communica ion echnologies. F om 2004 he ange
o new companies go mo e colo ul by chemical indus y, consul ing and se ices,
enginee ing in en ions, mic o and nano echnologies, o he na u al sciences, as well
as elec onics.
We can see educ ion o he numbe o company s a ups, which can be pa ially
explained by he c isis, which ha e s a ed in 2008 and escala ed in 2009, which
in luenced he inancing o uni e si ies on one hand, and on he o he led o he
d ying ou o he unding sou ces ha we e abundan ly a ailable in he pe iod o
2004-2007, a e he en o cemen o he ac on esea ch and de elopmen and
inno a ion.
The 59,5% o he ques ioned companies de elop p oduc s based on new echnology
and sell hem o business consume s and 51,4% p o ide inno a i e se ices o
business consume s, he e o e mo e han a hal o he companies apply he B2B
(business o business) business model. Compa ed o he p e ious a lo less 27%
and 24,3% om he same ac i i ies sell di ec ly o he consume s in o he wo ds hey
apply he B2C (business o consume ) model. Only 13,5% o he companies sell new
(basic) echnologies. (Figu e 2)
3 Two companies we e excluded om he sample since hey did no comply wi h ou
de ini ion.
353
Figu e 1: The numbe o Hunga ian uni e si y spin-o companies by
knowledge-in ensi e ac i i y sec o s and he yea o ounda ion in 2012
(pc)
Sou ce: own compila ion
The 59,5% o he ques ioned companies de elop p oduc s based on new echnology
and sell hem o business consume s and 51,4% p o ide inno a i e se ices o
business consume s, he e o e mo e han a hal o he companies apply he B2B
(business o business) business model. Compa ed o he p e ious a lo less 27%
and 24,3% om he same ac i i ies sell di ec ly o he consume s in o he wo ds hey
apply he B2C (business o consume ) model. Only 13,5% o he companies sell new
(basic) echnologies. (Figu e 2)
Figu e 2: Ac i i y na u e o he Hunga ian uni e si y spin-o companies (%)
Sou ce: own compila ion
Commen : mul iple answe s allowed
The main ma ke s o he companies based on he cu en o planned e enue a e
shown on he Figu e 3 97,3% o he esponden s icked Asia, 73% Hunga y, 30-50%
Eu opean coun ies, bu No h Ame ica coun s o could coun as a ma ke only o
one hi d o he companies. The No he n Eu opean coun ies, A ica, Aus alia, e c.
we e in he o he ca ego y, and i was icked by almos all esponden s jus like Asia.
354
Figu e 3: Ta ge ma ke s o he Hunga ian uni e si y spin-o companies (% o
hose selec ing he ce ain ma ke )
Sou ce: own compila ion
3. The inancing o Hunga ian uni e si y spin-o companies
The Table 1 shows he pe cen age o he companies wi hin he sample epo ing o
ha e been ecei ed inancial suppo in he gi en phase o g ow h. Since he cu en
phase o li ecycle is di e en among he companies, hence he company being in an
ea ly phase could no ha e chosen an answe o e.g. inancial suppo o expansion,
bu he da a in he columns can be compa ed wi h each o he . Two- hi ds o he
companies used hei own sa ings in he seed pe iod, while one- hi d ecei ed non-
e undable inancial suppo om he s a e. The companies ha inanced hei
ac i i ies h ough in ol ing a o eign capi al o an angel in es o o a close amily
membe , also eached he high pe cen age o 22,2%.
In he s a -up phase he non- e undable inancial sou ces go he mos sco es as
inancing sou ces (41,7%), he own sa ings go he second place (36,1%). The
sequence is e y simila among o he companies being in o he ea ly s ages o ea ly
expansion, whe e he esponden s anked 33,3% and 19,4% he abo e men ioned
sou ces. In he phase o expansion mos o hem selec ed he non- e undable
sou ces, bu he own sa ings we e p eceded by close amily membe s and inancing
h ough cus ome s. By he way, inancing h ough cus ome s in all phases indica ed
16,7%.
In he s a -up pe iod he en u e capi al inancing ecei ed he highes p opo ion,
which we e ollowed by he pe iod o ea ly g ow h and seed, bu in he expansion
pe iod non o he companies ecei ed en u e capi al. Financing h ough dis an
amily membe s, iends, o he non- inancial companies and supplie s we e selec ed
in li le numbe , and an e en smalle p opo ion chose he e undable s a e suppo
(e.g. p e e en ial loans), pa en companies as well as sho e m and long e m bank
loans. The sho e m bank loans we e selec ed in he ea ly g owing s ages, while
he long e m bank loans in he s a -up phases in 13,9% and 11,1%. The
signi icance o uni e si y sou ces is simila ly low, i only go o e 10% in he seed
phase. O e all, he Hunga ian spin-o companies wi hin he sample p ima ily ely on
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own esou ces and non- e undable s a e unds in inancing hei ac i i ies, and he
3F-s’ ole is also signi ican ( amily, iends, ools – i.e. s ange s) in he seed and
s a -up phases.
Table 1: Financing sou ces o he Hunga ian spin-o companies in he
a ious phases o hei li ecycle (p opo ion o hose indica ing he gi en
answe compa ed o he o al numbe o esponen s, %)
Financial sou ces
Seed
S a -up
O he
ea ly
Expansion
S ange indi idual/ex e nal
capi al/angel in es o
22,2
13,9
2,8
2,8
Dis an amily membe s,
iends
2,8
0
2,8
2,8
Close amily membe s
22,2
11,1
5,6
16,7
Own sa ings
66,7
36,1
19,4
8,3
O he non- inancial company
5,6
2,8
2,8
0
Ven u e capi al company
5,6
13,9
8,3
0
Re undable s a e (EU)
suppo
8,3
5,6
2,8
0
Pa en company
5,6
11,1
8,3
2,8
Non- e undable suppo
33,3
41,7
33,3
19,4
Sho e m bank loan
2,8
2,8
13,9
2,8
Long e m bank loan
5,6
11,1
8,3
8,3
Uni e si y
11,1
8,3
8,3
2,8
Supplie
2,8
2,8
2,8
2,8
Cus ome
16,7
16,7
16,7
16,7
Sou ce: own compila ion
Rema k: mo e answe s we e accep able
The ins i u ional en u e capi al does no mean gene al unding sou ce o hem,
despi e he ac ha echnology-o ien ed companies, in he same ime spin-o
companies wi h big expansion po en ial a e mo e likely o ecei e en u e capi al
han o he companies.
7.1. The ins i u ional en u e capi al inancing o he Hunga ian spin-o companies
The esponden s indica ed hei expe iences connec ed o en u e capi al inancing
in all di e en cases on a i e-poin scale (Table 2). Conside ing he a e age o he
answe s he highes alue was eached by he a iable indica ing ha he en u e
capi al in es o s do no know enough abou he gi en echnology. The in e na ional
compe i i eness o he applied echnologies do no mean p oblems in he aspec o

356
he g owing o he companies as men ioned p e iously, bu in he aspec o inding
in es o s i doesn’ . The new na u e o he echnology may cause his in o ma ion
gap, he e o e he en u e capi al in es o s do no know he applied echnology, bu
i – no only in he owne s’ opinion o ealis ically – he echnology o he p oduc is
in e na ionally compe i i e, he e would p obably be will om he en u e capi al
in es o s’ side o inance he company. The a ailabili y o he en u e capi als o he
spin-o companies could be esol ed h ough dissolu ion o he in o ma ional
asymme y.
The en u e capi al in es o s do no like o in es small amoun s, which is he second
signi ican p oblem and a p oblem also con i med in he in e na ional li e a u e, is he
en u e capi al in es o s mo ed in he di ec ion o inancing companies in la e
phases o g ow h o companies wi h bigge capi al needs and mainly o ou buying
due o economics o scale easons. The de eloped capi al gap and in o ma ional
asymme y oge he esul in a inancing gap in he ea ly s age (Becskyné, 2008;
F eea e al., 2002; F eea e al., 1994; F eea and Sohl 2001). The inancing gap
could be o e b idged h ough angel in es o s and h ough angel in es o s’ ne wo ks.
The supply o en u e capi al o he spin-o companies is also ammeled by he high
yield expec a ions o he in es o s, which is an in e na ionally known an
cha ac e is ic o he supply’s side simila ly o he p e iously said, since usually he
indus y is cha ac e ized by g ea g ow h po en ial, aiming a in e na ional ma ke s,
p omising high yield o in es men when exi ing (Ka sai, 1997). On he demand side,
namely om he companies’ iew he mos impo an p oblems a ising a e he ea
o eedom o decision es ain , on he o he hand hey do no ha e adequa e
en ep eneu ial and managemen skills. These a e gene al p oblems in o he
coun ies, oo, bu as long as he change in app oach does no happen, he spin-o
companies canno expec o ecei e highe en u e capi al inancing han be o e.
Table 2: The expe iences o he Hunga ian uni e si y spin-o companies in
he ield o en u e capi al inancing
Value
Opinion
4,0
The en u e capi al in es o s do no know enough abou he gi en
echnology
3,7
The en u e capi al in es o s do no like o in es small amoun s
3,6
The en u e capi al in es o s ha e high yield expec a ions
3,5
The in ol emen o en u e capi al in es o s es ic s he company
leade (s)’ eedom o decision du ing he unc ioning o he company
3,2
The en u e capi al in es o s a e se o inancing seed, s a -up o ea ly
s age companies
2,9
The in es men is hampe ed by he low quali y business plan
2,8
The in es men is hampe ed by he lack o en ep eneu ial, managemen
skills
2,7
The economic policy does no suppo enough he en u e capi al
in es men s
2,6
The e is no enough in o ma ion abou he en u e capi al in es o s
357
2,6
The possibili ies o exi ing o he company o he en u e capi al
in es o s a e bad
Sou ce: own compila ion
7.2. The in o mal en u e capi al inancing o he Hunga ian uni e si y spin-o
companies
In he aspec o angel in es o s he esponden s iden i ied he bigges p oblem o be
in he small numbe o angel in es o s and he lack o angel in es o ’s ne wo ks in
Hunga y (Table 3). So he angel in es o s a e no he solu ion o he inancial gap
o med h ough ins i u ional en u e capi al’s in e na ional endency nei he in he
aspec o uni e si y spin-o companies. Acco ding o he esponden s he economic
policy’s insu icien suppo o angel in es o na u e in es men s is a signi ican
bu den. Go e nmen in e en ion on bo h demand and supply side could con ibu e
o he e icien unc ioning o he in o mal en u e capi al segmen and o he
ad an ages o po en ial possibili ies, bu he go e nmen mus no in any way ake
o e he ole o he angel in es o s (Ka sai, 2002), namely i can only suppo he
unc ioning o he indus y indi ec ly, by imp o ing he in es men en i onmen on
he supply side, and by c ea ing an en ep eneu ial en i onmen s imula ing
inno a ion on he demand side (Kosz opulosz - Mak a, 2004). The change o
en ep eneu ial a i ude, he change o app oach o indi iduals ha ing adequa e
capi al o in o mal in es men s, and he c ea ion o an en ep eneu ial laye wi h
managemen skills could lead o esul s in his a ea.
The in o ma i e gap connec ed o angel in es o s means a simila p oblem o he
esponden s as in he case o ins i u ional en u e capi al, bu acco ding o he
in e na ional li e a u e he in o ma ional asymme y is in ensi ied in his case, namely
he companies seeking capi al and he angel in es o s ind each o he e en ha de
(Ha ding, 2002). Since he ole o angel in es o s in Hunga y is minimal, hence he
bigges p oblem lies in he lack o angel in es o s and no in he e iciency o he
indus y’s unc ioning. The second s ep in he segmen ’s de elopmen is he
de elopmen angel in es o s’ ne wo k, which could play an impo an ole in
o e coming he second inancing gap ensuing om he edi ec ion o o mal capi als
o la e phases (Ae noud , 2005). Acco ding o Whea he by (2007) he inancial gap
is ge ing na owe in he wes e n coun ies esul ing om hei ma ke eac ions,
since he “supe angels” and hei g oups o e b idge he p oblem, and on he o he
hand he ini ial capi al equi emen s o ce ain echnology-o ien ed companies,
especially o in e ne companies signi ican ly d opped.
358
Table 3: The expe ience o he Hunga ian uni e si y spin-o companies
wi h angel in es o s
Value
Opinion
4,7
The e a e only ew angel in es o s in Hunga y
3,6
The angel in es o s’ ne wo ks (pa ne media o o ganiza ions) a e
missing in Hunga y
3,6
The economic policy does no suppo su icien ly he angel in es o
na u e in es men s
3,1
The p o essionalism, expe ise o he angel in es o s is insu icien
3,1
The in es men is ammeled by he lack o en ep eneu ial and
managemen skills o he company leade s seeking capi al
3,0
The exi ing possibili ies o he angel in es o s a e limi ed
2,6
The angel in es o s do no unde s and ou company’s echnology
2,6
The quali y o he business plan o he company seeking capi al is
unaccep able
2,5
The company owne (s) do no wish o sha e o any ex en hei con ol
o e he company wi h an ex e nal pa y
2,3
The e is no enough in o ma ion a ailable on he ole and cha ac e is ics
o he angel in es o s
1,9
The angel in es o does no ha e he needed sum o capi al
1,9
The angel in es o s’ yield expec a ions a e oo high
Sou ce: own compila ion
7.3. Financing o he Hunga ian uni e si y spin-o companies h ough applica ion
possibili ies
We could al eady see a he selec ion o inancing me hods based on
li ecycle phases ha he non- e undable s a e unding is one o he main esou ces
o he spin-o companies, and as I men ioned al eady 62% o he esponden s
al eady ecei ed s a e o communi y unding. Mos o he esponden s ind he
applica ion p ocedu es oo bu eauc a ic, bu hey belie e ha hese undings helped
he de elopmen o hei companies. Acco ding o he esponden s he delay o he
call o p oposals and imbu semen s makes he planning and unc ioning o he
companies di icul . The di icul implemen a ion o obliga o y commi men s and he
oo high own con ibu ion in he aspec o companies is mode a ely alid. The
companies ind i leas impo an ha he applica ions edi ec he company’s ocus
om he ma ke s and ha he decision making p ocesses a e impene able and
co up (Table 4).
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Table 4: Expe iences o Hunga ian uni e si y spin-o companies wi h
applica ion p ocedu es
Value
Possible answe s
4,2
The applica ion p ocedu es a e oo bu eauc a ic
4,1
The unding h ough applica ion helped he de elopmen o ou company
3,9
The e en uali y and delay o call o p oposals make planning di icul
3,9
The delay o imbu semen made he unc ioning and he de elopmen o
ou company di icul
3,0
The obliga o y commi men s connec ed o he applica ion a e ha dly
implemen able
2,9
The equi ed own con ibu ion is oo high
2,6
The call o p oposals edi ec he company’s ocus om he ma ke wo k
2,3
The decision making conce ning o applica ions is impene able and co up
Sou ce: own compila ion
8. Summa y
Mos o he Hunga ian uni e si y spin-o companies included in he sample we e
es ablished be ween 2004 and 2008. Pa allel o he global economic c isis he
p opensi y o spin-o company es ablishmen d opped, in he pas ou yea s only
wo companies we e es ablished. Mos o he spin-o companies a e connec ed o
bio echnology and pha maceu ical indus y, as well as in o ma ion communica ion
echnology among he knowledge-in ensi e ac i i ies. In he aspec o business
ac i i ies o he companies he “business o business” model is mo e cha ac e is ic
han he „business o consume ”. The main ma ke s i selling a e he ones in Asia,
bu Hunga y is also a signi ican a ge .
The bigges p oblems in he aspec o en u e capi al inancing a e he in o ma ional
asymme y and he shi ing o he in es o s’ in e es on la e phases in he li ecycle.
The companies ind i ha d o gi e up hei independence in decision making and
hey a e no eady o en u e capi al in ol emen , which impedes he ealiza ion o
en u e capi al in es men s. The bigges obs uc ions o angel in es men s a e he
small numbe o p o essionally p epa ed angel in es o s in Hunga y and he lack o
angel in es o s’ ne wo ks, oo. The bigges p oblems o applica ion p ocedu es a e
he o e loaded bu eauc acy and unp edic abili y.
Summa izing all, he companies see hei mos impo an inancing
possibili ies in applica ions and non- e undable sou ces, namely hey expec om
he go e nmen o di ec ly suppo hem wi h “so ” money. The companies p ima ily
expec om he go e nmen o co e hei capi al needs o g ow h, e en a e he
s a e inancial esou ces d y ou . The go e nmen on he o he hand could suppo
he as e g ow h o spin-o companies h ough he s imula ion o bo h demand and
supply side o he ins i u ional and in o mal en u e capi al indus y, and ha g ow h
would also con ibu e o he de elopmen o he na ional economy.