The stigma of entrepreneurship in Central Europe

April 29, 2012, Sunday/ 15:34:00/ LES NEMETHY

I returned a few days ago from Silicon Valley. It was like a breath of fresh air. I talked to people who were involved in creating companies worth hundreds of millions of dollars within a few years after incorporation.

There is a constant stream of new start-ups and projects, an excitement in the air. A recently incorporated company was sold to Google for $1 billion. And it got me thinking about how entrepreneurship is viewed so differently in Central Europe and the United States.

In the United States, in my view it is the Ayn Rand view of entrepreneurship that prevails: entrepreneurs are the ultimate modern heroes of society. They create the wealth and are the engines of development and progress. They are among the most respected members of society -- in a place like Silicon Valley, probably the most respected. And as Steve Jobs once famously stated, their objective is to change the world (at least in their own little niche). They often succeed.

In Central Europe, perhaps as a hangover from Homo Sovieticus, the intelligentsia typically looked down on business. Even before the fall of the Berlin Wall, they saw nothing intellectual about business. Business is little more than buying low and selling high. Sales is not something with which we dirty our hands. A writer who demonstrates creativity or a politician who exercises power is incomparably higher on the food chain than a businessman.

Over the last 20+ years since the fall of the Berlin Wall, a large segment of Central European society looked, and still looks, at business with a jaundiced eye; making money in business is all about dubious privatizations, government relationships, or worse: cheating on taxes and corruption. The “nouveau riche” way of conspicuous consumption and occasional arrogance has not helped.

Many Central Europeans are generally unaware how many thousands of companies there are throughout Central Europe whose owners and managers deserve to be respected in the Ayn Rand way: creating wealth, innovating, bringing new products into the market, creating jobs and exports and competing in international markets. There are thousands of Central European entrepreneurs who are making an impact, changing the world for the better.

A comparison in business values between the US and Central Europe could be made in many other ways. One North American investor whom I greatly respect refuses to invest in an entrepreneur unless he or she has already been through a bankruptcy procedure. Such entrepreneurs have learned the value of a dollar and have learned some real lessons. But bankruptcy still has a very strong stigma in Central Europe. The laws of some Central European countries even prohibit individuals who have been directors in companies that declared bankruptcy to act as directors for a number of years. In Central Europe there is more of a tendency to look at bankruptcy as a total failure, rather than the ultimate learning experience. I perhaps exaggerate to make my point.

You have probably gathered from the tenor of my comments that I am more of the American school in my attitude towards entrepreneurship. Our standards of living in Central Europe, our ability to withstand financial crises and our ability to address social issues such as health and poverty are directly linked to the ability of our economies to create wealth. And entrepreneurs are the primary orchestrators of that.

It will take time for social views to evolve in Central Europe; I believe they are evolving, but faster would be better.

*Les Nemethy is CEO of Euro-Phoenix Financial Advisors Ltd. (, a Central European corporate finance company focused on mergers & acquisitions. He is also the author of “Business Exit Planning,” published by John Wiley & Sons.

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