Networking giant Cisco has never made a secret of its aggressive acquisition strategy, which should be good news for start-ups in Central and Eastern Europe as the company gets set to deepen its ties with the region.
The company lists 174 acquisitions dating back to 1995. Last year it bought ten companies, including for the first time two from CEE (Vienna-based SolveDirect and Cognitive Security, a 28-person company headquartered in Prague).
Cisco, working with the Pioneers Festival team, will select five teams to join its first European Entrepreneurs in Residence (EIR) program. It will make the announcement at the Festival, an annual conference in Vienna that this year takes place on 29th and 30th October. Cisco EIR focuses on companies that are innovating in Internet of Everything/Things, security, big data and analytics, smart cities and other transformational opportunities.
While other companies have looked to the larger tech hubs such as London, Stockholm or Berlin to connect with tech talent, Cisco has chosen to base its program in the Austrian capital.
Hilton Romanski, who leads corporate development at Cisco and is a guest speaker at the Festival, says working with start-ups in Vienna is part of the company’s long-term strategic ambition to strengthen its engagement with the CEE region.
“We looked at the world about seven ago and said, ‘where do we think the next big trends around innovation and venture formation are going to occur?’,” says Romanski. “Very quickly we zeroed in on Central Europe.”
This Market Is Full Of Really Talented Scientists
“The reason why we are so passionate about being in the region and having this engagement with Pioneers is because we see a lot of very compelling innovation happening across multiple sectors that we care about, whether it is IT automation, services, video, security, really right across the gamut of things we care about,” he says, adding that he sees the region as a place where Cisco can potentially acquire more companies.
Romanski acknowledges that while the level of engineering and mathematical skills in the CEE is high, business skills are not as well developed. But, he said, this is a relatively easy problem to solve.
“You have to weigh the trade-offs,” he says. “This market is full of really talented scientists and mathematicians that have come out of an educational system that is really world class and they are inventing things that are really innovative but you need to package and really drive that into a marketplace. I would rather solve that problem than marketing something that ultimately anyone can replicate pretty quickly.”
Winning companies will get funding from Cisco in the form of a convertible note, as well as the free co-working space in the city. But, says Thomas Werner, one of the two Cisco people running the accelerator, the most important thing the company will bring is a combination of its mentors and staff, alongside the opportunity to connect with Cisco customers. Of the 300-plus applicants (see the panel below), about half are from the CEE region including the Baltics and Russia.
The City Of Vienna Was Very Open
How does Cisco see the process working? “I want to find start-ups that are close to us and what we do, but extremely innovative,” says Werner. “After six months of incubation I want to have a co-development, co-market, co-usage agreement to take them on the route from product to market 12 months after the program itself. That will be a very tangible outcome.”
Alongside Werner, the program will be run by Martin Bittner. The two entrepreneurs were part of SolveDirect, a Vienna-based provider of cloud-delivered services management integration software and services acquired by Cisco in April 2013.
“The city of Vienna was very open, letting us use their projects for use cases,” says Bittner. “Pioneers are very active in the start-up community. The elements came together pretty well here and our mission is European wide so it’s not that important where the program is.”
Bittner says he hopes that some of the teams will be able to work with the Vienna authorities to deliver a program that can really help solve some of the city’s problems, maybe in the area of the Internet of Things. One in ten applicants to the EIR program said it was working in the IoT space.
“I would like to have a start-up that solves a problem that everyone gets,” says Bittner. “That would be something like we can save the cost of lighting in the city by millions and make it secure. Those type of things are things that normal people get.”
50 Billion Devices By 2020
Cisco has bullishly predicted that 50 billion devices will be connected to the Internet by 2020, so that’s just five years away. The company also released a white paper that said the Internet of Everything had the potential to unlock $14 trillion of value globally. To put that into perspective, the combined GDP of the 27 member states of the European Union in 2012 was $16 trillion.
Hilton stands strongly behind the company’s projections. “If you imagine the things that are currently not connected but by virtue of the fact that IP anywhere is now a reality simply because it’s cheap enough — a sensor on a piece of clothing, or sitting on a jet engine at 30,000 feet, or sitting on the shop floor — that is a relatively inexpensive individual value proposition that in aggregate begins to become very robust because it redefines the processes that have so far been manual and closed in nature,” he says.
“Think about the trillions of dollars that are involved in all the different processes right now that are associated with any number of things that IP will go to add much more value to. The numbers add up very quickly.”