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A Startup Is a Predatory Fish. The Law Must Allow for It

Vladan Hejnic na akci JIC
I invest in companies

At an investor meetup in Brno, Martin Jiránek and I discussed the startup act currently going through the interministerial comment procedure. I left in an optimistic mood, though with one important reservation that Martin wrote down.

On 5 October the South Moravian Innovation Centre, together with Garage Angels, hosted a gathering of investors where Martin came to present the basic outlines of the proposed law. As the government commissioner for startups under Minister Havlíček, he also brought Markéta Přenosilová from CzechBusiness, the agency that has merged CzechTrade and CzechInvest since August.

I have known Martin for a long time. I can say we are friends, but even so we did not make it easy for him in the room. We had questions prepared and we challenged him quite a bit.

We see the law as a step in the right direction. At the same time, we would like it to be more comprehensive and to address not only the needs of investors, but also the needs of the startups themselves.

What Has Worked

Let me start with what I consider a good step. There is no shortage of them.

The proposed law introduces a definition of a startup for the first time, something concrete support can be attached to. According to the government proposal, it means a company up to eight years from founding, up to ten years for selected deep-tech projects, with annual revenue of up to 250 million crowns, which does not distribute profit to its shareholders and whose product, traction and team are assessed by experts.

An investor will then be able to deduct an investment in such a company from their tax base, up to five million crowns a year. The government is aiming for it to take effect from 1 July 2027.

At first glance a definition of a startup may not look like anything groundbreaking. But without it the tax relief would be an invitation to abuse. Anyone could claim to be a startup whenever it suited them.

This is work that is not very visible and yet it is essential. Big thanks for it go to Martin and to the Czech Startup Association, which has been working on the definition of a startup for a long time.

So we have a foundation to build on. And that is exactly my point: that we keep building on it.

A Startup Is a Predatory Fish. And the River Keeps Changing

Here I come to my reservation.

So far the law is built mainly from the investor’s point of view. I am an investor, so I could actually be satisfied. I get a tax incentive to invest and the startup gets capital.

But my money only appreciates if the company manages to succeed. And a startup has somewhat different conditions for success than an established company.

A startup is a predatory fish. It swims fast, changes direction and hunts for prey.

A startup is a predatory fish. It swims fast, changes direction and hunts for prey. That prey is the right market and a product that solves a real problem for its customers.

Let us say the river is the entire economy. Today it is in flood. The currents shift, new obstacles appear and the fish has to keep reacting.

Those currents are legislation, market development and technology. And right now all three areas are changing fundamentally under the influence of artificial intelligence. What customers need is changing, what they are willing to pay for is changing, and so is how fast competitors can come up with a new solution.

A startup therefore needs one essential quality: flexibility.

It has to be able to recognise quickly that its original idea does not work, change the product, find a different market or rebuild the team. And it has to manage that with the smallest possible cost in time and money. Including ours, the investors’.

It Needs the Greatest Flexibility With People

When a company changes direction, it needs a different team. It has to be able to hire new people quickly, but also to handle flexibly the situations where it no longer needs certain positions. And more broadly, we need to straighten out the employment system, including the grey-zone contracting model in which a large share of early-stage teams operate today.

The startup act barely reflects any of this so far. And that is no accident. Right after it was presented, the media pointed out that the legalisation of that contracting model is missing from it and that it does not address employee options or freelance work either. The labour agenda is to be handled by the Ministry of Labour in a separate amendment to the Labour Code.

This year’s flexibility amendment showed how hard such changes are to push through. The Chamber of Deputies rejected dismissal without stating a reason. The debate also raised the point that severance acceptable to the unions could be ruinous for employers.

For a large company such a compromise may be reasonable. For a startup with eight people that discovers after six months that its market is somewhere else entirely, it can mean swimming against the current with a weight on its tail.

And now let us ask a question: does a startup typically employ people in the positions most exposed to such changes? Mostly these are IT specialists, marketers, business consultants or salespeople. In other words, people used to flexibility and to working at one company one year and somewhere else the next.

In my view you therefore cannot simply transfer to startups the same approach we apply to large factories and established manufacturing companies. They need more flexibility so they can respond to market changes and have a chance to succeed.

We Are Not the First. And That Is Good News

When I looked abroad, I found reasons for optimism. Some countries are already addressing similar problems and their experience can be useful for the Czech Republic.

Italy did it back in 2012. Its Startup Act allowed innovative startups to conclude fixed-term employment contracts without justification, extendable to 36 or 48 months, and to pay people partly with a stake in the company.

A study published in Small Business Economics in 2021 found that companies in the programme had easier access to capital and loans and hired more employees.

That matters to me. Flexibility here is not the opposite of employment. It can be one of the conditions for its growth.

In its 2022 startup act, Spain focused among other things on employee shares and investment incentives. The tax exemption for employee shares rose from 12 to 50 thousand euros a year and tax relief on investments in startups was strengthened as well.

Another important point is visible here: the state can support not only the person who puts money into a company, but also the person who helps build it.

And then there is the European Union. In March 2026 the European Commission presented a proposal for EU Inc., a single European company form with registration within 48 hours, no minimum capital and a common regime for employee options where tax is paid only on the sale of the stake.

It is still a proposal awaiting the legislative process. The direction is interesting though: Europe is starting to look for a way to remove the obstacles that complicate growth across borders for young companies.

So the Czech Republic does not have to invent everything from scratch. It can learn from what already works elsewhere and build on the first step it is taking now.

Why It Matters So Much Right Now

2025 was not an easy year for Czech startups. According to the Startupové Česko overview, the volume of announced investment rounds fell by almost a third year on year to 9.8 billion crowns. Founders announced the fewest investments in six years and the median pre-seed round was 13 million crowns.

Private investors play an important role at exactly this stage. Angels willing to put their own money into companies that have potential, but also a great deal of uncertainty ahead of them.

A tax incentive can make the decision to invest easier for them. But for those investments to turn into successful companies, startups also need conditions in which they can grow and respond to change.

Thanks for getting the startup act to the Chamber of Deputies belong to the whole startup community and to Minister Havlíček. I believe it can help get investment into young companies moving. But if we want those investments to produce results, we also have to create conditions in which startups have a chance to succeed.

Why a Small Gathering Gave Me More Than a Conference

That is also why the meeting in Brno was so valuable for me. Fewer than twenty-five of us came and the intimate atmosphere allowed an open discussion.

It was not just a presentation of the proposed law, but also questions, doubts and the experience of people who actually invest in startups. Martin Jiránek listened to our comments and wrote them down. Exactly this kind of discussion can help move the proposed legislation forward.

Thanks for organising it go to the South Moravian Innovation Centre and Garage Angels. And to Martin for coming not only to present the proposal, but also to discuss what could be improved about it.

We also have examples of people who decided to invest their own money in early-stage companies. Garage Angels is one of them. This club of more than twenty angel investors has already put over 300 million crowns into young companies. Initiatives like these show that we have something to build on in the Czech Republic.

Investing in Startups Can Become a Tradition

I imagine it becoming a normal part of business culture for a successful entrepreneur to invest in other companies alongside their main business. In people whose ideas they believe in. In young companies that may one day grow into their business partners, or even change an entire industry.

The law alone will not create such a tradition. But it can help bring capital into companies and give investors a reason to take the first step.

And if we manage to add rules that respect the needs of young companies and let them respond quickly to change, it will be better still.

It is not enough to bring capital into a river the fish cannot move in.

Because it is not enough to bring capital into a river the fish cannot move in. We also have to give startups the room not just to survive in it, but to grow.

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