While still in its infancy and still developing and aspiring to be more like mature ecosystems such as London or Berlin, the tech startup ecosystem in Romania and Poland should be taken into account when looking at the European entrepreneurial scene.
The first step the Romanian tech ecosystem should take is to catch up to the Polish environment, and we should start with the financing ecosystem. Poland and other developed countries have everything they need: ideas, motivation, enthusiasm, world-class engineers, and more money. But how is Romania doing in terms of financing for companies with growth potential as compared to Poland?
Investors (337 versus 97)
While Poland has a total of 337 investors, mainly investment funds, only 97 investors are active in Romania today, according to Dealroom data. For example, the largest investment fund in Poland is MCI Capital, which invests on average between EUR 5 million and EUR 50 million and so far has had 55 rounds of investment. This investment fund has invested EUR 544 million in Polish companies. Innova Capital is the second largest fund in Poland, based on the number of transactions, with 49 investments, totaling EUR 13.9 million. For comparison, of the 97 investors, GapMinder is the fund with the most investments in Romania, namely 39 transactions, with a total value of EUR 29.3 million. By the number of investments, the second most active financing vehicle is Gecad Ventures, with 18 investments, totaling EUR 20.5 million.
Funding rounds (1,376 versus 355)
While Poland can boast of 1,376 rounds of investments, only 355 financing rounds by private investors have been concluded in Romania in recent years. On the local market, eight teams raised financing in Q1 2020 and 15 tech startups and scaleups closed or announced deals in Q2 2020 (the first full quarter of pandemic times).
It is difficult to know how long the economic downturn caused by the coronavirus will last, but the amount of venture capital funding for Romanian tech startups during the first semester looks satisfying. The level of investments is comparable with pre-pandemic times, but almost all investments had their negotiation roots before March 2020. Is the current situation quite as gloomy as the previous crises for Romanian tech fundraising? For a realistic assessment of venture capital landscape, we should look at the evolution of deals in the next four months.
In the tech area, companies seem to be less affected by the current crisis, but it is clear that we are about to see a resettlement of the market. Investment fund managers expect that in the near future – though not the very near future – founders will try to tell their stories in a different way, addressing risks that could arise.
It is important that these risks are not kept hidden, but communicated to others and understood.
Exits (366 versus 116)
The number of exits made by entrepreneurial companies has risen to 366 in Poland is recent years, while in Romania this number is 116. Two notable exits have taken place lately on the Romanian market. First, the gaming and software testing company Whyttest, founded in 2014 by entrepreneur Marius Potirniche, was acquired by British quality assurance (QA) service provider Testronic, part of the Catalis group. Second, investment fund Abris signed a new investment in Romania, having bought the Romanian branch of Hungarian company Eltex for over EUR 5 million, through a firm belonging to Romanian holding company Green Group, the owner of the largest integrated recycling park in Southeast Europe.