A melting pot of inspiration

A melting pot of inspiration

Viesturs Sosars has created a stimulating environment giving start-ups the tools to grow and thrive. Colin Donald joins him for lunch at Pinot Restaurant in Riga

When BQ Baltic wants intelligence – in both senses of the word – on the Latvian tech entrepreneur scene, it saves time by going straight to Viesturs Sosars.

Sosars’ view of the dynamic world of IT start-ups is informed by spells working abroad that have given him a poised perspective on his native country, and left slightly cockney traces [London accent] on his elegant English – at times oddly reminiscent of the British-born Hollywood star Cary Grant.

Along with fellow entrepreneurs Andris Berzins, Gunis Grundstoks and Ernest Stals, Viesturs runs Techhub Riga, a pioneering “collocation” where, for a small per-person monthly membership fee (€80 for a fixed desk, €60 for moveable laptop space), fledgling tech start-ups can establish themselves in an informal but purposeful working atmosphere, and replace the insecurity of isolation, rub shoulders with other youthful businesses to discuss “scaling”, “A-rounds” and other start-up lore, and compare notes on common problems.

More practically, in a reasonably expensive city, they get cheaper office space where the costs of services such as kitchen and toilet facilities
are shared.

The fact that some teams elect to stay on in Techhub when their growth in personnel numbers (and therefore fees) mean that it would be cheaper for them to rent their own space is testament to the value of the collocation model.

If they want to, Techhub Riga members can tap into the combined experience of the wiser and more experienced heads that pervades the project, and also plug into the expertise of visiting entrepreneurs. In Viestur’s case that expert overview – which is sometimes accessed by the Latvian Government – was gained while starting up RealSoundLab, a successful audio measurement software company, which he has led for the past seven years.

To catch up with Viesturs, and hear the news of Techhub’s progress, I invite him to Pinot, a restaurant adjacent to the famous House of the Blackheads, which has a reputation as one of the Old Town’s finest restaurants. It is owned and run by the father-and-son team of Aleksander and Dmitri Malahov, the former also a well-known magazine publisher and party organiser, invitations from whom are always a hot ticket in Riga.

It turns out to be a wise and well-informed choice. The food, which is French and Italian in inspiration, is amazingly good and the service impeccable, as might be expected given that the owner’s flair as an imaginative host is legendary. His creativity is evident in the decor, and his responsiveness to customers’ whims, mean that Pinot, and its sister restaurant M Cafe in the seaside resort town of Jurmala are particularly popular with well-heeled Russian tourists. The food may be fancy, but the prices surprisingly are not, or anyway not at lunchtime (see box).

This is despite the fact that, Latvia’s President temporarily moved his office to this part of the city pending an office refurbishment, Pinot has also become a venue for high-level international politics. It’s not unusual for diners to find themselves “accidentally” eavesdropping on the high-level international discussions with visiting European statesman at the next table.

Apparently the staff consider the occasional security sweeps with dogs in advance of VIP visits as a small price to pay for this additional kudos, though a more serious drawback is that the handy parking spaces have been fenced off without compensation to become part of the presidential car pool. This is one impediment to trade that Dmitri would like the Latvian state to address.

Pinot’s atmosphere, and the assiduousness of the staff, encourage guests to take their time and indulge themselves. However on the day we lunched Viesturs – a busy man – had a seminar on the Chinese economy to go to afterwards at Riga’s Stockholm School of Economics (SSE) where he also lectures on entrepreneurialism. This was therefore no occasion for a full blow-out with wine and pudding, though in the interests of proper research your correspondent felt duty-bound to sample both.

Techhub Riga (slogan:“We help startups get better, faster”) was founded in February 2012. It illustrates the vision of Viesturs and the other founders – and the promise of Latvian entrepreneurship – that it was the first of a series of spin-offs of an original Techhub next to Old Street Station in East London also known as “silicon roundabout”. Since then further satellites have been launched including one in Manchester. But the fact that the first expansion of this glamorous and innovative brand was to Riga did the reputation of Latvian entrepreneurialism a lot of good amongst the globally-minded tech start-up community.

Before we peruse the menus, the big news that Viesturs has to impart is that Techhub Riga is moving. The project has outgrown the atmospheric and attractive historical building not far from Riga Castle, that in its time has served as an arsenal, a prison, and what in the old days would have been called a “mad house.” Viesturs jokes that it should have been known as “silicon asylum.”

Anyway, Techhub is now too big for it, and has also come to the end of a two-year
preferential rent deal. The company has found new premises on another, bigger, converted old building on Kalku street, the main artery of Old Riga, and a short walk on cobbled streets from this restaurant.

Although he is as positive as always, from reading his body language, I would guess that Viesturs has mixed feelings, and perhaps some trepidation about the move. It’s a sign of success, but in his business, surroundings can alter working atmosphere. The new space is over two floors and there is a lot more of it, putting at risk the intimate dynamic that worked so well in the original place. Also two of his bigger members, interactive and graphic software pioneers Froont and Infogram have announced that they are flying the nest, a mark of their success that he admits prompts a complicated reaction of pride and regret, perhaps like a parent seeing a grown-up child leave for college.

Also, he jokes, “we now have to fill the space and it’s not THAT easy. We have about 50 working desks and right now only 25-30 company members.”

Techhub Riga’s founders are thinking of ways of tweaking the business model, perhaps encouraging successful “graduate” companies to pay a tiny proportion of success back to the place that nurtured them so that “when you exit or raise a round you pay a little bit back. If you raise $2m then paying $5k is peanuts, but its huge amout for us.”
“The ultimate goal of Techhub is to facilitate building companies, not just cool start-ups but financially successful companies. Initially we were very modest in our aims, which were basically to fill the premises and make ends meet, and we have already fulfilled this goal.”

“Culturally Techhub had a good effect. The start-up culture has seen a real change over the past 2-3 years. Has Techhub somehow facilitated that? Or has Techhub been successful because of that? It’s a chicken or egg question.”

Viesturs may be determinedly positive, but he is also quite frank and realistic about Latvia’s lack of international distinction in the IT start-up space, for all the progress of Techhub. Indeed it must be taxing for the country’s morale that it borders with Estonia, a country with little over half Latvia’s population that it is the birthplace of Skype, which is virtually a holy name, universally revered in the international brother-and-sisterhood of start-ups.

On Latvia’s southern border, Lithuania, which perhaps has less of a technocratic tradition than either Latvia and Estonia, has more tech start-ups, perhaps a function of its size, which is twice that of Latvia’s population.

“The general profile of start-ups in Latvia is quite low, at least lower than Estonia and also perhaps Lithuania. Estonia for a variety of reasons, perhaps the most significant being the existence of Skype, but it’s not just the start-up community themselves but its citizens in general who celebrate that they have this huge success story, that is clearly associated with Estonia.”

“This means that anyone doing any sort of start-up is automatically more visible. The average person in Estonia is at least aware that there is a tech start-up sector, whereas in Latvia...? I don’t know.”

As we chew on the succulent snails in our spinach soup, I ask Viesturs if any company in Latvia comes anywhere close to demonstrating the potential of a Skype? He scoffs.

Sosars Food

“Nothing comes close. There are expectations around some nice start-ups that are doing well, but its really incomparable. But these are companies that have barely made their A round [a Series A round is the first round of venture funding in the Silicon Valley model of start-up company formation]. You can’t compare an elephant to a flea, the comparison doesn’t make much sense. Only when there is a tech company in Latvia which has a turnover getting into eight digit numbers can we start talking of having anything that gets close to Skype.”

As he describes it, nurturing a successful start-up in an area as dynamic as IT, where predicting the market place of tomorrow is a wildly hit-or-miss affair, the secret of success is largely a numbers game, the more people encouraged to come forward, form a company and attempt to commercialise an idea, the more success you will have.

Even if Latvia has yet to achieve critical mass as a nursery of start-up culture, the good
news is that the ideas keep coming. A glance at Techhub’s website reveals a rich variation of ideas, Flatline, an online student accommodation finding site, GoCarShare (you can guess) Mailjet, an email management tool, Swiftkey, a new language technology invention.

“We have between one and three applications every week, which shows you that that something is going on. There are other collocations in town, but if it’s in IT and doesn’t require specific [physical infrastructural] things, people tend to think of Techhub.”
Do they ever turn applicants away? “We are not judging on their stage of development, we’re judging on the idea. We’re very open”.

But surely there are some start-up ideas that are so wacky or ill-considered that it would be better not to encourage? “That’s the cool and the weird part about tech start-ups, you never know. No matter how weird the idea, you never know which one will fly.”
“That’s why all the best seed investment and all the best policies are based on just getting them all in! Get the numbers. If there’s 100 [fledgling start-ups] there’s a chance you will get 20 [scalable companies]. If there’s ten, there may be one”.
“In this field, cherry picking is impossible, and it’s only people who are inexperienced who believe that they are good at cherry picking technology.”

Techhub’s admission procedures are very simple. To get through the door, all that is required is that the team should be working on a product, even software-as-a-service product, but a product. This means no consultancies, and no support services.

“We don’t want to create an immediate market place with freelance designers trying to sell you stuff, that doesn’t help.”

The conversation moves off start-ups into the more general area of Latvia’s technocratic strengths. The quintessentially Latvian companies that Viesturs kindly tips me off about in the meantime, are not ones with the hit-or-miss allure of IT, but extremely successful and highly advanced niche tech players, like MicroTik, a manufacturer of networking hardware and SAFtechnica, which designs, produces and distributes on digital Microwave Data transmission equipment.

We talk about Latvia’s economic progress, which by some measurements is the highest in Europe. Although he disclaims any special knowledge of economic strategy, Viesturs has enough “common sense” not to be satisfied with the kind of predicted headline GDP growth rate of 3.5%. As the father of three children (aged, in a pleasing mathematical series, 21, 14 and 7), he does admit worrying a bit about the country’s future.

“I see things from an entrepreneur’s perspective rather than from that of a macro economist, but using common sense I think there are some very decisive and very tough times ahead of Latvia, which faces what economists call the mid-income trap.

“This is what happens when you find that you aren’t able to grow any further, or not without improving productivity, and you can’t really improve it in a small country like Latvia. You could perhaps if you import workforce, but given Latvian general attitudes to immigrants, I don’t think that will happen.”

“The problem for the economy is that there is not much rise in productivity in any given industry, and the headroom is starting to get smaller. Trying to shift the entire economy into industries that allow for higher productivity is not easy, because the whole white collar market is saturated. What can we do differently? We have to figure it out.”

VIP“In a sense I am sceptical about the long term wellbeing of Europe. Latvia is part of a continent which is clearly stagnating. Compared to almost every other region in the world, we’re doing worse. This worries me more as a European than as a Latvian!”

Viesturs jokes that he should be forcing his children to learn Chinese, but “they’re almost as lazy as I am so they’re not going to.”

“Kids should be focused outside of Europe. The world is in transition, we are moving away from the state being a unit of measurement of everything to the region being the unit that counts. I’m afraid the four separate regions of Europe don’t have much chance in a global competition. The other guys are way bigger!”

Viesturs tells me that one of the lessons he tries to impart to the companies he mentors is to think outside of Europe, though start-ups with any sense don’t need much encouragement in this direction, especially given the home market is far too small for meaningful testing and piloting of products and services. “You need to be global from day one.”

What’s impressive about Viesturs is that he doesn’t sugar coat stuff, which makes his underlying optimism more persuasive. He is a tech-head whose interest is in solving problems and making things happen. In a business sector that is not immune to hype, he and his colleagues have helped to create a bridge between potential and reality, one that will help make Techhub Riga into a realistic description of the nature of the Latvian capital, rather than just a brand name.

Pinot, 26 Grecinieku street, Riga
+371 6 722 5616