5 Tips for Launching a Startup Outside a Traditional Startup Hub

Earlier this year, our fraud protection startup SEON raised a $12M Series A. 

That's not unusual in and of itself. The fraud prevention market is growing by the day, and the Covid-19 pandemic has accelerated digitization and the need for solutions that can protect online businesses.

What's unique is how the funding happened: during a lockdown, with no international business travel, and mostly via videoconference. 

Here are some tips on succeeding as an outsider, which hopefully can also apply to any other locations that aren't as startup-friendly.

1. Use Your Location to Your Advantage

I grew up, studied, and started working in Hungary. And yet, if I could have chosen to, I would have launched my business anywhere else in the world.

In spite of all the op-ed pieces I've read about Budapest becoming a booming startup hub, the truth on the ground is that it's nowhere near as good for entrepreneurs as Berlin, Oslo, or Tel-Aviv. 

The labour laws are antiquated, the networking is non-existent, and the culture and language are a major obstacle to attracting international talent.

And yet, we managed to make it work to our advantage. Corporate tax is one of the lowest in Europe, set at 9%, which helped us pour more money into the company at the earliest stages.

Budapest has a strong history of producing great engineering talent, and the OPEX costs were affordable, which also allowed us to keep our overheads low while we tried and tested our solution.

We were also forced to hire team members remotely, and optimized management for a team that can rarely meet in person. This proved to be a great advantage for the pandemic lockdowns: we had already perfect the art of remote work.

What I'm trying to say is: if you're not in a startup hub, chances are you are already saving a ton of money. This is especially important in the early days when you should really be focusing on building a quality product.

Speaking of which…

2. Focus on Your Product and Customers

One of my strongest beliefs as an entrepreneur is that the product-led growth model is here to stay. Provided you have a strong market fit and you can build, maintain and update a useful product, you can absolutely believe in the old motto of "build it and they will come".

I know it's often derided in the startup world, but we are the living proof that it works. Our fraud prevention solution was born because we couldn't find anyone else offering a better alternative. Competitor solutions were either too expensive, complex, or ineffective, so we knew we could find customers who would need ours. 

And as Jeff Bezos himself said, you should spend less time worrying about competitors. They're not the ones who are going to give you money – your customers will.

Now having said that, there came a time when we started looking for funds elsewhere. And it proved to be an uphill battle.

3. Be Prepared to Be Snubbed by Investors

Venture capitalists are conservative and risk-averse by nature. So as soon as they hear the name Central European Union, they instinctively tend to back away. 

It's certainly a lesson we learned the hard way. We struggled to find angel investors or VCs because of the tiny Hungarian startup network. 

The ones we got in touch with at international events wouldn't give us the time of day in the early stages. Yes, it's probably because we were young, but the fact that we came from Budapest didn't help.

It took a ton of hard work to raise seed capital, and we had to show our faces on the world stage to begin gaining some form of clout. Maybe this will change in a post-pandemic future, but I would recommend working extra hard to attract VC attention if you're located in the sticks.

4. Establish International Connections

This is easier said than done in the age of Covid, but I just wanted to reiterate once more how important it was to step out of our comfort zone. 

For us, it was about taking the time to travel to international startup events, such as the PitchIt or Lion's Den pitch events in London. It served a double purpose of presenting our product on the world stage, and expanding our network.

And it paid off. Our first international executive hire (COO) outside of Budapest was arranged by people in London, completely remotely. They helped set up our London office, which is now our commercial headquarters.

So we started small, with international events, and eventually and we now want to replicate that winning formula by establishing local hubs in Austin and Singapore, to gain a foothold in international markets. Think in small steps, with big consequences.

5. Make Being an Outsider Part of Your Story

Early stage startup entrepreneurs tend to feel like outsiders. This is doubly true if they aren't surrounded by like-minded people. But instead of feeling ashamed of our status, we decided to lean into it.

We began writing more about what it was to work in Budapest on our blog pages, and made it clear that the region's socioeconomic factor didn't reflect on our mentality. 

Counter-intuitively, this actually helped us build a small community around us. Our first clients were local companies, and they shared the same concerns we had about the lack of growing opportunities for startups in the region. 

The point is that if we'd ignored this part of our history, we would have probably missed out on some early growth opportunities. 

Startups Work, ScaleUps – Maybe Not So Much

Hopefully, these five tips will help you understand and accept some of the pros and cons of launching a company in a non-traditional startup hub.

If anything, my company is the living proof that it is not only possible, but can actually work to your advantage.