New technologies, fast growing clusters and the token economy are changing the game. UiPath reaches $1B+ valuation.
According to the Financial Times, Romania — one of Europe’s fastest-growing economies, has became a popular tech destination. Quartz adds that it could very well be EU’s next tech-startup hub while TechCrunch called it the Silicon Valley of Transylvania.
Surprised? You shouldn’t be.
“The country is building on its communist legacy of excellence in science, mathematics, and technical education. The focus is shifting from outsourcing to using its competitive advantages including its domestic market of 20 million to develop homegrown innovative companies.” Andrew MacDowall, FT.
Romania closed 2017 with a total of $53M investment in tech companies. That’s three times more than in 2016 and four times more than 2015, according to the State of European Tech report, produced by Atomico.
This is 0.27% of the $19B invested in tech companies across Europe which is to say there is still plenty room for growth.
This article is going to explore where that growth is coming from today, and the growth opportunities I see for the future.
1. Startup investments
No other investment matched the capital raised by the AI startup UiPath in terms of value in tech in Romania. Overall, the mid-2017 growth trend has maintained, the number of deals slightly increased, and new venture funds are about to be announced. The biggest deal was the €2 million investment in the online retailer Elefant. Another notable commitment was the Bitdefender secondary market deal, since it unlocked serious money to Axxess Capital and brought Vitruvian into the Romanian scene. Here you can find a sheet with all deals.
Here are the deals that marked the Q3-Q4 2017:
- Elefant.ro, $2.47M (€2M)
Elefant.ro is a Romanian online retailer that provides products for children and adults, for home, wellness, and garden. - Cyber Swarm, $1M via Tim Draper
Cyber Swarm is developing a CPU specialized for cyber-security which secures communication and networks and empowers every device to defend itself in case of a cyber-attack. - Miababy, $620k (€500k)
An e-commerce business focused on gifts, clothes and toys, and more, for children up to three years, maternity products for women in the third month of pregnancy, or even innovative products for the well-being of the little ones. - Doclandia, $620k (€500k)
Doclandia is a subscription health information provider that enables users to have online discussions with doctors. - FashionUp, $490k (€400k)
FashionUp is an online B2C fashion marketplace in Romania. - Fast Order, $250k (€200k)
The Fast Order app provides high-quality customer experiences in restaurants, bistros, cafes, pubs, clubs and any other venues. - Planable, $120k, part of Techstars
Planable is a platform that allows agencies and social media marketers to collaborate with their clients. They created a tool that speeds up the way social media campaigns are managed and makes planning, visualizing and approving social media posts easy and fun. - Baro, $98,8k (€80k), Fribourg Capital
Baro goes beyond automating launching campaigns on Facebook and Instagram, it can fully take care of managing and optimizing campaigns during their life cycle. - Wineful, $62k (€50k)
Wineful, a virtual community and online store for wine lovers who want to know more about wine. - Bitdefender, undisclosed. This secondary market deal is estimated at $187m [TBC]
Bitdefender delivers robust security you can rely on. With a global security delivery infrastructure protecting half a billion endpoints, visionary solutions, and a wealth of awards, They have been a trusted security provider since 2001.
Bitdefender is valued at over $600 million after growth capital investment firm Vitruvian Partners acquired a stake of roughly 30 percent in the company from existing shareholder Axxess Capital. - Serafim, undisclosed
Serafim is helping farmers save money and make the best decisions regarding planting, fertilizing and harvesting crops. Our plant health and growth analytics represent a valuable insight for precision agriculture. - Pago, undisclosed from BT Investments
Pago is the first mobile app in Romania for managing and paying all utility bills in one place. The app launched in September 2017 with over 40 service providers, including all major electricity, gas, telecom and cable companies. It also offers payments for mobile top-ups and the team is working on adding insurance and several types of taxes.
There is every reason to believe Romania will continue on its path of growth. IT companies contribute to 6% of the GDP today, but this figure is projected to grow to 10% in the coming years.
An unfair advantage is that compared to other EU geographies, Romania has highly professional talent, and cheaper salaries.
In the country there are 108k developers, from which about 51% live in Bucharest according to Stack Overflow. If only 1% of them will launch their company or join one startup, this list will definitely look different in the coming years.
Some of these developers are masters of the iOS and Android space. That’s why the share of App Economy jobs represents a 0.3% share of all jobs in the country. By comparison Finland share is 2.2% considering the high number of gaming companies (ie Rovio or Supercell).
As it stands, multinationals control over 60% of talent in the Romanian IT sector. Romania had 19,068 software companies in September 2017, up 1,000 compared to September last year. The number increased by more than 8,000 compared to 2012. More economic stimulus and stability will give a huge boost to these figures according to KeysFin.
2. Initial Coin Offerings (ICO) & Blockchain initiatives
According to Token Data, in December 2017 alone, ICOs have raised more than $1 Billion in December and $5.6 Billion in 2017. Romanian founders got involved in key blockchain initiatives, launched new ICOs and 2018 will definitely see new initiatives. In the last months 3 initiatives have raised $63 millions via ICOs. This definitely changes the fundraising game.
- Lampix — Is an augmented reality startup (AR) founded by two Romanians, George Popescu and Mihai Dumitrescu, based in the USA. They attracted in just 24 hours a grant equivalent to about $5 million through an ICO.
- Sether — Blockchain’s first intelligent social marketing platform — Token sale open. The token sale concluded on 15 January with 22000 ETH ($28 million).
- Restart Energy — A blockchain based energy ecosystem for a sustainable future. The token sale concluded at $30M.
- The Mine — A cryptocurrency mining operation company set out to improve your public mining experience. The token sale expected on mid-January 2018.
- Crypto Alias — Associate your blockchain addresses with aliases to make it simpler and more secure for your clients to reach you. The Token sale is ongoing.
- Go Help Fund– First blockchain-based platform for fast Humanitarian Fundraising 3.0. Token sale starts at the end of the January.
- Persona — The solution for identity management, aligned with the latest data protection regulations on blockchain. The token sale will start on February.
- Modex — a Smart Contract Marketplace and app ecosystem that allows for easy, user-friendly access to crypto-currencies and smart contracts alike. The ICO will start on March 28th.
- Blockbits — An ICO launching platform, that brings trust into the Investor — Project Owner relationship. The platform itself is fully driven by blockchain code, making it the next step in the evolution of the ICOs and provides innovative mechanisms such as safe funding vaults and secure milestone-based payments.
- COSS — Crypto-One-Stop-Solution and represents a platform with all features of a digital economical system based on cryptocurrency. Based in Singapore, and branches in New York and development in Bucharest.
- IP Exchange — a crucial component for the next layer of the web. Alongside distributed storage and processing tools IPSX will create the distributed network layer.
- WebDollar — a p2p blockchain protocol that runs in the browser.
- ARK — a decentralized ecosystem designed to increase user adoption of blockchain technology. Stefan Neagu is a co-founder.
- Squeezer is a platform that helps software developers to build apps easily without tackling the entire blockchain infrastructure . It is also a powerful tool to provide high quality blockchain software components to the large enterprise organisations.
- Carmel — The Decentralized Open Source Tech Education Platform that helps aspiring and seasoned Software Developers grow their skill set and track their growth through tokenized peer challenges.
- Bitclouder — a datacenter special made for bitcoin and ethereum miners.
If you want to know more about the topic, you should read the Bitcoin whitepaper, create a wallet and buy a digital currency [*this is not an investment advice]. It’s an easy way to start being more aware about the ecosystem and begin learning about it in a practical way.
3. Startups graduating from Romanian accelerators
An avalanche of startups graduated from Romanian accelerators. Maybe because it has amazing designers and developers.This is the biggest cohort yet — 51 startups, 15 coming from the Romanian Stock exchange Made in Romania program and 36 graduates of the four big startup initiatives: Spherik accelerator , Orange Fab, Startarium.Inc and Hubcelerator by ImpactHub.
4. Romanian cluster growth
“Romania could easily begin to play the role of a regional tech aggregator for business. eMAG is a good example of a regional platform that started in Romania. This is based on the fact that at this point in time, Romania is the first market in the SEE region on many business segments, already exceeding Hungary (even the Czech Republic on many consumption areas) and is well placed regionally geographically but also geopolitical (including increasingly close cooperation with the US on the economic side). Another important thing to mention is that we already see more tech development poles in Romania, not just Bucharest; Cluj is developing very well, Timisoara and Iasi are the following important centers — these are cities with large university centers and good national and international flight connections — with key European hubs.” Marius Ghenea, Partner 3TS Capital.
The below graphic illustrates this recent activity in the different regional hubs. A few things that could stimulate growth in these clusters could be:
- dedicated programs around industries.
- alliances between universities, corporates, investors.
- solid communities of entrepreneurs interested to drive the growth in their local ecosystems.
The investment in new startup programs stayed strong. Banks, consulting, retail firms are starting to invest in the ecosystem. This has to be accelerated. Moving forward, I am hoping these startup-corporate partnerships will get stronger (more C-level, innovation or product development folks will get on board).
- Fab Lab Iasi has a surface of over 700 square meters and it offers different scenarios for flexible use of the space (competition areas, co-working, makerspace, teaching rooms, spaces for video conferences and personal desks).
- TBNR Accelerator is a new startup accelerator based in Iasi and focused exclusively on high potential, 10x and above tech startups.
- TechHub established partnerships with EY and Societe Generale.
- Survivor Accelerator, Timisoara’s first acceleration program for tech startups, Survivor Accelerator is targeting very early stage business ideas and aims to bring them to an investable state.
- Rubik Hub’s coworking launched in Piatra Neamt.
- Commons Lounge co-working opens in Bucharest.
- ImpactHub and EY România launched the second edition of the Startup Barometer.
- Codiax — a deep tech event from the organizers of Techsylvania.
“Romania is extremely well positioned to develop an automotive cluster, considering that excluding agriculture and natural resources, automotive is the biggest industry in Romania — with almost 1.2 million people working in the field. Think about the fact that London is known for fintech, Helsinki for Gaming, New York on Media, Boston biotech, Zug on Crypto. Romania needs to create its own industry position as competitive advantage globally.” Serban Mogos — Cofounder & COO Eyeware
5. Winners of startup competitions
In 2017 we saw more Romanian founders get into international competitions and win prizes from giants like Facebook, Google (Mondly Languages — FB App of the year, and best of 2017 on Google Play), or Microsoft (Dacobots). We also saw more awareness about the investors and accelerators from New Europe 100 or Central European Startup Awards(Nodmakerspace, Spherik or Catalyst). These were accentuated by Statup Avalanche by Techsylvania, Chivas Venture and Startarium Pitchday.
6. Crowdfunding
The local crowdfunding platform is getting a lot of traction, support, and enthusiasm around creative people. Many more similar projects could be launched, however there is a lot of education needed for the general public about the potential and impact of these initiatives. Startarium, there had been 7 projects receiving including MATER, €18k — Materials library by NOD Makerspace, and Nutristandard — an app to make dieting and nutrition easy.
7. Romanian startups abroad
Compared to the first half of the year when the impact of the Romanian tech scene had been felt outside our borders, there were no spectacular developments besides one startup that joined the South African branch of a famous accelerator.
- Justnow.co — Startupbootcamp, Cape Town, $15k
JustNow aims to reduce fresh food waste by making use of a smart advertising mobile application. Brad Constantinescu is one of the co-founders. - Loyalcraft — Wexelerate, Vienna
The solution that Loyalcraft proposes in order to solve the loyalty challenge for S&Bs is a unified, global, gamified loyalty platform based on a single crypto currency which companies use to reward existing and potential consumers for their ambassadorship and engagement activities on one side and for their purchases on the other side. Loyalcraft was seed-funded with €600K.
8. Exits
The ecosystem is in its early stage. As more and more successful companies emerge, exits will follow. We have seen 23 exits between 2016 and 2017. This shows that many founders are ready and eager to sell for sub-market values instead of continuing to develop their business.
It is critical that Romanian entrepreneurs get better access to capital skills and talent. That will unlock more growth, more innovation, more collaboration, and ultimately lead to the emergence of a new wave of local tech industry crusaders.
- Benefit Seven (7card) by Sodexho [FR]
- Bringo by Carrefour [FR]
- Likeit Solution acquired ALEF [CZ]
- eMag acquires Sameday Courier [RO]
There is much need for international market access from a capital, skills and talent point of view. The international investment cooperation part must be built from scratch, programs to create skills in scaling up business and capital to hire talent from the gates of the big four is needed.
“The top priority for early-stage ecosystems is to grow the funnel. Generating around 1,000 startups is important to reach a critical mass of successful ones, given the failure rate of around 90%. Over time, as knowledge and experience grow, more of them turn into scaleups and produce exits.” Marc Penzel, COO Startup Genome.
The Romanian Startup Scene in 2017 (12-month summary)
2017 came with some big wins for the Romanian tech scene:
- a record year for total capital investment at €53.7m
- largest round (UIPath $30m), biggest secondary market transaction (Bitdefender — Vitruvian Partners 30% stake acquisition in Axxess Capital)
- first Facebook app of the year win
- First Microsoft BizSpark acceptance
- two dozen new startup programs
Adding up the increased number of accelerator programs — this will lead to new companies interested about growth, new angel deals, crowdfunding campaigns, with time additional exits and capital from abroad will be invested in smart talent and ecosystem.
These kind of investments heights were previously difficult to imagine. However, if we add the new type of actors — blockchain powered startups like Restart Energy, FootballCoin, Lampix, Sether that raised $65.7 millions in ICOs, there is more hope.
Romania is well positioned to develop a cluster of innovation in the area of automotive, and we are looking forward seeing more investment and startup creation in this space.
One of the biggest opportunities is the $1B fund focused on new mobility and autonomous systems family: Alliance Ventures, driven by Renault-Nissan-Mitsubishi in the following years. Can Dacia launch a program in Romania to help founders access those funds? I would like to see that.
Additionally, in order to continue the growth the following aspects must be tackled:
- New corporate venturing programs,
- Investment in deep tech education in universities,
- Increasing the innovation commercialization skills and blockchain knowledge of professionals,
- Development of cluster and industry-specific strategies,
- Attracting international capital,
- Shifting talented developers from outsourcing projects to join Romanian startups.
If such energy is accelerated, Romania could very well be the next Berlin by 2020.
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This work could not have reached this accuracy without the editorial support of Patricia Becus, Martin Bryant and Janessa Lantz. Appreciation goes to Mihai Silviu Istrate, Mircea Goia, Micky Socaci and Serban Mogos whom inputs were highly valuable.