Austria's IT companies are growing dynamically. However, investors seem to be too risk-averse and the tax incentives too low to keep the ideas in the country.

Vienna. "2 Minuten 2 Millionen" is the name of a programme in which a handful of Austrian private investors decide whether to financially support a young company. The sums invested in the show lead viewers to believe that Austria's well-heeled are scrambling for stakes in young, creative companies.

But the advisors of the Viennese law firm TJP, which specialises in transactions, wave it off with a sideways glance at the market as a whole. "In Austria, wealthy people are very risk averse. When you talk to foundation directors, the top of the list is real estate," says partner Christian Hurek. Together with his colleague Thomas Jungreithmeier, he analysed the transactions in the information and communication technology (ICT) sector in 2015. Their conclusion: The domestic start-up scene is a growth driver. So are business fields such as IT security, Big Data and Industry 4.0. What sounds like an accumulation of buzzwords has made Vienna a hub for IT companies attracting international buyers over the past three years.

In 2015, the industry grew two per cent above the average of 0.9 per cent general economic growth, according to surveys by TJP. But IT companies would leave the country once they reach a certain size. "What is still missing, of course, is venture capital like in other countries," says Jungreithmeier.

Berlin money calls

Large takeovers like that of the fitness software Runtastic are slowly attracting more private capital. "But at the moment the successful start-ups do it in such a way that they eventually go abroad," says Jungreithmeier. He points to the concentrated presence of successful Austrians in Berlin. In the past five years, 65 per cent of the takeovers of domestic IT companies were made by foreign buyers, mainly from Germany and the USA. In order to keep start-ups in Austria, the TJP analysts say that what is needed is not more state aid, but larger private venture capital funds. And the introduction of the often demanded tax relief for writing off losses from such investments. But it is not only risk aversion and tax unattractiveness that the two see as a stumbling block. Jungreithmeier: "I see in conversations that many investors think very locally." Theoretical scalability, i.e. the possibility of playing on the global market with the company in the shortest possible time, is the be-all and end-all in the industry: "Let's try Austria" is the wrong approach.

Even if investors, with few exceptions, do not think in global terms, the young companies do. According to a survey of 121 start-ups by the WU Start-up Centre, just under a third have a global presence. 89 percent pursue a global strategy. The survey also reveals the lack of private money in early-stage financing. Young people resort to their own savings, family savings and state subsidies before this. Good news for foreign financiers that Austria's IT scene is attracting. Jungreithmeier: "Of course it would be better to strengthen the companies and then help them expand. But that brings us full circle to the framework conditions." (loan)

("Die Presse", print edition, 27.04.2016)

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