16 June 2014

Romanian Startup Scene: Ups and Downs

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The next stop of our Startup Europe Roadshow is happening in Bucharest (June 18th), so we took a look at the country’s entrepreneurial ecosystem. What is going on there? What has Romania and what does it lack in terms of the creation of tech startups? Here are the facts we found about it.

There’s a lot of technical talent. During years of communism, the accent was put on producing engineers, science and maths graduates in Romania. In a guest post in Techcrunch Maria Constantinescu, founder of Slickflick app, wrote a detailed description of Romanian coding talent in the context of of “technology talent war”. “Soviet-era industrialisation ended up producing a country where almost half of the educated population were trained to become engineers. Today, in 2012, they are more likely to be coders. And now they can take their place with the rest of the world on the level playing field of technology”.

It gets hired by big companies. Back in the nineties, big companies like Microsoft, which has been present in Romania since 1996, noticed the talent pool. The salaries are lower than other european capitals, like Berlin or London. And companies like Adobe, Intel or Amazon have development offices there. “We realized that there are no startups created by most of the bright students. They go and get hired because they have a lot of offers. Also by companies in the US: they go there to make internships and get offers”, said Andrei Pitis, president at ANIS and cofounder at TechAngels, in a phone interview.

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Picture courtesy of romanianstartups.com

There’s also lack of product knowledge. “They get hired because they are really good technically, but not in product”, continues Pitis. “There is no formal education for technology product people. I spoke to people in the UK and they told me there’s people from product, more than from technology. This is very important in my opinion”. For Pitis, this lack of technical product management knowledge affects the marketing and biz side as well. “They are good in marketing, but they don’t understand how to build the product, to polish the market the money sources…”.

And lack of investment and public initiatives. We have seen this in countries hit by the economic crisis, like Greece and Spain, and in emerging startup hubs, like Berlin. At some point, Governments do take a role in supporting and promoting the entrepreneurial scene, but that is not exactly the case in Romania. Although the department for Export Promotion has supported tech companies to go to international events – 17 romanian companies went to CeBIT this year -, Pitis thinks there should be more public money invested. “I would say we need more investment in the form of other countries. Bulgaria has some european money, Hungary has public money for accelerators. We would need it to invest in startups”. According to him, it is not that the Government does not listen to them. It is more that the country faces problems in other economic sectors, while the IT one – with big foreign corporations and big and medium outsourcing companies – does pretty well.

When it comes to private capital investment, Forbes noted that “there is a serious lack of capital investment in Romania’s tech sector. In the absence of any real VC presence, most startups attempt to secure loans, but banks generally require collateral warranty, which these young businesses don’t have”. Along with other investors, Pitis is part of Techangels, a romanian based business angel network for financing tech startups. He says they do not have invested in any company yet. “We’re looking at startups but it’s hard to get them. Many of good startups get investment from abroad”.

But a startup scene (a its success stories) is flourishing! Giving all the facts above – students going directly from University to big companies and lack of product knowledge and public initiatives – Pitis mentions Innovation Labs, a program to incubate startup teams founded by students. “We created this program that gathers students in their first or second year of studies. We’ve had successes and we’ve managed to create startups”. Although it is young and it is early to see results, Innovation Labs has a list of the teams they formed and some prototypes on it. “And in last couple of years we’ve seen some more role models. People that made technology startups and had successful exits”, says Pitis. UberVU, a social media monitoring and aggregation platform founded by a romanian team but headquartered in London, was acquired by Hootsuite and names like the gaming company Mavenhut or the taxi app Clevertaxi are becoming famous in the Romanian ecosystem.

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The established IT sector produces startups, too. Webcrumbz team started nine years ago as an outsourcing company. They recently released its own “baby website” (as they call it) Appticles: an HTML5 platform that allows publishers to turn their content into mobile apps. “It’s not unusual for small, profitable East European companies to invest in projects of their own, and we were no exception”, writes her founder, Alexandra Anghel. They were selected to be part of Startupbootcamp, where they learn to pivot – “we did have a lot of technical skills, but the selling part of the team was non-existent. We were like baby ducklings learning how to paddle and stay afloat” – and today they monetize their product and have international clients like journalism.co.uk.

Startupbootcamp and Innovation Labs are not the only programs developing a startup community: events like Startup Weekend or Techsylvania shake the tech scene along the country, where the activity is not just concentrated in Bucharest but also in cities like Cluj. “They are also doing pretty well in this area. It’s not just Bucharest”. Will Romania succeed to see its talent founding successful tech companies? According to Pitis, it will. “Romania is one of the biggest countries in the region (and the 9th in the European Union). There are a lot of cities doing well. And I think it is going to grow fast”.

Now: don’t forget to pre-register for UnConvention 2014.  Don’t miss an opportunity to meet and network with top European innovators, investors and policy makers.