Cluj-Napoca — A Vibrant Tech Scene
There’s a lot of buzz happening lately around the Cluj tech scene in the national and international media. Some even call it the “Silicon Valley” of Europe/Romania/Transylvania while some are a bit more skeptical. In the next paragraphs I’m going to express my point of view on what was the tech scene in Cluj, what’s the current state of it and where we’re headed for mid to long term.
Disclaimer: I moved to Cluj 7 years ago as a Computer Science student. Since then I was an intern, worked as a Software Engineer and I’m currently working as a Product Manager at one of Europe’s tech unicorns — it’s been a blast and I enjoyed every moment of it.
It all started in 1957 when Tiberiu Popoviciu founded the Institute of Numerical Analysis in Cluj. In the upcoming years the local universities slowly opened Computer Departments. These departments were and still are the foundation of the framework which generates a lot of technically talented folks. Lots of software and hardware engineers and developers graduate each year from these departments of universities. These folks are at the heart of Cluj renaissance. They represent the present and future not only of Cluj’s continual growth, but they also are a major contributor to Romania’s growth as well. Why? Because there’s a shortage of tech people around the world. European Commission urged people to learn to code, warning that a lack of basic coding skills could result in Europe facing a shortage of up to 900.000 ICT professionals by 2020. Similarly, a Gartner report stated:
By 2020, there will be 1.4 million computer specialist job openings, according to the U.S. Department of Labor. But projections show universities are not likely to produce enough qualified graduates to fill even about 30% of these jobs.
A lot of American and West European companies have started to outsource their tech needs to Cluj a long time ago for two reasons: (1) tech talent is hard to find in some areas around the world, and (2) tech talent is a lot more expensive than in Eastern Europe. This trend started for quite a few years now and it led to the birth of lots of outsourcing companies which initially started with a team of 3–5 guys and now, some of them employ hundreds of tech people. This was the step representing the tech revolution in Cluj. Nowadays, 1 in 25 Cluj residents works in tech. The density of tech people is greater than the one in Bucharest. Everything sounds good, right? Even with this density of tech people there still is a shortage of tech talent therefore a talent war is happening on the labour market.
Having a talent war going on can only lead to two things: (1) companies increasing salaries and benefits so that they can attract and retain the talent, and (2) job hopping. This means that the salary gap in Romania between people working in tech and others working in other industries is getting bigger, while the salary gap between Romanian tech people and West European/USA tech people is decreasing. Therefore, on the mid term, we won’t be that cheap anymore. So why should companies still outsource work to Cluj? Because the brilliant people in Cluj have evolved. They not only know the technologies and methodologies needed to build a great product, but they are also slowly becoming subject matter experts for different industries — AdTech, FinTech, RegTech, <insert your industry here>. This represents the evolution of the local tech scene after the outsourcing revolution. Adding industry expertise on top of tech knowledge. Offering end-to-end solutions and implementations.
Enough about outsourcing, lets talk product
A major milestone in Cluj’s tech scene was in 2014 when Facebook bought LiveRail — a 170 people start-up from Cluj for what is speculated to be a 400$-500$ millions transaction. This was a really big thing because they were bought for their business know-how. There have been other acquisitions as well at a smaller scale (e.g. Televan acquired Skobbler for 24$ million). These acquisitions created a lot of buzz in the international media (aka marketing), and it’s really important for getting future investors in Cluj.
This shows the potential is here, we just need a few more years to get the hang of things. A few more years during which the product guys learn the whole product lifecycle process not only the development stage which they already master having learned it in the outsourcing companies. A few more years where brilliant guys from outsourcing transition to product development and start to understand the different business models. A few more years for the entrepreneurial culture to get more traction in Cluj. A few more years to build a culture of mentorship where todays’ entrepreneurs will become the mentors of tomorrow. A few more years to build the digital marketing and commercial knowledge.
Government, where’s your strategy?
Having contributed with 6.7% to Romania’s GDP in 2015, ICT is one of the major contributors which can generate A LOT MORE given a proper strategy is created and then fostered by the government. You need to invest in young entrepreneurs if you want ICT to increase exponentially. You need to think on the long term ROI and not on the short term benefits. You need to start thinking about the big picture.
The tax exemption for people working in tech was a good start back in 2001. Look where it got you in 15 years — 6.7% GDP. Nice, huh? Invest, invest, invest! Create programmes where money can be accessed without too much bureaucracy! Create frameworks where entrepreneurs can thrive and create intellectual property easily!
Everything started with the outsourcing revolution which provided well paid and secure jobs for lots of tech graduates. Now we’re going through an evolution stage where we’re slowly starting to offer industry expertise and domain know-how on top of technical knowledge. We’re also getting more and more into the product world by either local development centres opened by foreigners or by local products brought to live by local entrepreneurs. It’s only a matter of time till we hear about new million dollar exits. I’m really hoping we’ll even get to billion dollar exits.
Cluj definitely has some of the main ingredients which are needed to build an ecosystem similar to Silicon Valley. We have the tech talent. We have a hard-working culture. We have lighting fast internet. We have a good international image. There are two things on which we should focus in the next years — bringing in investors and encouraging the entrepreneurial mindset. Can Cluj be compared to Silicon Valley? — I’ll let you decide that!