Romanian Startup Boom: Insights from 8 Investors

With substantial investment activity and the emergence of three unicorn companies, investors are optimistic about Romania’s economic future as 2021 begins. Recent discussions with eight investors revealed how the country’s skilled workforce, widespread broadband availability, and affordable cost of living are positioning it favorably in the era of globally distributed, remote-first businesses across various sectors.

The positive trend from the previous year included 58 startups securing a total of €30.39 million in funding, as detailed in a new report from the long-standing Romanian conference, How To Web. This represents a 6% increase in the overall volume of investments and a 51% year-over-year increase in total investment value. A significant portion of this funding was directed towards companies raising capital for the first time.

Key sectors driving this growth include cybersecurity, enterprise software, and fintech, characterized by “highly skilled teams with considerable expertise in their respective fields,” as noted by one investor. Another investor emphasized a focus on Romanian founders, while acknowledging that, due to recent emigration patterns, “they are able to establish and operate businesses from anywhere in the world.”

Below are insights from the investors themselves, intended for TechCrunch readers interested in hiring, investing, or launching a company within the country:

Cristian Negrutiu, Founding Partner, Sparking Capital
Cristian Munteanu, Managing partner, Early Game Ventures
Andrei Pitis, Founding Partner, Simple Capital
Bogdan Axinia, Managing Partner, eMAG Ventures
Dan Mihaescu, Founding Partner, GapMinder Ventures
Alexandru Popescu, Managing Partner, Cleverage Venture Capital
Theodor Genoiu, Associate, Roca X
Matei Dumitrescu, Founding Partner, Impact Capital

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Cristian Negrutiu, Sparking Capital, Founding Partner

What investment trends are you currently most enthusiastic about?
Considering the early stage of the Romanian ecosystem, our fund maintains an industry-agnostic approach. Personally, I am interested in sectors such as supply chain, mobility, proptech, and the circular/sharing economy.

What is your most recent and exciting investment?
Our latest investment is in a startup operating within the digital fitness industry.

What types of startups would you like to see emerge in the industry that are currently lacking? What overlooked opportunities exist right now?
I believe there is a need for more solutions focused on supply chain optimization, as this industry requires a fundamental shift in approach.

What key attributes are you seeking in your next investment, generally?
1. A relevant market 2. A strong product 3. An exceptional team 4. A good fit with our fund

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you cautious about?
I believe the marketing and finance sectors are particularly challenging to enter without a truly differentiated offering. Regarding products and services, marketplaces need to evolve to remain competitive.

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
We are strongly focused on Romania.

Which industries in your city and region appear best positioned for long-term success, or conversely, are facing challenges? What companies or founders are you particularly excited about (whether in your portfolio or not)?
The Romanian ecosystem is still developing, but it is experiencing rapid growth and holds significant promise for the future. I anticipate seeing more Romanian unicorns emerge, including from within our portfolio.

How should investors from other cities perceive the investment climate and opportunities in your city?
As previously mentioned, the ecosystem is still in its early stages, but it is brimming with opportunities and progressing rapidly.

Do you anticipate an increase in founders originating from areas outside major cities in the coming years, as startup hubs potentially lose talent due to the pandemic and the appeal of remote work?
Not in the case of Romania. The ecosystem remains concentrated in a few key cities like Bucharest, Cluj, and Iasi, and the hubs within those cities.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
Beyond the traditional hospitality (Hotel/Restaurant/Café) sector, we haven’t observed significant impacts. In fact, any startup promoting digitization within a specific industry (e.g., proptech) has gained momentum during this period.

How has COVID-19 influenced your investment strategy?
We have strived to maintain a normal business flow and consistent investment activity. We advise founders to prioritize their teams and customers and exercise caution with cash flow.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Yes, as previously noted.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
It’s important to remain positive and avoid exaggerating the impact of the pandemic. It will eventually pass.

Cristian Munteanu, Managing partner, Early Game Ventures

What investment trends are you most excited about, generally?
Given our limited geographic focus (we invest solely in Romania), we must adopt a broad approach and consider numerous verticals and trends. For example, we are exploring startups applying technologies that have achieved widespread adoption to niche fields: computer vision applied to specific crops (agritech) or to in-store customer behavior (martech); biometric data (collected through wearable devices) applied to group interactions rather than individuals; and lightweight blockchain ledgers applied to smart buildings. From an investment perspective, we are also looking at startups building APIs – we believe Romania is currently underserved in this area.

What is your latest and most exciting investment?
Our most recent term sheet was signed with a startup developing technology to help enterprise-level companies better manage their software licenses. It’s a team of highly skilled individuals with deep expertise in the field, creating significant value for their customers.

What types of startups would you like to see emerge in the industry that are currently lacking? What overlooked opportunities exist right now?
I would like to find strong teams working on simplifying in-game payments (at the intersection of payments and gaming), or developing Irrigation-as-a-Service (agritech), or creating a NASDAQ for energy.

What are you looking for in your next investment, generally?
I seek founders who are both highly competent and courageous – individuals who will dare to tackle significant problems and have a chance of solving them.

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you wary or concerned about?
I’ve seen too many startups building apps to help people find parking spots, too many unnecessary marketplaces, too much off-the-shelf technology for marketing, and too many CRMs and ERPs.

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
We invest exclusively in Romania – 100% committed to the local ecosystem.

Which industries in your city and region appear best positioned for long-term success, or conversely, are facing challenges? What companies or founders are you particularly excited about (whether in your portfolio or not)?
I believe that, given Romania’s natural potential, agritech has significant opportunities. Cybersecurity, enterprise software, and fintech are also well-represented. From our portfolio of almost 20 startups, CODA is empowering managed service providers with cybersecurity skills; Humans is building a hub for synthetic media technologies; Mechine is enabling communication between agricultural equipment; Tokinomo is collecting and analyzing data from retail shelves (in-store marketing); and BunnyShell is developing next-generation cloud technology, making server setup accessible to everyone.

How should investors from other cities perceive the investment climate and opportunities in your city?
The startup ecosystem in Romania is very young, with the first local VC funds established three years ago with support from the European Investment Fund. Despite this, Romania is home to three unicorns and many other promising startups. The large technical talent pool, widespread broadband access, and low costs of doing business and living make Romania a market to watch.

Do you anticipate an increase in founders originating from areas outside major cities in the coming years, as startup hubs potentially lose talent due to the pandemic and the appeal of remote work?
I expect founders from major cities to remain in those cities, as building and operating a startup requires more than just coding on a laptop from a remote beach. The search for product-market fit involves business discussions, partner visits, contract signings, event attendance, peer interaction, surveys, prototyping, and a thousand other activities that cannot be fully replicated on Zoom.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
Unfortunately, urban mobility apps suffered from the restrictions imposed by the pandemic. Similarly, businesses related to restaurants, hotels, and conventional events were negatively affected. We invested in startups in these verticals and did everything we could to support them during the most challenging times.

How has COVID-19 influenced your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Our fund experienced a 20% decrease in the number of investments in 2020 compared to 2019 and a 40% decrease in the total value of deals, demonstrating the significant impact of COVID. However, in terms of fund performance, 2020 was a good year, with portfolio companies raising new investment rounds with outside investors, increasing their valuation, and showing positive returns. The first half of 2020 was dedicated to damage control and supporting portfolio companies, but the situation improved towards the end of the year, with high new deal activity in the fourth quarter (higher than in Q4 2019). VC-backed startups had access to investors during difficult times and benefited from support and additional funding when needed; however, the situation was more challenging for other startups.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
The first thing we noticed at the start of the pandemic was a surge in productivity. During the months of mandatory stay-at-home orders, early-stage startups working on their prototypes put in extra hours and accelerated their progress. Personnel retention was good, people were focused, and there was a general desire to achieve results. Some startups even reported an immediate increase in sales, such as Tokinomo, whose robots replaced human promoters in supermarkets.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
The highlight of 2020 was spending a week on a magnificent yacht sailing with friends through the Greek islands. It was a rejuvenating experience that provided a boost for the rest of the year. Another uplifting moment came in December with the Series A investments that improved our fund’s performance.

Andrei Pitis, Founding partner, Simple Capital

What investment trends are you most excited about, generally?
Startups creating world-leading Intellectual Property with Romanian and broader Eastern European founders.

What is your latest and most exciting investment?
Uniapply.com

What are you looking for in your next investment, generally?
Strong, committed founders with a deep understanding of the domain they are planning to disrupt on a global scale through innovative intellectual property.

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you wary or concerned about?
I think too many people are trying to launch platforms without a major differentiator. Customer acquisition through other digital marketing platforms is very expensive without an unfair advantage.

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
We are very focused on Romanian founders – but they can reside and launch anywhere in the world. We have investments in many US-based companies started by Romanian founders.

Which industries in your city and region appear best positioned for long-term success, or conversely, are facing challenges? What companies or founders are you particularly excited about (whether in your portfolio or not)?
I think Romania is well-positioned to succeed in cybersecurity and enterprise software, as well as AI-based engines. I am very excited about pentest-tools.com, deepstash.com, uniapply.com from our portfolio, as well as Fintech OS and TypingDNA, which are not in our portfolio.

How should investors from other cities perceive the investment climate and opportunities in your city?
Bucharest is a thriving ecosystem with plenty of opportunities ripe for global expansion.

Do you anticipate an increase in founders originating from areas outside major cities in the coming years, as startup hubs potentially lose talent due to the pandemic and the appeal of remote work?
Indeed, we have seen an increase in founders from smaller cities in Romania. We are founding partners of the Innovation Labs pre-accelerator, which has a nationwide footprint, and we are seeing more students interested in becoming founders across Romania.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
Mobility solutions have been impacted, with local players losing to larger companies like Lime.

How has COVID-19 influenced your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
The pandemic delayed some investments, but we closed them towards the end of the year. The biggest concern for founders is the increasing difficulty of attracting tech talent, as tech professionals can now work for any company globally, driving up salaries and rates.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Yes, we have seen some benefit from people staying at home and having more time.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
The introduction of the vaccine and the pace of vaccination in Romania, which is not the fastest but also not the slowest. An online platform for appointments is up and running and people are using it!

Bogdan Axinia, Managing partner, eMAG Ventures

What investment trends are you most excited about, generally?
Health & wellbeing are areas that, aided by the pandemic, are on the verge of transformation and growth. A blend of software and hardware readiness is developing rapidly, along with the openness of clients and regulatory authorities.

What is your latest and most exciting investment?
Food delivery services. It is still early days with great opportunities ahead in terms of consumer services and business growth: food, ready-to-cook meals, convenience items, groceries, etc.

What types of startups would you like to see emerge in the industry that are currently lacking? What overlooked opportunities exist right now?
There is still room to grow in the B2C and B2B2C fintech space despite a relatively high number of startups.

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
Bucharest and Romania, in general, have great potential when it comes to the tech talent pool and are a great place to start to scale regionally and globally.

How should investors from other cities perceive the investment climate and opportunities in your city?
A great place to visit: excellent infrastructure (internet cost & speed, number of hubs), talent pool, and an increased number of investment transactions in the last three years.

Do you anticipate an increase in founders originating from areas outside major cities in the coming years, as startup hubs potentially lose talent due to the pandemic and the appeal of remote work?
I expect to see growth, but not a surge, of founders from other geographies. And I believe that’s a good thing for the ecosystem.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
Travel is both exposed and, at the same time, has great potential for new startups. There will be a “revenge travel” period from consumers, but they will look for something different, and business travel will not be the same, creating new practices and behaviors.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
The start of the vaccine campaign across the globe and the initial results.

Dan Mihaescu, Founding partner, GapMinder Ventures

What investment trends are you most excited about, generally?
B2B platforms enabled by ML/automation/AI in fintech, SaaS enterprise software, cybersecurity, healthcare IT, low-code development environments, conversational technologies, and automation in logistics.

What is your latest and most exciting investment?
– Our latest investment was DruidAI, announced on January 12th, 2021. GapMinder led a $2.5M round.
– Other exciting new investments or follow-ons in 2020: TypingDNA, FintechOS, DeepStash, Soleadify, Machinations, Innoship, Frisbo, Cartloop, XVision.

What are you looking for in your next investment, generally?
– Stage: Seed or Series A
– Technology: Automation or conversational technology assisted by ML or AI
– Team: Mature with a track record for International expansion
– Product: B2B scalable internationally, with B2B platforms as the main focus.

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you wary or concerned about?
Copies of B2C models (from the US) that are born in CEE tend to be limited to small local markets and evolve into highly crowded environments. Shared economy companies born in Romania are such examples. Unit economics were simply not attractive to us as a VC investor.

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
More than 70%

Which industries in your city and region appear best positioned for long-term success, or conversely, are facing challenges? What companies or founders are you particularly excited about (whether in your portfolio or not)?
– Models we consider will continue to thrive: B2B platforms enabled by automation/conversational technologies (assisted by ML/AI) have a higher potential for internationalization versus B2C models.
– Verticals with higher potential include fintech, healthcare, and logistics.
– Exciting companies in our portfolio: FintechOS, TypingDNA, DeepStash, DruidAI, Soleadify, Machinations, Innoship, Frisbo, Cartloop, SmartDreamers, XVision, among others.

How should investors from other cities perceive the investment climate and opportunities in your city?
Romania (in cities such as Bucharest, Cluj, Timisoara, Brasov, and Iasi) is a high-opportunity market, with excellent teams, startups born with international vision, and an excellent environment for automation and ML-enabled projects.

The ecosystem is becoming more mature, from coverage of pre-seed rounds towards Series A, while not overcrowded yet.
Overall, a high-opportunity environment for Series B and late Series A investors from the US or Europe.

Do you anticipate an increase in founders originating from areas outside major cities in the coming years, as startup hubs potentially lose talent due to the pandemic and the appeal of remote work?
The hubs are concentrated in terms of education, potential customers (B2B or more sophisticated B2C) to test new products, potential investors in the pre-seed phase, which are crucial for the initial steps of startup development.

For more advanced startups, hyper-growth is important, therefore the capability to scale up and go international might be helped by the presence in certain hubs.
In other words, there is a complex mix that the hubs offer. So, at the Romanian level, we do not expect a diminishing role of the hubs.

At the European or US level, it is debatable if main hubs are too overcrowded or over-expensive for teams. However, the business growth potential for the more advanced startups is important.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
The behavior of users, both internal and external, has shifted towards a need for autonomy, which drives the need for:
– Tools that allow conversational interactions (including in natural language) with evolved human-like feeling
– Remote collaborative low-code development tools
– A general need for all companies (from the smallest to enterprise) to move to digital interactions.

In 2020, many consumers and companies were forced to focus on core priorities and move to secondary focus the “nice-to-have” services or products. VCs saw even a sharper delimitation between high-tech and tech-enabled companies, not to mention some “interesting” proofs of Fake Tech. This shift has impacted many verticals and such shift might be here to stay.

How has COVID-19 influenced your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
GapMinder’s strategy, as described above, is focused on companies that actually benefited from the urgency in accelerating digital transformations. We saw this in the 2x-3x growth of most of our portfolio companies in 2020.
Our advice to our portfolio companies has been simple:
1. Cash is king. Make sure you have an 18-month minimum runway. If an opportunity to raise capital arises, seriously consider it.
2. Customers are the most important partners you have. Listen to them.
3. The team is your most important asset. Keep it close and take care of it during these challenging times.
4. Act fast.

Of course, on top of the above, we had very specific conversations with each team.

To be candid, this all looks good at the end of 2020, but the first half of 2020 was intense for founders in our portfolio and filled with doubts about decisional freeze in some verticals, stress on implementation in international markets wherever travel was needed, and alignment between teams inside larger companies. Looking back, this was just normal. We feel fortunate to be part of the life of such great teams and startups, that proved so resilient during tough times.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Yes, we already felt signs of recovery in the second half of 2020, especially in Q4.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
The start of the vaccination campaign across the globe and the initial results.

Alexandru Popescu, Managing Partner, Cleverage Investment

What investment trends are you most excited about, generally?
HealthTech

What is your latest and most exciting investment?
Oncochain

What types of startups would you like to see emerge in the industry that are currently lacking? What overlooked opportunities exist right now?

What are you looking for in your next investment, generally?
Team, idea, traction

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
50%

Which industries in your city and region appear best positioned for long-term success, or conversely, are facing challenges? What companies or founders are you particularly excited about (whether in your portfolio or not)?
Positive industry outlook – edutech, medtech, fintech, logistics;
Exciting companies – Fintech OS, Medicai, Kinderpedia, iFactor and a few others.

Negative industry outlook – marketplaces, Deeptech, gaming (in terms of funding, not talent), advertising

How should investors from other cities perceive the investment climate and opportunities in your city?
Very dynamic yet at an early stage

How has COVID-19 influenced your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
No impact due COVID; biggest worries are related to teams maturity & to market capacity to absorb new ideas fast enough; my advice is to look for know-how and try to grow as fast as possible

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Definitely I see “green shoots”

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
Much better evaluation of one of our investments after only few months

Theodor Genoiu, Associate, Roca X

What investment trends are you most excited about, generally?
Edutech, energy, deeptech

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you wary or concerned about?
eCommerce marketplaces, some service areas, mobility

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
Our thesis has a goal of a 40% distribution of the AuM in Romania

Exciting companies – Fintech OS, Medicai, Kinderpedia, iFactor and a few others.

Negative industry outlook – marketplaces, Deeptech, gaming (in terms of funding, not talent), advertising

How should investors from other cities perceive the investment climate and opportunities in your city?
Growing ecosystem with a large technical talent pool but in need of true entrepreneurial education, experience and mentality.

Yes and no, in more established ecosystems a surge in founders coming from geographies outside major cities might be an outcome, the onset of remote work will bring a major boost to startups, although talented technical employees will become more and more difficult to onboard.

How has COVID-19 influenced your investment strategy? What are the biggest worries of the founders in your portfolio? What is your advice to startups in your portfolio right now?
Our investment strategy remains unchanged, the most commons worries of founders in our portfolio are linked to attracting new funding partners, lack of foresight in some target markets and difficulty in finding employees in certain verticals. We don’t have a general advice for all our startups, it’s case by case, we advise some to pivot, others to start conversion efforts on their large customer base and others to launch in new geographies.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Yes

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
The openness to adopt new technologies and try new things from well-known conservative verticals such as education.

Matei Dumitrescu, Founding Partner, Smart Impact Capital

What investment trends are you most excited about, generally?
Impact, health, energy

What is your latest and most exciting investment?
iFactor, Ringhel, Sanopass

What types of startups would you like to see emerge in the industry that are currently lacking? What overlooked opportunities exist right now?
Yes, there are: impact startups

What are you looking for in your next investment, generally?
Impact, innovation, scalability

Which areas are becoming overly competitive or would present significant challenges for a new startup? What types of products or services are you wary or concerned about?
Marcom, ecomm, marketplaces

To what extent are you focused on investing in the local ecosystem versus other startup hubs? Is it more than 50%? Less?
Almost 100% focused on local startups with a global view

How should investors from other cities perceive the investment climate and opportunities in your city?
Bucharest is booming, the market in getting bigger, the VCs are growing, the number of new initiatives is dramatically increased.

Which industry segments in which you invest appear weaker or more vulnerable to changes in consumer and business behavior due to COVID-19? What opportunities might startups be able to capitalize on during these unprecedented times?
We had an opportunity with e-education and e-health. However, sharing economy was exposed to problems.

Are you observing positive indicators, such as revenue growth, customer retention, or other momentum, within your portfolio companies as they adapt to the pandemic?
Yes, we do.

What recent event has given you a sense of optimism? This could be professional, personal, or a combination of both.
There wasn’t such moment.

Any other thoughts you want to share with TechCrunch readers?
We invest in IMPACT, because the impact creates VALUE, and that is what people pay for!

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8 investors tell us the story behind the romanian startup boom