Global ecosystems: Romania, a nascent, but growing startup land
I am the child of an entrepreneur. Romanian entrepreneur.
Contrary to other countries, entrepreneurship is in the blood of a lot of Romanians. Post revolution, the country was so poor and suffering that many young educated Romanians had no other option to work, than to create their own jobs. SO they started from scratch and opened a business. Private companies emerged with the onset of democratic change. I will always remember the sweet smell back home from the local bakery chain my mother founded back in my home town, Arad.
I am the child of an entrepreneur. I have been dragged in the world of long accounting nights and hard working weekends. I loved the independent & badass image my mother had, the same she tried to project on my sister and me: work hard, don’t be afraid of failure, stand up for yourself, be a leader but don’t be afraid to also rub the floor on your way out of your office.
I however found out years later how corrupted the country remained and the pressure the state used to put on entrepreneurs: blackmailing to close business, over taxing and playing the well know “who knows who” game..
So what’s it like to be an entrepreneur in Romania today? A nascent, but growing startup land they say
Romania is one of Europe’s poorest countries, yet one of the fastest growing economies in the EU. The +6% of Romania’s GDP from the IT industry has raised awareness in the public administration and opened doors for support in innovation programs. The Romanian government put a focus on technology, attracting foreign corporates to invest, hire, or open up subsidiaries.
The country has a tax-exemption for IT workers depending on the contribution of their employer, but taxes on labour are among the highest in Europe.
Almost 80% of young educated Romanians under 30, have a positive attitude to working on their own, and every three of 10 Romanians think they will have their own business (“Entrepreneurship in Romania in 2012 and the Entrepreneurial Spirit in Europe”), even though the main motivation to do so is the possibility to have a second income (compared to other EU countries where this comes third after independence and self fulfillment).
STEAM Talent and surprisingly good IT
Positive residual post communism effects can be seen in the strong telecom infrastructure & a STEM-focused education system which puts Romania in the top 10 globally in number of certified IT specialists (according to Brainspotting over 100.000, about half of whom are software developers; with Bucharest that ranks between the EU capitals with the highest number of IT professionals).
A funny story is also how Romania is the sixth fastest internet speed country in the world (compared with US ranked 17th): back in the ’90 entrepreneurs set up small-scale local fiber networks using overhead cables due to Romtelecom (the telecoms company) taking time to offer broadband was slow to offer broadband in the ’90s, so. While other western European countries had to upgrade existing infrastructure to deliver broadband, Romania skipped a stage and went straight to fiber. Thanks to the genius mindset of entrepreneurs trying to make more out of less, Romania’s digital infrastructure ranks higher than other eastern European countries and makes it an attractive place to start a tech business.
Akash Nigam, co-founder of Valley-based messaging app Blend says in a Forbes article :
“This is world class talent and many of our Bucharest employees have been with us for over two years. We could have easily hired a team in San Francisco, but we chose to have our engineering core in Bucharest because it’s simply better than anything on the market, more prolific than your quintessential college hackers and far more nimble than your typical corporate team. This is our team for life.”
Source:Brainspotting talent map 2017–2018
A Go-Global strategy from day one
19.8M population, bilingual young generation (almost 90 percent of Romania’s IT professionals speak English) and a wide gap between rural and urban pushed Romanian tech startups to adopt a go-global strategy from day one.
Look at Aliens by Daria (robotics startup), is currently developing Woogie, a voice-activated personal assistant for children. Even though they are selling, promoting, and testing it in Romania, they’ve targeted the US market for its greater user potential: “When we had to choose one language to start with, English was the first choice,” says co-founder Bogdan Coman.
Access to capital: A reluctant investment culture
Ironically, same communist history that made the country a lightning-fast internet speed hub has also set back the investment initiative. Romanians have a weird “money culture”, people would store money around the house to prepare for bad days. Under the communist regime, the country was lacking food and resources as everything was exported to cover international debts and so, Romanian have a more austere mindset when it comes to money and doing business.
According to the EY barometer on Romanian startups, 69% of entrepreneurs are financing their startups with personal cash (income from another place or personal loans), 6% have grants from the state, 1% from institutional investors, 1% from angels investors.
They however have the intention to seek for financing from: 21% from clients; 15% from EU funds; 13% startups programs; 11% love money; 11% angel investors; 9% crowdfunding; 6% banks.
Romanian startups have received a funding of €13.1M (USD$14.8M) over the past decade, according to European Digital City Index (compared to London startups that have raised €8.3B / USD$9.4B).
€11.3m raised & €72m in exits, in 2016 alone — According to Bogdan Florin Ceobanu’s recent article
In 2014, Facebook acquired the adtech LiveRail; in 2013, Avangate, the e-commerce platform was bought by San Francisco’s Francisco Partners, in 2012, Twitter acquired Summify, a Vancouver-based company started by Romanian entrepreneurs.
In the past 3 years, 16 Romanian tech & telecom companies were acquired in , plus 13 other media & entertainment companies too (from market researcher Thomson Reuters).
Growing & Non-saturated eco-system
22 Hubs & Incubators
Accelerators: currently only 2 Tier 2 Acceleration Programs in Romania (MVP Academy, and RICAP host Acceleration programs, but without investing in equity), 2 Tier 3 Accelerators (Sprint Point and Spherik), while the rest of the programs are de facto Incubator or Pre-Accelerators (e.g. Innovation Lab, Junior Achievement, etc.). No Tier 1 Acceleration Program (such as TechStars Boston or Seedcamp) is present in Romania.
4 foreign Accelerators are scouting for projects in Romania: Hub:raum, LAUNCHub, Eleven, Microsoft Ventures Accelerators.
Microsoft has startup programs with own IPR (50–100 new Romanian companies per year) to indirectly sustain their growth, Google also has startup programs and trainings, Orange Romania started to partner with startups on some verticals (IoT or geo-fenced marketing), Carrefour has a program to sustain startups into Advanced Analytics, Automated Marketing, IoT, and waste management.
Startup focus
The most developed sectors are cybersecurity, e-commerce & gaming. Since 2014 there has been an increase of startups in hardware, machine learning & artificial intelligence, neural networks, 3D printing, and virtual & augmented reality.
Some startups to keep an eye on: Typying DNA (typing biometrics cloud authentication and user profile APIs, based on machine learning), Symme3D (multifunctional delta platform for 3D printing), Axosuits (medical exoskeleton for people with disabilities), . FaceRig (digital embodies of characters using a webcam), SkinVision (mobile app detects suspicious moles on people’s skin, suggesting a doctor visit or not), MIRA Rehab (aims to motivate patients by transforming traditional exercises into video games) and many other on RomanianStartups.ro.
If you are interested in finding out more, join me (I will be at Techsylvania right after Vivatech) and a pay the Romania and Eastern European ecosystem a visit. The endless options of helping its startups is only limited by you: mentor, share your founder experience, connect with them or just invest.
We are all part of this growing global community. We need more connectedness between ecosystems, founders and countries so we can move together towards a more distributed global startup ecosystem.
