Change is afoot in Slovakia. The country’s economy is enjoying a promising patch right now, with several key statistics outperforming European averages. According to the OECD, Slovakia is enjoying high GDP growth and low inflation, while investment in the country, although fluctuating highly year-on-year, is currently around the same level as bigger neighbors such as the Czech Republic and Hungary.
The country became dependent on heavy industry during its communist era, as coal mines and machinery plants were less exposed to military threats than areas of western Czechoslovakia. But when the Berlin Wall fell, that reliance fell with it, and heavy industry comprises just under a third of the national economy today.
Instead, Slovakia has spawned a promising number of technology startups, which in the past few years have begun to excite worldwide. A high number of skilled technical workers, many of whom are groomed for careers in the automotive industry, helps: Slovakia makes almost a million cars per year – the world’s highest per capita – and boasts Volkswagen, PSA Peugeot Citroën, Skoda and Kia plants. Among its higher education centers are the Technical University of Kosice, the University of Zilina and the Slovak University of Technology, which all offer extensive tech and engineering courses.
Communist Czechoslovakia’s planned economy also featured the manufacture of warplanes and helicopters. It’s fitting, therefore, that the country’s biggest tech headline-grabber was born of a strong aeronautic lineage. Stefan Klein grew up in the communist 1980s dreaming of a way to escape the borders, which then required a lot of money or connections. Klein had a deep affection for planes, which he had inherited from his father, and grandfather – who was one of Czechoslovakia’s first pilots.
In 1989, then-student Klein participated in the Velvet Revolution that brought down Czechoslovakia’s communist rule. At those demonstrations, too, was Juraj Vaculik, a performing arts graduate. The pair stayed in touch, and in 2010 brought together their skills to create Aeromobil, a Bratislava-based firm which, three years later, presented a flying car, Aeromobil 1. This year the company unveiled Aeromobil 3.0, a composite-material vehicle which achieves speeds of 90 miles per hour on the road, 124 miles per hour in the air, and a range of 435 miles – enough to make it from Bratislava to Frankfurt.
Developed by 12 people in just 10 months, and with Klein as head designer, , Aeromobil has won fans across the world. The company keeps up ties with the local startup community, says CCO of Aeromobil Stefan Vadocz.. “The country is very young, and it still tries to find an identity,” he says. “And one of the possible ways to do that is technological innovation. But because we are so young, that motivates a lot of people to change how the country is perceived.”
But while Aeromobil’s cloud-hugging credentials have had car and tech fans cooing worldwide, Slovakia’s other heavyweight industrial innovation has made its name deep beneath the ground. GA Drilling, founded in Bratislava in 1994, as Geothermal Anywhere, has taken on the mantel of Slovakia’s hardware history to create the (literally) groundbreaking PLASMABIT system, which uses a plasma generator to shift rock at depths most drills cannot muster. Since its beginnings, the company has branched into London and Houston, and has won awards for its unique technology.
With well-developed heavy industry, unrivaled auto manufacturing and the education, and talent, to boot, you’d expect the vast majority of Slovakia’s tech scene to be comprised of hardware. It’s not so. In the past five years the country has enjoyed an explosion of software services and app-makers, spurred by added investment, the space to create and a government that is growing warm to startups.
According to Anna Zavodska, a PhD student at the University of Zilina and management consultant, the past two years in particular have provided a springboard for local firms to win success: “Last year it was a big boom, and now it’s even better. About the investments I would say we used to have business angels, but not big investments – just a few thousand Euros. Now it’s different.” Local VC funds, the biggest of which is Bratislava’s Neulogy, are making money available where until very recently there was none.
The four largest Slovak cities now have incubators, and students who one looked solely to automakers for a career have found it relatively easy to convert IT and engineering degrees to startups. Outside organizers such as Startup Weekend have also found a home in the country, while events like Slovak Business Agency – where Silicon Valley experts come to teach locals – and the Startup Sharks Roadshow, which came to Bratislava in February, are providing a high level of knowledge for Slovak entrepreneurs to pick up on.
No wonder, then, that startups such as Diagnose.me have begun to turn heads well beyond Slovakia. The service, which matches patients with second opinions online, began two years ago and launched in full early 2015. Co-founder and CEO Lukas Alner, who brought over 20 years of experience in telcos and ISPs to the role, was surprised at the clients who’ve enlisted in his firm. “At the beginning I thought it would be mainly for people coming from developing countries. But actually the most clients we have are from western Europe – particularly the U.K.”
Alner, too, has seen an immeasurable shift in the way business is being done in Slovakia, which he claims has accelerated in the past five years. After communism fell it was “chaos, no clear legislation,” he says. “But not only that – people had no idea how to start a business. There was lots of privatization, so the main thing was that. All the publicly-owned companies were transferred to private entities.
“There were a few simple sales, but there was a lack of transparency, lots of corruption,” he adds. “Also, there was another scheme where every citizen of Slovakia was given a bond they could use as shares in privatized companies. They could participate in the process. But this was in the 90s and no-one had a clue how to trade the bonds, what value they had. It was good for people who had an idea what to do, buy these bonds, sell them to private investors. We called it the Wild East – chaos.
“Then, because of this process a lot of people with good connections – not necessarily the best businesspeople – got into a huge amount of wealth,” adds Alner. “Becoming a businessman became a negative thing, because these people were well-connected, many linked to the former regime. So they became oligarchs who didn’t care about the companies and sold them for huge profits. Factories bankrupted, there was huge unemployment. So business became a negative connotation.”
Now though, he adds, the scene is “on a high.” Co-working spaces are popping up everywhere and even the government, once unable to grasp the key tenets of entrepreneurialism, is now getting on board. Journey is a VC set up by the state to help young businesses survive and succeed.
A scheme to allow people the opportunity to set up a business for just €1 ($1.11) has been mooted too, says Zavodska, but it’s not yet in place. “They also want to have tax reductions, but these are just the last two or three years,” she adds. “I think that giving startups the opportunity to start for one Euro is not as good as mentoring. They said it would be this year but they keep putting it back.”
For American David Brauchli, communications director at Piano Media, taxes in Slovakia are still more favorable than elsewhere. The company, which provides online subscription monetization platforms for newspapers and media outlets, was founded in 2011 and works with over 700 titles worldwide. Slovakia’s tax regime is good for new businesses, he insists – “plus there are also a huge amount of programmers in Slovakia – guys who are really good at what they do. So there’s a wealth of programming talent, and it’s much cheaper to hire them than it is even in Germany. So we were able to keep our overheads quite reasonable while we were expanding.”
Bratislava is under an hour from Vienna – but the difference in income disparity is still huge, says Brauchli. “Look and feel – as soon as you get across the border in Austria everything is nicer,” he says. “That’s partly because they have a 40 year headstart on the Slovaks, who were crushed by the Second World War then downtrodden by communism. Even in Bratislava the roads are bad, the trams look like they’re from the 1980s. Even in the suburbs of Vienna you wouldn’t find that.”
But, he adds, that is changing. And besides, when you’ve the chance to set up for a fraction of that in Austria or anywhere else across the old Iron Curtain, why would a few rusty trams put you off?