Goals, Recipients, Beneficiaries

HU has a large potential and would be well positioned to lead the CEE in deep-tech innovation. This needs patient but ambitious funding. This kind of investment is too rare in CEE, so the adaptation of Unicorn valley model is very important, like the complex accelerator tender, named Startup Factory program, to change that, as a special (Israeli styled) form of Accelerator complied with international standard, which is an appropriate instrument to prepare for the higher requirements for the highly growing Startup Hubs in developed, dense, mature innovation ecosystems within a particular fields of research and technological development which a range of Hungarian innovator SME-s, as potential unicorns. This restarting program also support the mentoring and investments on the investor parts helping the startups. Its budget amounts 5,75 billion HUF. This type of accelerator should be specialised, focusing their professional and business activities on prioritized fields, like IT Deep-Tech, energy technology and Industry 4.0.

The strategic objectives of the “Startup Factory 2023” programme, based on past experience and the needs of key players in the startup ecosystem, are the following priorities for support:

• To continue the co-funded investment activities of the successful technology incubators in the Startup Factory programme, allowing the accumulated incubation knowledge and experience not to be lost, but to be used in the long term.
• Strengthen investment in new incubators with sectoral specialisation (e.g. life sciences/medical technology; artificial intelligence technologies, deep-tech; environmental technologies), taking into account the characteristics of longer and more costly incubation.
• To further develop the co-funded investment activities of incubation companies that have achieved success outside the publicly funded programme.
• Encouraging the activities of state-owned incubators in the defence/dual-use focus area, due to the nature of the activity.

The general operational objectives of the programme will continue to be defined by the following objectives set out in previous calls.

• Strengthening incubators based on best international practices, to implement the following programme elements.
• The development of fast-growing businesses from project ideas based on RDI results, which (i) strengthen their export market positions by exploiting research results in the market, (ii) significantly increase knowledge-intensive employment, and (iii) accumulate business and product development knowledge, thereby strengthening the competitive, innovative SME sector and contributing to the long-term growth of the Hungarian economy.
• Leveraging the knowledge of incubation-experienced actors to create regional start-up hubs that provide opportunities for innovative ideas to emerge and be implemented.

Developing and strengthening the ecosystem that enables start-ups to develop, supporting early-stage start-ups (i) to support the initial incubation phase – from the idea phase, through validation, prototyping and development to the launch of an innovative product or service, and (ii) to help them develop a sustainable business model and achieve investment readiness.

• The incubator programme supports businesses which are interested in developing early-stage start-up companies based on innovative technologies through investment and extensive transfer of technical and business knowledge, bringing the start-ups’ products based on new technologies to market and obtaining the necessary additional financing.
• Who are the target organizations that benefit from the support scheme: Business, Non-profit organisation.
• Eligible beneficiaries: Enterprise (non-research).

Description of eligible activities: firstly, the eligible activities on their own, as the subcontracted support activities for start-ups, Services Provided: Incubators employ a cohort-based model, where multiple startups go through the program simultaneously. This fosters a dynamic environment that is both competitive and collaborative, encouraging learning and professional network building. Startups benefit from: hands-on mentorship, training sessions and workshops led by experienced entrepreneurs, industry experts, and investors. The program culminates in a “Demo Day,” where startups pitch their businesses to a select group of investors and industry stakeholders.

Secondly the activities not eligible on their own, as the fund management activity.

• Funding and Equity: Participation in the selected incubator program typically comes with seed investment in exchange for equity ownership in the startup. This equity stake, usually ranging from 25% to 50%, is intended to provide financial support throughout the acceleration/incubation period and beyond.
• Admission and Duration: Admission to accelerator programs is highly competitive. Programs meticulously select only a handful of startups from a large pool of applicants, prioritizing those with a well-defined product or service and demonstrably high growth potential.
• Fund management activity: the business, legal and financial activities carried out by the incubator in relation to the disbursement of the grant from the NRDI Fund under the Call.

The incubator programme supports businesses which are interested in developing early-stage start-up companies based on innovative technologies through investment and extensive transfer of technical and business knowledge, bringing the start-ups’ products based on new technologies to market and obtaining the necessary additional financing. One of the hardest elements of the market failure to overcome is the avoidance of higher-risk, higher-return projects. Market failures require public intervention and increased use of innovative financial instruments.

The amendment of Act XXXIV of 2004 on Small and Medium-Sized Enterprises and Support for their Development, effective from 1 September 2023, will provide a positive change for Hungarian start-ups, as start-ups will be able to raise capital from their investors more easily and quickly in the form of convertible notes. So, the incubator can meet the private equity investment commitment using this scheme. It is important to note, however, that a loan that can be converted into equity can only be accepted as a commitment if an acquisition of shares is made.

Duration of the project
The programs operate on a fixed-term basis, during which selected startups engage in an intensive development process. The primary focus is on scaling business models, accelerating product development, and refining market strategies, all aimed at fast-tracking market entry and investment readiness.

The incubation period varies depending on the type of program:

• Standard Incubator Projects: Duration ranges from a minimum of 24 months to a maximum of 30 months.
• Specialisation Incubator (New Incubator-V): Duration ranges from a minimum of 36 months to a maximum of 42 months.

Incubators are required to disburse the full amount of the sub-grant no later than six months before the physical completion of the project. This ensures that financial support is aligned with key implementation milestones. Additionally, at least 80% of the total project budget must be invested specifically in the supported areas.

Under this funding scheme, it is anticipated that 4 to 5 projects may be launched, each receiving between 600 and 900 million HUF.

The initiative is funded through the National Research, Development and Innovation Fund (Innovation Fund).

Total available budget for the call for proposals:
The total budget allocated for this call for proposals is HUF 5.75 billion. This funding is provided as a non-repayable grant.

Funding Ranges by Incubator Type:

• Old Incubator: HUF 300 million – 450 million
• Specialisation Incubator: HUF 600 million – 900 million
• New Incubator: HUF 150 million – 250 million
• New Incubator-V (Defence focus): HUF 450 million – 500 million

All projects must include co-financing, with aid intensity varying depending on the specific type and objectives of the proposal.

Programme Performance Indicators

The programme tracks key outcomes to measure impact and success:

• Volume of external investment attracted by supported startups
• Startup revenue growth
• Number and volume of successful exits

These indicators have consistently outperformed other public startup support programmes (e.g. venture capital schemes), often achieving 2x to 5x higher results.

An important strategic outcome of the programme is its role in generating a high-quality startup pipeline, particularly for angel investors and VCs—notably HiVentures.