Romania, the home of Dracula, the second largest administrative building in the world, and… a budding startup scene emerging as part of a global tech hub? You might not think it, but Romania is a country full of promise and potential when it comes to IT.
Romania as a Tech Hub? Who would have thought…? One of the advantages of an organization that operates in so many jurisdictions is added insights. The insights we gain are not limited to just the cities and countries we operate in, but also to the places our various team members originate from. Ignorance may be bliss for some, but it’s not an advantage.
Romania as a Global Tech Hub
Many people will not have even considered Romania as a regional hub, let alone the potential for the country to emerge as a globally recognized center of excellence. Yet, very quietly, many of the requirements necessary to have it develop organically have fallen into place.
Romania as a country has embraced the technology revolution, and the country has developed multiple centers of technology excellence, laying the groundwork for innovation and future prosperity. Too often governments act based on near-term wins that can translate to ballot box success. The policies adopted in Romania are demonstrating long-term perspective.
There are a number of factors that helped Romania develop a world-class technology ecosystem. Besides being relatively cheap to operate in, Romania also has one of the world’s fastest Internet connections (ranking in the top 5 for the past 4 years, according to Bloomberg); even Bernie (Sanders) is jealous. What’s more, a rigorous educational system and a surprising number of polytechnical institutions are bringing up a bright, new generation of tech savvy employees and entrepreneurs. Positive indicators can also be found in the tax breaks and legal incentives that have been put in place to stimulate the founding of innovative companies and the retention of talented employees.
If you are looking for a place to start a new business, it might be time to look east!
A lot of things are bound to change as the details of the Brexit come to light. With likelihood of a potential exodus looming, the tech hubs of Berlin, Paris, Milan, and Amsterdam are sure to attract most of the business migration. But another great contender to become the new base of operations is Romania.
New Tech Hub Opportunities
The country has a lot going for it. As an EU member nation, all of the benefits of freedom of movement still apply. The capital of Bucharest is a 3 hour flight from London or Paris and it offers a unique atmosphere, culture, and history to visitors. What’s more, Romania is a small country, but it has it all – from mountains to seaside beaches to rolling countryside to urban cityscapes. It is a place that can offer the lifestyle sought after by successful technology companies, and to all those who benefit from supporting that ecosystem.
Another huge advantage is affordability. While a member of the EU, Romania is not part of the Eurozone, and this still maintains its own currency, the Leu. One Romanian Leu is currently valued at $0.25USD, and with an average salary of just over $700USD per month and a significantly cheaper cost of living, Romania is a great place to invest or start a company.
The Startup Ecosystem in Romania
While the ecosystem is still young, only really developing over the past 10 years or so, it is growing. According to a 2016 report, exported software and IT services are expected to exceed €2.5 billion in Romania by the end of the year, (up from 2.5 in 2015), almost 100,000 people employed in the sector. With a population of 19MM, that emerged from decades of communist rule in 1989, the very quickly evolving Romanian IT economy features 324 homegrown startups, and 10 accelerators or incubators developing countless new opportunities every year. If you are seeking to familiarize yourself better with the Romanian opportunity, Bucharest Technology Week offers an excellent chance to learn!
The country’s superior internet connection is another huge advantage for tech companies, thanks in part to Microsoft’s presence there since 1996. But the workforce of young, hungry entrepreneurs is perhaps the country’s biggest advantage. While costs to operate appear low to the outsider, to a Romanian, these costs are high. While Bucharest is an obvious choice for entrepreneurs, it tends to be the most expensive city to operate in. Places like Cluj-Napoca, Lasi, and Timisoara have polytechnic institutes pumping out talented programmers, designers, and marketeers and may be an even better option for those looking to set up shop on a smaller budget. Most young people speak English fluently, with French, German, Spanish, Italian and Hungarian being common as well.
The tech talent coming out of Romania is evident in the acquisitions that have happened in recent years as well. According to Thomson Reuters, 16 Romanian tech and telecom companies and 13 media and entertainment companies have been bought over the last three years. Some of the acquirers of local technology firms include leading global IT firms such as Facebook, and Twitter.
Years of economic struggle have encouraged many Romanians to self-start, and entrepreneurship is abundant among the populous. Overcoming the lack of a private sector after decades under a communist regime, entrepreneurs have been quick to thrive in the vacuum that developed almost overnight when the Ceausescu rule ended, seizing the opportunity to found companies and bring business to Romania, particularly in the days when no one else would. Even so, the country’s tumultuous past has hindered its overall economic progress and the effects of the previous regime can still be seen today.
Challenges for Romania’s Tech Scene
While the tech skills are on par with most other areas, product development is lacking. Romanian culture is much more focused on growing and nurturing the practical and less accommodating to the creative. The country may have great coders, but when it comes to tech visionaries, there are fewer to choose from. As well, the culture is quite risk-averse which means developed support or mentorship networks and access to capital is still limited.
With a population of just 19MM people, the internal market is not huge, which requires a different approach to company building. Building niche solutions for the local population is not very viable and so most founders focus on the global market for this reason. However, while access to the European and global market is there, Romania still needs to become recognized more broadly in the international sphere.
Given its history, it comes as no real surprise that much of the government is still stuck in an antiquated mentality and corruption scandals are (still) aplenty in the country. Despite its quick organic emergence as a Tech Hub, a lack of initiatives by government bodies to support and continue growing the tech industry is challenge, as is the often senseless bureaucracy that still persists.
The Opportunity to Invest
Most foreign investors have ignored the opportunity Romania presents, but recent activity shows this is changing. As a place to innovate and develop new technology based businesses, Romania offers compelling opportunities. With low costs by Western standards, yet a similar cultural background and time zone to other European centers, Romania offers low-cost near-shore outsourcing opportunities that allow entrepreneurs to test the waters. Successful early engagements will provide opportunities for further engagement by all parties.
As the Romanian tech scene continues to mature, and the younger generation gets more involved in government and recognizes the potential that exists, change will come and Romania will continue to develop as a country full of bright minds with massive potential.