I am often asked by my foreign colleagues and clients about how the Czech Republic is doing, and my answer is that we are doing fine. Putting aside the political situation, which is similar to many other countries, economically we are doing very well; there was strong GDP growth of 4.6% in 2017 and almost 3% last year. Part of this growth is clearly attributable to our strong, maturing startup and investor community, which is pushing the country forward. Czechs have a talent for improvisation and finding solutions that work well, using innovation, research and development, and technology. We have invented many tools that have changed the world in fields such as nanotechnology, chemistry, and engineering. At the same time, we now have a pool of investors who are able to invest in new startup companies and back up the research and development that is done.
What is my perspective of the situation on the Central and Eastern European markets and in the Czech Republic? My view is that it is an area of great opportunity, especially if we look at human capital. As a whole, Central and Eastern Europe countries usually do very well and grow above the EU 28 average in terms of GDP. Only a handful of countries in this region grew less than 4% in 2017. Despite the language challenges, all of them have proven to be interesting places for expansion of foreign companies. Slovakia – together with the Czech Republic – is a regional powerhouse in regards to the automotive industry, which is also growing (along with other forms of manufacturing) in Hungary and Romania. The contribution of international companies to these four countries in value-add is more than 40% showing their openness towards international capital. Poland with its large population is quickly gaining strength as a business and investment hub. Austria is considered a top innovator - more than 3% of its GDP is spent on research and development.
If we look at Czechs specifically, they may have a rather conservative approach in many areas, but not in doing business. Czechs are used to doing things on their own – using their initiative and creating ingenious solutions. Let me illustrate this pioneering spirit with two stories of examples we were fortunate enough to be involved in.
My colleagues at DLA Piper and I have recently been working on a very interesting acquisition deal. A Czech game developer startup called Warhorse Studios was acquired by THQ Nordic, a big international game publisher. The game studio was founded just a few years before the EUR 33.2 million acquisition. Warhorse Studios founder, Daniel Vavra, is a good representation of what I call the Czech approach. He was a very experienced game developer but he had a dream of creating a new, disruptive, game that would change the rules of the genre. He was persistent enough to convince potential investors that his project, a game called Kingdom Come Deliverance, would be successful. However, before investing, they set him a challenge: to crowdsource enough money to start the development of the game. Only when he reached this target they would invest in the project. He raised – and exceeded – the required amount. As a result, investors provided the promised financial support, and a few years later the game became a huge success, with over two million copies sold.
Another good example is Kiwi.com. A majority stake of this successful travel search engine has recently been acquired for about USD 215 million by private equity firm General Atlantic, in a deal that converted Kiwi.com into a truly global company. At the beginning, Kiwi.com started with the simple assumption that things could be done differently and better. Its founder, Oliver Dlouhy, was not satisfied with how travel and air ticket search engines worked, so he and a small team of developers from South Moravia created a new project which has since grown tremendously. It was his stubborn approach and vision that led to this success.
As is usually the case, the most valuable investment is in smart people – in those with potential, who can transform ideas into great things, projects, and services. And I am lucky and privileged that we have an abundance of such people in my country – and in our Prague office. We have experienced lawyers who are not afraid to go the extra mile and deal with any issue. They are not afraid to challenge themselves, gain new knowledge and skills, and assist amazing clients (not only those mentioned above) on their way to success. And this is not only great news for the office but also for the country.
By Miroslav Dubovsky, Partner, DLA Piper Prague
This Article was originally published in Issue 6.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
