Follow the money, but stick to your team

If you have previously attended the How To Web Conference you must have heard the words “think on a global level, but leverage the local resources” at least once. It’s always nice to dream big, to aim high, to think of your product as a global one. But until the recent years that meant to act globally as well, to somehow reach Silicon Valley or at least London’s Tech City and try to make it there, where the real money is.

But things are changing pretty fast in Europe. London, Berlin, Paris, Munich, Stockholm, Moscow became tech clusters that rapidly focused on startups and the finances began to flow in. And the inevitable, but wrongful comparison with Silicon Valley started in the media.

“But Cluj is no Silicon Valley and that’s good. It shouldn’t be”, you often hear entrepreneur Philipp Kandal saying. He started the German maps and navigation apps developer Skobbler, with a subsidiary in Cluj, successfully sold to Telenav at the beginning of this year for $24 million.

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Kandal’s affirmation should be taken as an advice to quit the “Silicon Valley obsession” that tells you can succeed only if you are “born and raised” in a big tech cluster. Often it is better to identify local opportunities and take advantage of them, instead of fighting the big ones on their territory with their weapons.

17049_262487127618_7194367_n“However, it depends pretty much on the nature of your clients”, warns Vladimir Oane, cofounder of the social media analytics tool uberVU, also sold to HootSuite at the beginning of this year. “Chances to build a large B2B company from Bucharest have become increasingly larger in the last couple of years. But for consumer based businesses it’s still difficult to believe that an entrepreneur will be able to scale the distribution without moving.”

What’s the right approach?

Here enters the “think on a global level, but leverage the local resources” concept.

“It is a matter of priorities – companies which need to be closer to the clients, especially if they target the global market will transfer at least some of their operations. Same thing goes for businesses looking for financing opportunities”, explains Andrei Pitis, President of ANIS.

Pitis argues that, on the other hand, the focus on research and development and human resources will position some companies closer to their home markets, especially if they come from Eastern Europe, for costs-related reasons.

“Companies that look to both criteria will have a dual approach: will keep (or move – n.ed.) Research and Development departments closer to their human resources and will relocate Sales, Marketing and Customer Support near their clients” ads Pitis.
In that perspective, both uberVU and Skobbler are good examples of the same approach but from opposite sides. The first one moved from Romania to London right after receiving its first round of seed money and the second one was founded in Germany but immediately opened up a subsidiary in the Romanian city of Cluj.

In the first case, uberVU needed the proximity of venture capitalists and investment funds but kept its software development in Romania due to much more convenient labor market of highly skilled programmers.

In the case of Skobbler, the Berlin based company was already located in the hearth of one of the most important European tech clusters, but came East in search for the same much more convenient labor market.

For East European tech startups this should be a good strategy to follow and the good news is that the number of tech clusters is growing. And they are coming closer, but could we hope to see at least a “Tier 2” Eastern European one soon?

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“If all the right conditions are in place it’s just a matter of ecosystem after all”, says Andrei Pitis. “Such conditions refers to access to financing instruments, business culture, support mechanisms, human resources, access to the market and the clients and last but not least a set of policies including governmental support.”

ANIS’s President adds that the development of business culture and concentrations of startups in many centers in Eastern Europe shows that interest is in place. Unfortunately, the fine networking relationships built in years around big clusters is a stage that can’t be burnt through by the newcomers.

Fore more background stories from tech leaders from around the world, join us for the How to Web Conference 2014!

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