Thursday, May 11, 2017
The attendance of Prime Minister at PODIM is also dedicated to stopping Slovenian startups from going abroad!
Why are successful Slovenian startup entrepreneurs going abroad? How could we make Slovenia friendlier for startup companies? The dialogue on these questions between the government and representatives of the Slovenian startup community has already been established, because the government is aware of the importance of innovative startup companies, which are one of the key driving forces of economic growth, but also a serious industry that, according to rough estimations, employs around three thousand people, mostly highly educated and motivated staff. But startups in Slovenia still face numerous business, administrative and fiscal obstacles, which encroach upon practically all areas of their business operations – the launch and initial funding, obtaining further investments, employing and rewarding key staff, obstacles in web and mobile business, administrative obstacles … Despite presenting suggestions for solving them, addressed to the government by representatives of the Slovenian startup communities, a lot of these obstacles still impede the business of startups, because solving them isn’t within the jurisdiction of only one ministry but several, which fragments the field of responsibility and prevents suitable decision-making. That is why the Initiative Start:up Slovenia decided to invite Prime Minister of the Republic of Slovenia, Dr Miro Cerar, to the PODIM Conference and address an appeal to him to raise the priority of solving these obstacles and establish an interdepartmental group for eliminating them.
In the past couple of years, representatives of the Slovenian startup community addressed quite a few appeals to the government and line ministries, warning about the many business, administrative, and fiscal obstacles that Slovenian startup companies face and consequently move abroad in increasingly larger numbers. February last year, three known Slovenian startuppers – Primož Strajnar, Nejc Škoberne and Andraž Logar, addressed a letter to the Ministry of Economic Development and Technology (MGRT), explaining why startups need additional attention and which obstacles they face, but also giving concrete suggestions for solutions.
Only 5% of investments are realized in Slovenia!
A lot of attention and strong support of the Slovenian startup community was also given to the blog post of the Silicon Gardens community member Aleš Špetič, entitled Why are successful Slovenian startups going abroad. In it, one of the first Slovenian startuppers stated arguments for obstacles that are the reason why in the past few years, only 5% of investments have been realized in Slovenia from altogether 100 million Euros of investments that Slovenian startup founders annually collect in Slovenia and abroad on average.
Fragmented responsibility
On the initiative of the Securities Market Agency (ATVP), Aleš Špetič presented his findings of systematically overviewing the Slovenian startup community to the Ministry of Finance, MGRT, and the ATVP. There was also a meeting organized at MGRT based at the request of Slovenian startup community representatives. Initiative Start:up Slovenia prepared for it by listing additional obstacles of startups, especially in the field of payment systems, while at the same time we hoped that our previous documents, such as the Start:up Manifesto and Slovenia, the land of startups!, will help us quickly get to suitable solutions. Even though the meeting reflected the will and intention for proactively ensuring a more encouraging business environment, it was clear from the minutes of the meeting that the elimination of certain key obstacles is mostly prevented by the fact that their resolution isn’t within the jurisdiction of only one ministry, which fragments the responsibility and hinders the acceptance of suitable solutions.
Appeal to the Prime Minister
In this, all the aforementioned activities and documents apparently brought us to an excellent opportunity, where we can address the appeal for raising priorities and cutting the Gordian knot of helplessness in solving these problems in the right place, at the right time, and to the right person. We sent the Prime Minister of the Republic of Slovenia, Dr Miro Cerar, an invitation to attend PODIM, the biggest and most influential startup conference in Slovenia and the Alps-Adriatic region, along with the proposition that he establish an interdepartmental group for eliminating obstacles for startups’ business operations, where certain people are set to be responsible for systematically solving these challenges, including a timeline of the expected outcomes.
First Slovenian unicorn as role model and warning
Thus an important part of this year’s PODIM will also be dedicated to trying to stop Slovenian startups from leaving for abroad, and following the example of the main European startup hubs, such as London, Berlin or Paris, to enable them to quickly grow, innovate and create new jobs with above-average value added in Slovenia. The example of Slovenian entrepreneurs Iza and Samo Login, co-founders of Outfit, should be a paragon as well as a warning, because the bigger part of the billion-dollar amount mostly stayed abroad when the first Slovenian unicorn was sold. On the second day of the PODIM Conference, the Prime Minister will join as a guest of honour at the investment part of the conference PODIM Challenge, where representatives of the Slovenian community will hand over a list of key obstacles that are currently most frequently pestering Slovenian startups, summarized from the key sources, as well as the original documents that recently came into existence as a “cry for help”.
Summary of suggestions for improving the conditions for business operations of Slovenian startups
FOUNDING THE COMPANY AND FINANCING
Document links
Individual documents that we used to prepare the summary can be found on the following links:
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Authors of the article: Matej Rus, Aleš Špetič, Stanislava Vabšek
In the past couple of years, representatives of the Slovenian startup community addressed quite a few appeals to the government and line ministries, warning about the many business, administrative, and fiscal obstacles that Slovenian startup companies face and consequently move abroad in increasingly larger numbers. February last year, three known Slovenian startuppers – Primož Strajnar, Nejc Škoberne and Andraž Logar, addressed a letter to the Ministry of Economic Development and Technology (MGRT), explaining why startups need additional attention and which obstacles they face, but also giving concrete suggestions for solutions.
Only 5% of investments are realized in Slovenia!
A lot of attention and strong support of the Slovenian startup community was also given to the blog post of the Silicon Gardens community member Aleš Špetič, entitled Why are successful Slovenian startups going abroad. In it, one of the first Slovenian startuppers stated arguments for obstacles that are the reason why in the past few years, only 5% of investments have been realized in Slovenia from altogether 100 million Euros of investments that Slovenian startup founders annually collect in Slovenia and abroad on average.
Fragmented responsibility
On the initiative of the Securities Market Agency (ATVP), Aleš Špetič presented his findings of systematically overviewing the Slovenian startup community to the Ministry of Finance, MGRT, and the ATVP. There was also a meeting organized at MGRT based at the request of Slovenian startup community representatives. Initiative Start:up Slovenia prepared for it by listing additional obstacles of startups, especially in the field of payment systems, while at the same time we hoped that our previous documents, such as the Start:up Manifesto and Slovenia, the land of startups!, will help us quickly get to suitable solutions. Even though the meeting reflected the will and intention for proactively ensuring a more encouraging business environment, it was clear from the minutes of the meeting that the elimination of certain key obstacles is mostly prevented by the fact that their resolution isn’t within the jurisdiction of only one ministry, which fragments the responsibility and hinders the acceptance of suitable solutions.
Appeal to the Prime Minister
In this, all the aforementioned activities and documents apparently brought us to an excellent opportunity, where we can address the appeal for raising priorities and cutting the Gordian knot of helplessness in solving these problems in the right place, at the right time, and to the right person. We sent the Prime Minister of the Republic of Slovenia, Dr Miro Cerar, an invitation to attend PODIM, the biggest and most influential startup conference in Slovenia and the Alps-Adriatic region, along with the proposition that he establish an interdepartmental group for eliminating obstacles for startups’ business operations, where certain people are set to be responsible for systematically solving these challenges, including a timeline of the expected outcomes.
First Slovenian unicorn as role model and warning
Thus an important part of this year’s PODIM will also be dedicated to trying to stop Slovenian startups from leaving for abroad, and following the example of the main European startup hubs, such as London, Berlin or Paris, to enable them to quickly grow, innovate and create new jobs with above-average value added in Slovenia. The example of Slovenian entrepreneurs Iza and Samo Login, co-founders of Outfit, should be a paragon as well as a warning, because the bigger part of the billion-dollar amount mostly stayed abroad when the first Slovenian unicorn was sold. On the second day of the PODIM Conference, the Prime Minister will join as a guest of honour at the investment part of the conference PODIM Challenge, where representatives of the Slovenian community will hand over a list of key obstacles that are currently most frequently pestering Slovenian startups, summarized from the key sources, as well as the original documents that recently came into existence as a “cry for help”.
Summary of suggestions for improving the conditions for business operations of Slovenian startups
FOUNDING THE COMPANY AND FINANCING
- Eliminating obstacles due to which investors have to be physically present in Slovenia for the founding and recapitalization,
- Eliminating restrictions on divestiture and assembly management (startups usually don’t create profit in the first couple of years, and if one of the founders or investors wishes to leave the startup, this isn’t possible if the company is operating at a loss, according to Slovenian legislation),
- Eliminating restrictions that prevent investors from founding smaller investment funds,
- Eliminating restrictions that prevent investors from investing into several company consecutively, because the Companies Act prevents one company (d.o.o.) from investing into more than 4 companies annually,
- Maintaining public investments into startups and establishing a possibility for the country to balance out the investments of established venture capital funds; in this also eliminating the possibility of abuse in public investments without excessive legalisms,
- Establishing a programme for actively attracting foreign private investors to Slovenia and its strong promotion.
- Introducing tax relief for investors (legal and fiscal persons) into startups, following the examples of SEIS and EIS schemes from Great Britain, but investments amounts are capped at a relatively low amount,
- Lowering the effective business taxation and encouraging profit reinvestments,
- Introducing tax relief for young innovative companies, such as tax deferral following the example of Estonia, where the tax on profits is paid for the first time at the first dividends payment,
- Tax cashiers have made card payments significantly more difficult, because the legislation treats credit card payments the same as cash payments,
- It is problematic for startups that in rewarding employees through stock options, the sale of an ownership share is treated as a remuneration from employment and not as capital gain.
- Reducing tax burden on salaries, which is why young capable staff prefer to choose jobs abroad than in Slovenia,
- Eliminating the rigid and uncompetitive rewarding of employees with ownership and share options,
- Introducing options for faster and simpler employment of foreign citizens, also outside of the EU, at least for those who have specific knowledge and have their employment waiting for them with an employer known in advance,
- Introducing suitable educational programmes that reflect actual needs of the markets, set target educational directions (for example for app developers and ICT programmes) and encourage a larger interest for them in younger generations,
- Changing long-term and complicated procedures of firing, which increases risk for startups and prevent transition of staff and knowledge between companies,
- Introducing the option of providing scholarships for entrepreneurs (e.g. financing according to the principle of basic income), because regulating the basic existential question would significantly encourage the decision for entrepreneurship and strongly simplify the initial steps, when building the company is the most difficult.
- Eliminating complicated business operations and unclear and unstable rules for doing business with state authorities (FURS, government regulators …),
- Speeding up the procedure for obtaining the ID number for VAT for companies, because this is currently a procedure that can last up to several weeks,
- Eliminating the same formal treatment of micro, small and big companies because of which small companies have to deal with rules on protection at work, medical appropriateness for office workers, customs registration for import and export etc.,
- Eliminating the obstacle for the development of fintech companies, whereby the Bank of Slovenia prevents them from opening an escrow account where the user could collect the funds of their clients separate from their business and transaction account,
- Eliminating legislation obstacles due to which faculties can’t be company owners, which is otherwise standard practice in successful, entrepreneurship-focused American and British university centers.
- Eliminating problems of companies that exist because it isn’t possible to use the Google Merchant service in Slovenia, because Amazon Europe doesn’t support Slovenian companies, and because Slovenia doesn’t have the payment system Stripe, which prevents Slovenian companies from leading campaign on the beloved crowdfunding platform Kickstarter,
- Introducing initiatives for developing the video game industry following the example of other countries, which treats video gaming as one of cultural pillars with suitable educational programmes, calls for applications, tax relief, joint appearances at fairs etc.
- Slovenia has several very successful startups in the field of virtual currency, such as Bitsamp and Iconomi, so our country has the unique opportunity to be the first or one of the first countries in the world to recognize this field, and then also formally regulate it and legally work out the details, thus becoming interesting for Slovenian and international excellent entrepreneurial teams in the field of distributed (blockchain) economy.
Document links
Individual documents that we used to prepare the summary can be found on the following links:
- Aleš Špetič column: Why are successful Slovenian startup entrepreneurs going abroad?
- Record of the meeting of representatives from MGRT, MJU, Initiative Start:up Slovenia, and the Slovenian startup community (link to the document)
- Letter addressed to MGRT by Primož Strajnar, Nejc Škoberne and Andraž Logar (link to the document)
- Start:up Manifesto as the fundamental strategy for establishing a successful support environment for startups
- Additional comments of startups, especially concerning obstacles in payment systems (link to document)
- Slovenia, the land of startups! – brochure and infographics with collected startups’ suggestions for supporting innovative entrepreneurship
- Article on How startuppers create jobs
- Blog post: Slovenia should become one of the most desired locations for blockchain startups
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Authors of the article: Matej Rus, Aleš Špetič, Stanislava Vabšek
