Hungary has a fairly stable startup scene in general – it earned the title of the world’s 49th most startup-friendly country in 2024, and in the years prior, it’s been within a few positions of 50. Sitting at number 12 in Eastern Europe, Hungary is actually doing pretty well at creating a conducive environment for new businesses, especially in the tech industry.
This relative stability is even more impressive when you consider some of the challenges the country has faced in recent years, relating specifically to economic and political tensions in the region as well as the mass exodus of skilled and experienced IT professionals who have left Hungary to pursue opportunities elsewhere.
Indeed, Hungary’s tenuous relationship with Europe recently can be chalked up to concerns regarding its “rule of law” deficits. The country has received a great deal of scrutiny over the years as a result of some of the government’s actions (and, at times, inaction) with regard to electoral freedoms, freedom of association, freedom of expression and even electoral rights and basic democratic principles.
This has led to the European Union having serious concerns about Hungary’s membership to the union, but most concerning to them has been the fact that Hungary was scheduled to take control of the Presidency of the Council of the European Union in July this year.
Each member country takes its turn in leading the EU from the seat of the presidency in six-month increments, and it just so happens that Hungary’s turn has come at a time of serious volatility and tension with other member countries.
However, despite the difficulties and tensions between the EU, Hungary and other member states, controversial Hungarian president Orbán took control on of the 1st of July as scheduled, and while the issues haven’t at all disappeared, they do seem to have somewhat dissipated.
So, it goes without saying that the political situation in Hungary is complicated and tumultuous, but somehow, the country has managed to maintain a reasonably healthy environment for startups.
The Startup Ecosystem in Hungary
Despite the fact that Hungary has had a less than stable political history, its startup ecosystem is still healthy. While the country’s attractiveness in terms of investment may ebb and flow, there are several other important factors that contribute to Hungary having an economic environment that is conducive to new and budding businesses.
The main and most important factors that contribute to this include:
- The affordability of running a business
- Low cost of living
- Close proximity to European markets
- Opportunities for White Card Visas and the Hungarian Entrepreneur Program
- Favourable location for digital nomads
- Government programmes bolstering startup growth
- Skilled workforce, especially in STEM departments
- Government support via tax incentives, grants and incubation programmes
- Access to EU funding
So, despite the fact that Hungary isn’t always on the right side of the European Union, there are still plenty of other factors that make it a good place for startups, especially in Eastern Europe.
Dmall OS, Hungary’s One and Only Unicorn
As of September 2024, Hungary has only seen one startup rise to the status of unicorn. Dmall OS was founded in the country’s capital, Budapest, in 2015, and as of 2022, it was valued at $2.5 billion.
Dmall OS is a cloud-based, end-to-end digital retail solution that is designed to assist traditional retailers in transforming their operations by means of digitalisation. Essentially, the company offer a comprehensive platform that is able to integrate different aspects of retail. That is, everything from marketing to supply chain management. Ultimately, the goal is to enhance efficiency and customer experiences.
Dmall OS officially earned the title of unicorn in 2020 after having received $418 million in Series C funding.
While it was privately funded up until that point, mostly by venture capitalists based in China, the company has since decided to go public, registering for an initial public offering (IPO) in December 2022. Thus, Dmall OS is no longer a unicorn.
The Future of Unicorns in Hungary
Hungary’s history of unicorns – and the fact that it doesn’t currently have any – is fairly indicative of its tumultuous political, and subsequently economic, situation.
Despite the fact that the country’s economy is surprisingly stable in light of the political tension between Hungary and the EU, the future for startups and unicorns coming out of the region is uncertain. There are plenty of factors that make Hungary an attractive location for startups to be based in, but there are also a lot of challenges that its political situation introduces.
So, with these things in mind, we can’t say that Hungary is home to the most ideal environment for startups and potential unicorns.
However, given its history with flourishing young companies and Dmall OS specifically, which went from being founded in 2015 to earning a $2.5-billion valuation only five years later, it seems fair to say that Hungary is likely to see at least a few more unicorns in coming years. For now, we’ll just have to wait and see.
