Of the 30 or so professional venture capital (VC) funds currently present on the Hungarian market most are Western European and North American institutional investors, meaning domestic sources are marginal. While VC investors in Hungary have mainly brought expansion capital to large businesses in Hungary due to the successful buy-out opportunities they promised, there is a far greater demand for financing for start-up and early stage capital.
While western VC investors are more interested in the highest profit, state-owned VC funds are more focused on industry growth. A typical VC would rather invest in enterprises promising higher returns faster than in start-ups or early-stage small and medium enterprises (SMEs), where it can take anything up to 10 years to see any returns. SMEs also present a higher risk to large investors; their size alone indicates a management more dependent on its individuals, less diversification, and fewer exits for investors (secondary sales to larger VC and private equity (PE) firms may become the only applicable exit route).
