By Edwig Ban
2019 has all the attributes of a reference year for the development of the local startup ecosystem, according to analysts at EY. It grew in 2019 and attracted the interest of external investors, so that the financing of startups has diversified and become more accessible.
The number of startups increased in 2019 by over 20% compared to the previous year, new startups or older ideas, brought to the surface by the prospecting of accelerators in Romania. And the end of this year brings even better news: a second Series A investment after UiPath, received by FintechOS, and other companies that are also negotiating for a Series A investment (AlphaBlock and TypingDNA).
Speaking of ecosystem indicators, the average investment per round of financing increased by over 20% due to the large number of Seed investments of over one million euros and, in particular, the financing obtained in December by FintechOS. The increase of the average value of the investment per round is all the more valuable for the ecosystem, because also during 2019 most small Seed investments have been made in the history of the ecosystem. For the analysis of the indicators, the UiPath data were not used, which would have modified these indicators to values similar to those in the US market.
The main hub for financing is Bucharest, taking into account the number of active startups and their dedicated programs. Other important factors are the digital workforce and the large number of technology companies.
In terms of mergers and acquisitions (M&A), although they remain significantly smaller compared to Western Europe, corporations remain the most relevant buyers for startup founders. Romanian companies are sold at premature development stages, mainly to buyers outside Romania. Therefore, from the M&A perspective, there is a lack of experience with an IPO. The local stock market, although open, fails to become attractive to local companies.
To understand the current investment context, Western Europe is currently more attractive than 10 years ago. Eastern Europe is considered the second most attractive region for global investments. In this positive investment context, Romania should take advantage of being the second largest economy in Eastern Europe and has a long tradition in the IT field, to capture as much of the flow of investments in technology.
The growth of the startup ecosystem in Romania is visible, in line with the trends of Western European countries. We have a unicorn who has noticed, but the distance between it and the next place is very large. In order to reduce the gap, investors and companies in Romania must make a greater effort than ever before.
It is anticipated that 2020 will bring many pleasant surprises. However, it remains to be seen whether global economic developments will allow maintaining or, why not, increasing the rate of development and involvement in an increasingly effervescent ecosystem, ready to adapt rapidly to ecosystems in Western Europe and the US.
Can Romania generate new success stories, such as UiPath?
EY is one of the largest professional services companies worldwide, with 284,000 employees in over 700 offices in 150 countries.
Present in Romania since 1992, EY is the leader in the professional services market. The more than 800 employees in Romania and the Republic of Moldova provide integrated audit, tax assistance, transaction assistance and business assistance services to multinational and local companies. EY Romania has offices in Bucharest, Cluj-Napoca, Timișoara, Iași and Chisinau. EY Romania joined in 2014 the only worldwide competition dedicated to entrepreneurship, EY Entrepreneur Of The Year. The winner of the local edition represents Romania in the world final that takes place every year in June in Monte Carlo.
By Edwig Ban