And if investors are seeking the opportunities and technologies of the future, they should focus their attention on the Middle East. Just as the Czech company Springtide Ventures, which is 100 percent owned by Karel Komárek's KKCG, did years ago. It is this company that is looking for investor opportunities in three specific areas - cybersecurity, artificial intelligence and the cloud - in this Middle East country of eight million inhabitants.

To talk about how to seek and find the right opportunity in an extremely competitive environment, how to develop it from the Czech Republic, and how to leverage the strength of KKCG and Aricoma as its IT pillar, come two men who describe themselves as an inseparable duo - David Marek and Karel Tušek. During the course of the interview, they provide such an interesting insight into the soul of the world of start-ups and venture capital, and so many good stories, that it made for a slightly longer read than originally planned. Amongst other things, we will try to identify what we Czechs lack in order for the world to see us as a country of start-ups.

When Springtide Ventures started nine years ago, it was associated mainly with Czech start-ups. The broader public was interested, for example, in the purchase of game developers Geewa and the Nejřemeslníci platform. Today, the strategy is completely different. Instead of B2C, very narrow B2B; instead of a broad scope, three specific specialisations. When and why did the strategy change so dramatically?

David Marek: We came to rethink the overall strategy some four years ago, shortly after I joined Springtide. We realised that it doesn't pay to have too wide a scope. In practice, a narrow specialisation beats a generalist approach. If you understand something down to the finest detail, you’re more likely to identify the right opportunities, and to be able to work with them the moment you invest in them. And also to avoid investments that might be off course. Years ago, we worked together to define three areas that we believe are stable regardless of economic cycles. The first is cybersecurity. This is undoubtedly a huge field that will be of crucial importance in the future. The same goes for artificial intelligence. Since the beginning of the year, hardly a day goes by when GPT is not mentioned at least ten times, while AI has become a buzzword among the general public. Yet it is also true that the cloud and AI are transformative technologies and fit well with KKCG's overall IT pillar strategy. We wouldn't go into B2C models again as discipline beats opportunism in the long run. Although it sometimes happens that you miss an opportunity that could be extremely profitable. However, we focus on what we understand.

But above all, your strategy has changed in another key respect. Instead of Czech start-ups, you’ve started investing almost exclusively in Israeli ones. If we look at your portfolio of companies today: PlainID, Cognni, Shield IoT, Source Defense, Netop Cloud, Equalum and Cyngular are all connected by the fact that they originated in Israel. Why Israel?

Karel Tušek: In short, it's an extraordinary ecosystem that exists there. The whole country is driven by start-up culture. The last time David and I were in Israel, we were given a ride by a taxi driver who started presenting his own start-up to us on the way to the airport. He pitched us a captivating idea and showed us a demo of the future project on his mobile phone instead of navigation. Yet he couldn’t have known that we were dealing with start-ups in Israel. This is best illustrated by how the country’s entire culture is immersed in the desire to develop, sell and succeed.

David Marek: Yes, Israel is the cornerstone of our investment strategy. On the other hand, we’re actively open to new opportunities, especially in the Czech Republic, as we have the ability to pass on what we have learned in Israel to Czech start-ups and domestic founders. We don't close ourselves off to Europe in the wider sense either, but it's crucial for us to know the founders and the ecosystem as a whole, so we don't want to stretch ourselves too wide here, either. And from this perspective, Israel and the Czech Republic are our basic geographical strategy.

In what ways is Israel most inspiring to us, and how can we be a source of inspiration to Israel?

Karel Tušek: The fact that we have one foot in Israel and one in the Czech Republic gives us the opportunity to compare the approach of the companies themselves and their agility and efforts to achieve something. Both mentalities have something in common. Between us, we can say that sometimes Israeli assertiveness can make one a bit tense, while on the other hand we are sometimes too hesitant.

David Marek: Once they have a plan, the Israelis jump out of the plane and only then check if they have a parachute. In contrast, we Czechs spend a lot of time analysing whether to get on that plane at all. For my part, I believe that the optimal model is somewhere in the middle.

One frequent aphorism goes: "The Czechs are good at technology, but not at selling themselves". Is this true?

Karel Tušek: For the most part, yes. Even if they don't have a finished product, the Israelis are able to sell you the overall vision. Often, the client only later finds out that everything is not yet ready. It’s the other way around for Czech companies; we’re very appreciative of the fact that the products themselves tend to be really top-notch, and what we say often works even better than how we sell it.

How come? A legacy of forty years of communism, with central planning rather than trade and business?

Karel Tušek: I don't think it's even the legacy of communism; we've been like this since the days of the Austro-Hungarian Empire. It's more part of the German mentality. After all, the Israelis sometimes jokingly say: "You’re like the Germans, but with you it’s better."

How do Czech and Israeli founders differ in their business strategy mindset?

David Marek: Here, it’s very interesting to compare Israeli and Czech companies. A Czech company is usually looking to expand into Slovakia, Poland and Central Europe. It is only in the longer term that it envisages the whole of Europe and not until the later stages that it cautiously looks toward America. The US is the number one destination for Israeli start-ups. This is also because they don't have much room to expand in the Middle East region. And at the same time, they know that in the United States they’ll find a huge community and a lot of established "entry points".

How to convince them to start in Europe? Such as in the Czech Republic, or perhaps backed by Czech capital?

David Marek: In general, Europe is no less interesting to Israelis than the US. There are just fewer contacts, fewer entry points. But once those entry points have been created - and that's one of the things we're trying to systematically work on - Europe has a lot to offer.

Karel Tušek: In principle, Israelis don't distinguish between America and Europe. The moment they have the opportunity for a potential strategic partnership or someone to help them grow, they jump into action. Their start-ups are all about moving forward as fast as possible. If Europe opens the door, they won’t hesitate to take advantage of it.

David Marek: It is good for us that we’re from the centre of Europe; we’re close to Germany and the Czech Republic is seen as a developed country. Moreover, as a country, we have truly excellent diplomatic relations with Israel, which is also reflected in everyday life. All Israelis know Prague, the vast majority of them have been here, a large number of them have been here for their wedding or a friend's wedding, so this is a unique connection, one that makes us interesting to them.

How does your cooperation with Israelis work in day-to-day practice?

David Marek: We have a man right there in Israel. Without our Israeli colleague, Sivan Kanev, it probably wouldn’t be possible. You need someone "on the ground", someone who thinks and acts like an Israeli. Sometimes we also give Sivan the unofficial title of "chief negotiation officer". Karel and I are in Israel every four to six weeks, usually spending a very intense week there. Despite the fact that we sometimes talk of taking a dip in the sea, it never actually works out as Sivan doesn’t give us the opportunity.

Karel Tušek: But of course, we’re in talks with companies in our portfolio here and there. It's not that we don't communicate with them during breaks. We’re a hands-on investor, and when we’re in Israel, we don't slack off.

David Marek: Sivan is not only our chief negotiator, though; we also sometimes call him "master of our time". It's quite normal for us to manage eight meetings in a day. And anyway, at nine o'clock in the evening we sit down to dinner and work. You have to be in Israel, you have to be there often to get to know Israelis. It takes a while to adjust to their mentality. Flying there just once a year to take a look definitely wouldn’t work.

Karel Tušek: There’s no substitute for human contact in start-ups. If you invest in stocks, you don't need to know the company, it's a stock market commodity for you. In start-ups, the team decides. The newer the company, the more time you have to spend getting to know each other. You can have the product you want, but if you don't fit together and trust each other as people, it can't work. The nature of a start-up is that it’s a bumpy road. It’s up and down all the time. And you need to be sure that the moment things go down (and, to be honest, there will always be problems), you need to have trust in each other. A lot of things are gentlemen's agreements, one might say.

What arguments play in your favour when investors from almost all over the world are heading to Israel?

David Marek: Once again, good diplomatic relations help us a lot. By being the only Czech venture capital fund that systematically invests there, we are already known as "The Czechs", and it's a good differentiator as there are dozens, if not hundreds, of American VCs on the market. That's why we're a bit interesting and exotic for them.

What’s the Czech start-up scene like today?

Karel Tušek: The environment and climate in society is changing a lot. Ten years ago nobody knew what a start-up was, but today you can talk about it with people and it’s seen in a much more positive light. But we're still ten years behind the Israelis in how the whole ecosystem works. That's why we’re purposefully developing activities aimed at bringing the best of their know-how here. And at the same time, transferring some things from here to there. Both sides have room for cooperation here.

Is there any hope that the Czech Republic could be a "start-up nation" in the near future, or is that too ambitious an idea?

Karel Tušek: It's never a bad thing to have big ambitions. If some politicians come and plant a flag now, like they did in Israel years ago, and say that in ten years’ time we’ll be the top European country for start-ups, I’ll be very happy. On the other hand, I’ll always be troubled by the fact that we Czechs are always seeking our own ways. Instead of following paths that have been trodden before us. The sceptic in me thinks we might not make it.

David Marek: The topic of start-ups is being addressed across several ministries. We can see that the government sees this as an issue, but capacity is constantly being drained by more pressing short-term matters. The willingness is there, but let's see if it somehow translates into concrete action and results.

Karel Tušek: By the way, in percentage terms, we spend more on science and research than Israel. The money is just used in a different way. Of course, nothing can be copied precisely, but there are a number of models that we could easily transfer here as well.

But... where to start?

Karel Tušek: We should look at how to support start-ups in their earliest stage, where the "death rate” is highest. In our country, every start-up has to be financed by family, friends, maybe some "angels", but these are still very limited resources. In Israel, the state itself often steps in and helps them to get established and develop. Similarly, we can take inspiration from incubators, various accelerators and educational centres. These shouldn't be offices where the doors open once a week, but truly active centres that help start and set up businesses. These are models that can be adopted quite easily. We have been to several incubators and have very good relationships with them. Often you can get ready-made cookbooks from them, which ministers from all over the world take and go home to implement.

David Marek: The biggest pitfall is that we love our specific Czech ways. Things are changing a bit now; I feel more optimistic about it. You often don't need a million studies, but just a few people with the desire and ability to do something. From what we have observed, there are people like this in the Czech public sector.

Which of your investments do you consider the most interesting at the moment?

David Marek: I’d give as an example two companies that are on opposite sides in terms of their "stage of maturity". The first is PlainID, which we first invested in in mid-2018, and addresses SaaS authorisation management. This is a company that has already completed its "C" round and has become a market benchmark in the field of authority management. According to all the signs, it can now be categorised as a ‘black unicorn’, meaning it has all the prerequisites to become a unicorn within a reasonable time frame. The second is Cyngular Security. This is our pre-seed project, which we invested in in the third quarter of 2021. It's a company founded by the former deputy director of Israel's National Cyber Security Authority. We were the first to put money into the project. One thing that brought us to this project was that we had a positive reference from the co-founder of PlainID. This is a beautiful example from the opposite spectrum.

Karel Tušek: When talking about artificial intelligence, it’s worth mentioning Cognni. The technology is about a year, maybe eighteen months, ahead of developments in cognitive document recognition. And we have such a head start that the next release will do what has previously proved impossible - recognising up to a hundred world languages. Including for Japanese and Arabic, as well as many other languages that are not catered to today. That's why my colleagues from AEC asked when it will be able to handle Czech, because at that point you’ll find another big customer.

Speaking of AEC, what is your cooperation like with ARICOMA Group, the IT pillar of KKCG Group? There must be some overlap in your activities.

David Marek: From a formal point of view there is no connection, except that we’re part of the same group. Springtide invests in software technology companies. But we’re investing in start-ups, which in essence are companies that "consume cash", product companies that develop and sell software through licensing. In contrast, ARICOMA invests primarily in service companies that are already EBITDA positive and generate cash. That's the fundamental difference. However, we are in contact with our colleagues from Aricoma, so there is a synergy there. The software tools that our start-ups develop or sell are useful for the companies that form part of Aricoma. The most logical cooperation is with the AEC, as there are synergies in the field of cybersecurity.

Karel Tušek: The difference between a product and a service is crucial. Our companies are product-based, with the majority of our sales coming through licensing or sub-scripting. Typically - and this is what we’re looking for - it is a 'recurrent' model. We can estimate that the sales we achieve this year should be the same next year as well, unless the customer leaves. A very small part of this is for installation or implementation-related services, which comprises up to ten percent of our total sales. ARICOMA and Springtide together form the IT pillar of KKCG. We can rely on know-how when selecting companies. In addition, service companies are very often clients of these product companies.

Based on what parameters do you evaluate the company you plan to invest in?

Karel Tušek: When we invest, we look at companies that should be at the top in three to five years and try to hit the current trend as accurately as possible. From this perspective, we have to ask ourselves whether what is cutting edge now will remain cutting edge in the years to come. Whether it's not "obsolete" in terms of technology. This is particularly related to artificial intelligence. There are a number of projects that are based on AI today, but we already know that they are very vulnerable in terms of further development. We really try to work with experts, mathematicians and data scientists to be as sure as possible that the investments make sense.

Who ultimately decides that a particular start-up could be the right investment for your portfolio?

Karel Tušek: It's a team effort, where everyone has to be on the same page. It's certainly not that someone is cracking a whip over us. It is a thesis that is formed over time, which we then carefully verify together with the shareholder, and finally we all have to agree on it together. These three pillars are the key. On the other hand, there are areas that we are systematically looking at, as the cloud, artificial intelligence and cybersecurity interconnect and morph in different ways. For example, we have been monitoring quantum technologies for a long time now, as they will bring the next big breakthrough.

Where can your, or our, Israeli-Czech cooperation develop further?

Karel Tušek: We see huge opportunities for us and for Aricoma. And how to transfer know-how between regions. How to make Czech start-ups and talent work for Israeli companies and customers. There is a whole range of activities that we’d like to develop when our hands are free.

David Marek: We want to make much more use of what we’ve built, so that Czech companies have access to cutting-edge cyber, cloud and AI technologies. We want to be known as the ones who, when there is a demand for cutting-edge technology in these areas, are the right people to connect with.