Ernst&Young: Romanian entrepreneurs lack guts and information

The positive development within the CEE startup ecosystem seems to gradually be reaching every corner of the region as the emergence of more and more accelerator programmes and the need for startup investments set a certain standard. But some main concerns remain. In Romania, for example.

Romanian entrepreneurs are not well informed about existing sources of funding as well as entities aimed at supporting and expanding the startup scene. Low rates of risk-taking are seen as a major concern, as many startups continue to see failure is an end rather than a learning experience. Those are some of the conclusions of the Entrepreneurs Speak Out report by Ernst&Young. The study is based on the results of a survey completed by 95 local entrepreneurs, and on 12 personal interviews.

Difficult but getting better

The majority of participants in the study (92%) consider it difficult to find funding as a young entrepreneur. The emergence of business angels and venture capital is believed to have only “medium impact” on the ecosystem as opposed to bank loans and EU funds (pinpointed by more than 50% and 60% of all respondents, respectively). The report does not underestimate the influence VCs, accelerators and the like can have in Romania, rather points to the lack of knowledge that local entrepreneurs share in this field.

Nevertheless, the country has witnessed a gradual increase in the number of accelerator programmes, which more and more startups seem to be interested in. The Investment Ready Program Bucharest held its Warm-Up session a few weeks ago where ten ventures worked to validate their ideas and calibrate their business plans (Read our coverage here). Another accelerator is VentureConnect, founded in 2010, has been organising pitch events for startups in the fields of IT, technology, and e-commerce. The options, however, are limited. Yet, Romania is not an exception in facing difficulties to finance entrepreneurial ventures. Even in Austria, whose capital moves closer and closer According to the Austrian Startup Report of 2012, it may be relatively easy for startups in Austria to find early investment, but securing a major one at a later stage can prove problematic.

The fear of failure

Of course, trying to start a business without getting any initial funding can be problematic. What poses an even greater problem, though, is not trying at all. According to the report by Ernst&Young, about half of all respondents believe that the Romanian society is supportive of their entrepreneurial efforts, however, their perception seems to change once put in the context of doing business. Then, only about 12% tend to see failure as an experience that they can learn from, while more than half perceive it negatively – either as an indicator for the lack of necessary skills, or as a barrier to future business endeavours. And yet, there are exceptions.

In November, inventures.eu introduced you to Romanian entrepreneur Bogdan Iordache, whose personal motto is to learn from his own mistakes and keep trying. On his first attempt of founding his own company, an e-learning platform called Interactive People, he wasn’t very successful. “I wanted to see if my product idea could work. It didn’t,” he explained with the poise of a man ready to take a chance once, twice, three times, if necessary.  

It may not be pervasive yet, but there is a gradually increasing sense of awareness among CEE entrepreneurs that risk-taking is indeed the base of entrepreneurship. Recently, Bulgarian Vassil Velichkov, founder of the IT company Gramma Systems, told Capital Daily in an interview that it is failure that has taught him how to run his business, not success. “I haven’t learned anything from my successes. Really, nothing.” Success can give you so much confidence, he believes, that it can distract you from the business course you’re on. “Failure, on the other hand, helps you find your focus all over again.”

Similarly, the Austrian Startup Report 2012 indicated increasing willingness on the part of local startups to take risks, however, “there is still a lot more to be done to revive the Austrian startup scene,” STARTeurope’s CEO Andreas Tschas told futurezone.at.

It seems like there are overarching similarities among the attitudes of CEE entrepreneurs, and the hurdles they encounter along the way of setting up their own business. Ernst&Young’s report may be specifically focused on Romania’s startup scene, but it appears to apply to other parts of the CEE ecosystem as well. Examples of courageous entrepreneurs like Bodgan Iordache, however, show that slowly but surely, attitudes are changing.