Following TechChill Baltics and Infogram funding announcement, TechHub Riga was invited to testify at Latvian parliamentary sub-commission.
With the modern world relying more and more on the success of IT and technology, the talks on how to ignite a technological powerhouse in Latvia reached the corridors of the parliamentary sub-commission of Innovation and Science. TechHub�s Andris K. Berzins was requested to present to the sub-commission on innovation and education regarding TechHub Riga and the relevance of startups for the economy.
The noise surrounding TechChill pushed innovative business onto the parliamentary agenda. Apart from being different from traditional �lifestyle� small businesses, producing high-risk and niche products, startups today also go global from day one, and that seemed to inspire the deputies. Andris started by briefly describing the two short years of TechHub Riga history - going from nothing to 70+ resident members and a collection of some of the most successful new startups in the country that have collectively raised over 2.5M Euros in external funding during these two years.
Giving examples to the sub-commission on the recent crop of successful startups such as Infogram, Cobook and Sellfy, Andris made clear that the necessity to support this type of breakthrough is vital for both the startups and Latvia's economy. What is important to understand is that for a small economy startups are powerful, because Latvia cannot scale IT outsourcing to compete with the massive operations in the Belarus or Ukraine. On the other hand, a small team of people like Infogram - 20+ people - can bring 1.34m Euros of investment to the country.
Most important, success depends on having the right people involved. Traditional real-estate driven incubator models will not help - rather strong advisory teams are necessary to help founders avoid at least some of the mistakes that others have made. Schools and universities also need to prepare students that are capable and interested in taking on the challenge of technology entrepreneurship.
Andris also pointed out that the form of government support is important. Other parties attending the sub-commission meeting, such as the Latvian IT cluster, also noted that startups avoid entering government funding programs due to the excessive administrative burden. The deputies discussed future revisions to the micro-company tax program, which would be welcome, as the recent changes in tax rate due to come into effect in 2015 would negate all the value of that tax program.
The advice provided by Andris focused on making sure that government support for startups was not mixed up with general small-medium enterprise support and that financial support is available in the best form. Grants are not preferred for commercialization support as they tend to distort incentives, while the TechHub inspired and LGA-created soft-loan program is a good support mechanism.
Presentation: TechHub - The Center of Startup Community in Latvia