barometer of the romanian entrepreneurship

Entrepreneurs Speak OutEntrepreneurship BarometerRomania 2013

1 Entrepreneurship Barometer Romania 2013

Entrepreneurs Speak Out

Bogdan Ion Country Managing PartnerEY Romania

The entrepreneurs play a vital role in any healthy economy. Within the last years, especially in a difficult economic context, their role became more and more visible in the eyes of the authorities and for the Romanian public. The awareness of their relevance in the economy increased: entrepreneurs hire when few business people consider this option, they are those who see opportunities in economic downfall and who invest during recession.

This is the reason why, supporting the entrepreneurs and those who are thinking of becoming entrepreneurs is one of the measures which can create a strong foundation for economic growth. And, according to EY The Power Of Three - G20 Entrepreneurship Barometer 2013, the governments and those responsible for public policies are paying increased attention to the entrepreneurs’ needs, through specific programs and public initiatives.

EY has been supporting entrepreneurs from all over the world for more than 30 years, offering dedicated services and competencies. We are committed to do this also in Romania.

Also, we reached the second edition of the Entrepreneurs Speak Out Entrepreneurship Barometer, a project developed by EY Romania in order to support and promote successful businesses and the principles that made their performance possible in Romania.

I want to thank Romanian Business Leaders Foundation for their support and collaboration in conducting this study.

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2Entrepreneurship Barometer Romania 2013

Entrepreneurs speak out - A call to action

Romanian entrepreneurshipOne of the main conclusions of our first edition of The Entrepreneurship Barometer, issued in 2013, was that Romanian entrepreneurs lack relevant information about sources of financing, organizations that support entrepreneurship, specific entrepreneurial education and training. However, this year‘s barometer indicates a higher degree of information, especially regarding sources of financing. Also, funding continues to be one of the most important challenges for the Romanian entrepreneurs: 88% of them consider access to funding difficult or very difficult. At the same time, the Romanian entrepreneurs believe, as in the previous editions, that entrepreneurship and business failure are negatively perceived in the Romanian society, 81% of them considering business failure a barrier for future business projects.

In this context, in order to generate change and to develop the Romanian entrepreneurship, it is vital to monitor the performance of measures dedicated to entrepreneurs and to understand local entrepreneurs’ needs. This is the reason why we publish the second edition of the Entrepreneurs Speak Out - Entrepreneurship Barometer in Romania 2013.

The Barometer represents the voice of 106 Romanian entrepreneurs (with companies in different stages of development, from startups to mature ones) who answered to an online survey. The study is also based on 10 direct interviews with successful Romanian businessmen, and also on quantitative and qualitative insights from The World Bank, OECD and the Romanian National Institute of Statistics.

The conclusions of the study must be seen as an opportunity and a challenge for the state institutions, credit and financing institutions and for all the stakeholders, including the entrepreneurs. By taking actions in the areas where the study shows that entrepreneurs are not supported enough, the entrepreneurial environment could be strengthened, while the Romanian economy could be revitalized more rapidly. The Entrepreneurship Barometer may even represent an instrument for the government to tackle barriers which prevent entrepreneurial success and the formation of a strong entrepreneurial environment in Romania.

We emphasize that the small sample of answers indicates that results of the study cannot be considered exhaustive, but can be taken into account as a snapshot of what some of the most active Romanian entrepreneurs think about financing, entrepreneurship culture, education and coordinated support and tax and regulatory frameworks for entrepreneurial companies.

88%of entrepreneurs consider access to finance difficult or very difficult

94%of entrepreneurs think that regulatory and tax environment should be more predictable

81%of entrepreneurs consider business failure to be a barrier for future projects



About Entrepreneurs Speak Out – The Entrepreneurship BarometerThe Entrepreneurship Barometer is a yearly perception barometer that aims to explore and articulate in a direct manner the issues, expectations and needs of Romanian entrepreneurs, based on a qualitative and quantitative analysis of the Romanian entrepreneurship environment.

Our focus on entrepreneurship aims also to emphasize how policy makers could crucially assist entrepreneurs in Romania, thus supporting new business generation, economic growth and job creation.

However, the study emphasizes not only what the government can do, but also what entrepreneurs can do to seize opportunities. At the same time, Romanian entrepreneurs that have created successful businesses share with us their entrepreneurial story, the challenges of the Romanian entrepreneurial environment as they perceive them and measures that they recommend for improvement.

The entrepreneurial development framework: five pillars that foster entrepreneurship

Goals: The analysis is focused on five fundamental factors: entrepreneurship culture, access to funding, regulation and taxation, education and training, and coordinated support from specialized associations.

• Provide a simple tool to measure the competitiveness of the Romanian entrepreneurship environment

• Provide year-on-year figures to measure progress

• Simple and recommendation-oriented indicators

Our approach is based on:

The opinions of entrepreneurs regarding the progress and impact of specific enablers

Quantitative economic and social indicators

Best practices identified in other countries for developing entrepreneurship to be applied in Romania.

123

Our barometer sums up the perceptions of 106 online surveyed entrepreneurs and 10 directly interviewed well-known Romanian entrepreneurs.

This Barometer follows a global initiative of EY. Its first edition was published on the occasion of The G20 Young Entrepreneurs Summit (31 October - 2 November 2011) in Nice, France. The second edition of the G20 Barometer was issued in august 2013. The EY G20 Entrepreneurship Barometer 2013 study analyzes individually and jointly the entrepreneurial ecosystem in G20 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Korea, United Kingdom, United States and European Union.

Coordinated supportMentors, advisors, networks and clubs, Business incubators, clusters, parks and business centers

Access to funding• Seed

• Start-up

• Expansion

• Capital growth

Tax and regulation• Taxation incentives

• Ease of starting a business

• Business-friendly legislation/policies

Education and training• Pre-university education

• University education

• Entrepreneurship-specific training

• Informal education/lifelong learning

Entrepreneurship culture• Tolerance of risk and failure• Preference for self-employment• Innovation and research culture• Celebration of self-made wealth



Entrepreneurs provide one of the main engines of growth and are a key source of jobs1.

Across the EU as a whole, entrepreneurs supplied 67% of all jobs in 2012. In China, they provide 75% of all jobs2.

1 Ecorys, EU SMEs in 2012: at the crossroads. Annual report on small and medium-sized enterprises in the EU, 2011/12 (ECORYS Nederland BV, 2012) p. 15.

2 Ministry Of Commerce People’s Republic Of China website, english.mofcom.gov.cn, accessed 3 July 2013

Why are the entrepreneurs important and how can they be helped?

In the US, start-ups and firms less than 5 years old account for nearly all net job creation over the past three decades3.

In Romania, according to OECD, SMEs contribute with 66% of the total number of employees from private companies.

3 D Stangler and P Kedrosky, Neutralism and Entrepreneurship: The Structural Dynamics of Startups, Young Firms, and Job Creation (Ewing Marion Kauffman Foundation, 2010) p. 13.

43%

91% 29%

52%

94%

88%

80%

81%

of entrepreneurs are unsatisfied with the level of fiscal policies, fiscal uncertainty and bureaucracy

need taxes and regulation to be simplified

of them consider that SME credit schemes would be the most effective

expect improved communication of successful entrepreneurial stories to have a major impact on the entrepreneurial culture

of the entrepreneurs advocate for a more predictable tax and regulatory environment

of entrepreneurs say that access to funding is difficult or very difficult

are mentoring in a formal or informal environment

say that failure in business is perceived as a barrier for starting a new business, a career failure or a lack in necessary abilities

“I am an innovator, I develop new products and services, I apply efficient production methods and I create new business models. I am eager to learn, I network. I think globally and make a significant impact on my communities through creating jobs and bolstering economies.”

I need a streamlined tax and regulatory system

I need a more supportive culture

I need a simplified fiscal environment

I need a predictable fiscal environment I need society to

tolerate failure

I need support from the government

I need help to access funding

I offer mentoring in order to help other entrepreneurs develop

Source: Entrepreneurs Speak Out - Entrepreneurship Barometer Romania 2013



The economic impact of SMEsThe figures indicate that countries with strong support for entrepreneurship benefit from an increased level of new business generation. By matching the best rankings in the EY G20 Entrepreneurship Barometer 2013 with the number of new companies created in those countries, we can conclude that countries with a friendly regulatory, financial, educational, cultural environment for entrepreneurs have the greatest business generation rate. Countries ranked highest (e.g. Great Britain, Canada and Australia) have the largest density of companies. On the other hand, many economies experiencing rapid growth, where entrepreneurship is not yet well developed, like Argentina, India and Brazil, neither registered a high rate of new created companies, nor a good position in the EY ranking.

The conclusion is clear: the countries that manage to improve the conditions offered to entrepreneurs can expect an increase in the number of created companies, as more people will consider entering entrepreneurship as convenient and more accessible.

SMEs contribution to total number of employees in the private sector

One of the main drivers of stimulating business creation is the role of entrepreneurs in economic growth and creation of new jobs. SMEs (companies with less than 250 employees) represent the majority of the companies in economy and are those which provide the highest rate of employment. Among OECD countries, SMEs represent 99% of the companies and employ 2/3 of all hires1. In Romania, SMEs employees represent 66% of all jobs in private companies.

Moreover, those companies create twice as many jobs as mature companies. In the European Union, between 2002 and 2010, 85% of employment growth was provided by SMEs2.

1 Organisation for Economic Co-operation and Development, Issues Paper 1: Innovative SMEs and Entrepreneurship for Job Creation and Growth (Bologna+10 Meeting Brief, 2010

2 EIM, Do SMEs create more and better jobs? (EIM Business & Policy Research, 2011).

Up to 250 employees

Romania

United States

United Kingdom

Turkey (2009)

Spain

Slovenia

Slovak Republic

Russian Federation

Portugal

Poland

Lithuania

Italy

Hungary

Germany

Czech Republic

Bulgaria

Belgium

Austria

66%

50%

34%

50%

47%

31%

25%

28%

28%

53%

69%

75%

72%

72%

29%

79%

68%

75%

80%

72%

63%

70%

76%

69%

68%

71%

21%

32%

25%

20%

28%

37%

30%

24%

31%

32%

0% 20% 40% 60% 80% 100%

More than 250 employees

Source: OECD, Entrepreneurship at a Glance 2013 - © OECD 2013



A call for actionA common effort is needed for the improvement of entrepreneurship environment

The entrepreneurs are extremely motivated, innovative and are able to find resources to face any context. However, if the fiscal, regulatory, funding, cultural and educational environment were friendlier, more people would have the courage to start a business, contributing to the Romanian economic competitiveness.

“In an environment with a high degree of uncertainty, entrepreneurship starts gaining ground, specifically in the area of technology. We see more and more young people trying to develop a new product on their own, targeting the international markets and, rarely, the local one. More often, Romania is the market where the products are tested, despite the fact that there are numerous areas in Romania that could benefit from technological innovation.

It is important to mention the trend in outsourcing companies: they now are developing their own products, which determine transformations in their organizational culture and their market positioning.

A common effort is needed for the development of entrepreneurship:

In order to remove barriers, a common effort is needed not only from those who set the public policies, but also from investors, entrepreneurs, journalists, teachers, specialized associations and corporations.

Entrepreneurs

Investors

Press

Specialized support bodies

Regulatory bodies

Culture

School and education

GovernmentCompanies

The challenges remain numerous, starting from difficulty in accessing funds, lack of a complex entrepreneurial education to cover the needs of a start-up, and, sometimes, lack of strategic vision from the young entrepreneurs. On the other hand, examples of successful companies come into light, with record growth rates, like MavenHut or CyberGhost, or those acquired by international companies, like uberVU and Avangate. Those examples of success are essential for attracting foreign investors to Romania and for increasing the faith that a start-up founded here can be successful on the international market, not only as a brand, but also financially speaking“.

Daniel Dragomir, CEO TechHub Bucharest, community and co-working space for technology entrepreneurs

Access to funding

Romanian entrepreneurs, in line with entrepreneurs from EU or G20 countries, consider improved access to funding to be crucial to the development of entrepreneurship.


90%of the Romanian entrepreneurs consider access to funding difficult or very difficult for young entrepreneurs (less than 40 years old)

Conclusions on access to funding48% of entrepreneurs who answered our survey consider access to funding has worsened during the last year in Romania, despite the fact that entrepreneurs from EU, as well as from Romania, say that funding is the most impactful factor for the entrepreneurship environment.

That is why it is necessary to facilitate the access to funding for entrepreneurs.

Among the instruments that are considered to have the largest potential impact in Romania are bank loans, venture capital investments, business angels and private equity, in line with answers of entrepreneurs from EU and G20 countries.

State aids and crowdfunding though are not perceived by Romanian entrepreneurs to have the same potential, in contrast with EU’s and G20 entrepreneurs’ perceptions.

Has access of entrepreneurs to funding improved during the last year in Romania?

The 3 instruments that could have the largest impact in sustaining entrepreneurship in Romania, if boosted

The perception on access to funding of entrepreneurs in 2013, in Romania, by age groups

Stayed the same

27%

Don’t know or no opinion

9%

Improved 16%

Worsened 48%

Worsened Stayed the same

Improved

> 40 years old

< 40 years old


50%

45%

24%

32%

15%

18%

11%

5%

0% 20% 40% 60% 80% 100%

Bank loans

Venture capital

Business angels

Private equity

Microfinance

State aid

Clients

Public-private partnership

Family and friends

IPO

Suppliers

Crowdfunding

Romania EU G20 average

0% 10% 20% 25%

Source: EY Entrepreneurship Barometer Romania 2013

Source: EY Entrepreneurship Barometer Romania 2013 and EY G20 Entrepreneurship Barometer



Conclusions on access to fundingWorsening of access to funding in 2013 is felt by Romanian entrepreneurs in a context that was already difficult from a financing standpoint. Therefore, 88% of them say they can hardly access funding in the local market.

In the case of young entrepreneurs (aged under 40), the access is even more difficult: 90% of respondents think that for them funding is difficult or very difficult – marking a slight increase compared to 2012.

If we compare the results with EU or G20 data, the perception of the Romanian businessmen is more than pessimistic, in line with the negative EU general perception regarding access to funding, hovering around 76%.

2012 2013

Difficult

Very difficult


Easy

Very easy

37%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

56%

4%5%

3% 5%

55%

35%

Difficult

Difficult

Very difficult

Very difficult



Easy

Easy

Very easy

Very easy

5% 5%55%

33%

33%

17%

15%

2%

2%

29%

29%

19%

21%

35%Romania

EU

G20 average

0% 20% 40% 60% 80% 100%

Romania

EU

G20 average

0% 20% 40% 60% 80% 100%

8% 4%69%

32%

30%

9%

10%

7%

9%

27%

26%

25%

25%

19%

Do you think that access to funding in Romania is easy for entrepreneurs below the age of 40? (2013 vs 2012)

Do you think that access to funding in Romania is easy for entrepreneurs below the age of 40? (Romania vs EU vs G20 average)

How do you perceive access to funding for entrepreneurs?





Which are the 3 most important areas of action for the government that can improve entrepreneurs’ access to funding?


Conclusions on access to fundingRegarding the areas of action for the government, the Romanian entrepreneurs consider that tax incentives for investments in SMEs (16%), more effective and simplified regulatory systems for businesses (13%), and credit warranties (13%) would have the most significant impact on funding in Romania. The first two set of actions are the ones identified also by EU entrepreneurs as having a significant impact.

For EU entrepreneurs, the most important actions following the previous two are the reduction of capital gains tax (9%), credit warranties (8%), infrastructure investments (8%) and simplified listing rules for SMEs on stock exchanges (8%).

Tax incentives for investment in small business

*government undertakes to use small entrepreneurs for a certain percentage of their tenders

Funding for lending schemes/targeted lending schemes

Grants

Simplified, more efficient business regulatory systems

Low capital gains tax

Regulatory framework for crowd funding and other

Loan guarantee

Tax breaks for corporate venturing

Simplified listing rules for small companies

Promotion of fair, efficient labour laws

Promotion of a business environment that is not overlay litigated

Sponsorship of networking and entrepreneurship forums

Invesment in infrastructure

Procurement*

Match/partner with private investments in high-growth


0% 2% 4% 6% 8% 10% 12% 14% 16% 18%



Financing growth: the funding ecosystem for entrepreneurs

As entrepreneurial businesses grow and develop, the sources of finance they rely on change.

Newborn companies - in the pre-seed, seed and start-up stages, the most vulnerable stages of any business, also named The Valley of Death– are in a great need for capital, usually very hard to find in this phase.

Most of the times, entrepreneurs rely on their own funds. According to Global Entrepreneurship Monitor 2012 US Report, 73% of entrepreneurs who have started new companies in the US in 2012 funded them from their personal savings. In this phase, the family, friends, but also banks through personal loans and credit card offers, are important.

Further in the emerging stage, the new companies do not follow the same type of funding. For many, their own savings and the working capital represent the most important types of capital.

Other will access specific funding for this stage of growth, like capital offered by:• Business angels - wealthy individuals, usually entrepreneurs

whom invest in young companies and offer advice for the funded start-up.

Stage 1: emerging company

It is therefore essential that governments create a range of mechanisms and institutions that provide entrepreneurs with the capital they need at every stage of the growth journey.

• Crowdfunding - offers funding even earlier than business angels, is based on contributions made on specialized online platforms.

• Venture capital - capital offered by institutional investors, especially to innovative startups with promising growth prospects.

Despite an unfriendly macroeconomic climate for startups in the last years, we have witnessed an extraordinary dynamics of the funding methods for newborn companies, especially due to crowdfunding.

The entrepreneurs from G20 countries generally claim that the access to necessary funds during the emergence phase has improved in the last 3 years.

In the same time, the Romanian entrepreneurs have made significant steps in understanding these types of investors/funding instruments. If in the 2012 edition, the entrepreneurs could not appreciate the impact of business angels and venture capitals, this year 19% of the respondents consider that these two types of funding have the most potential in developing entrepreneurial initiatives, almost as much (20%) as those who consider bank loans – the most well-known funding method – as having the greatest potential impact.

Reve

nues

Entrepreneur, friends, family

Incubator/accelerator

Corporate accelerators Corporate VC

Angels

Crowdfunding

Seed/early stage VC

Speciality bank loans and guaranatees

Government grants (e.g., R&D), SME purchasing focus

Government export schemes, grants

Formal VC/growth capital

Private equity

Public stock markets

Pre-seed Seed Start-up

Development stage

Rapid-growth Expansion / market leaderEmerging

EY guide for funding entrepreneurial companies




Among the countries which rank highest at funding conditions for the new born companies are US, Canada and Australia, but also Saudi Arabia and Indonesia. The last two countries ranked so well due to 50% debt government guarantees at accessing risk capital, while one of the largest state companies in Saudi Arabia has a corporate venture capital fund to invest in start-ups. The Indonesian government guarantees 70% of the loans, with an estimated fund of USD 2.9 billion in 2013. In Romania, at the moment, there are no guarantees made by the government at comparable level or corporate venture funds initiated by state companies.

Motivation of those who offer sums of money through crowdfunding

Financial motivation

Social Motivation

Material motivation

Bank loan

Social loan Capital for the product/service

Loan for the product/service

Own capital

Donations Rewards based

Sales in advance

Innovative forms of funding are emergingMicro financing, a financing option for entrepreneurs who do not have access to traditional banking loans, has improved significantly, especially in the markets with fast economic growth. In Romania, according to EBRD, the potential market of microfinancing is 500 million EUR, fueled by commercial banks and nonbanking financial institutions in proportion of 70%, while 30% of the demand is not satisfied. Over time, EBRD partnered with Romanian financial institutions in order to offer micro financing to the Romanian market.

At the moment, some of these institutions offer micro financing through the programe “Progress” financed by the European Investment Bank. These institutions have an annual portfolio of EUR 100 million, offering 20.000 credits per year. The average value of a microloan is under EUR 10.000 and can reach EUR 25.000.

Source: A Framework for European Crowdfunding, October 2012

“Crowd funding is a disruptive industry. Because of it, people can use an extremely simple and inexpensive mechanism to finance their projects.Crowdfunding is still at the beginning in Romania, but we expect that this industry will grow in the next years. A significant barrier in the development of the field is represented by the small degree of familiarity of initiators of the projects as well as of funders with this financing method.

The efforts directed toward educating the market seem to have results, because there are significantly more persons interested in this funding method now compared to last year.The value of the market for the crowd funding reward-based projects (financing in exchange for rewards) in Romania is estimated at about EUR 100.000”.

Judit Katona, co-funder of the crowd funding platform Creştemidei.ro



Expectations from crowd funding are high, the new comer in the world of funding for startups being increasingly perceived as a solution for overcoming the big problem of funding in the early stage of the business.

At a global level, there are over 400 crowdfunding websites (one of the largest is kickstarter.com). This means you can finance your business from tens, hundreds, thousands of donors of small sums. At a global level, crowd funding platforms have raised funds of USD 2.7 billion in 2012 for more than one million campaigns and USD 5.1 billion in 2013 (estimate by Massolution Crowd Power Solutions). The field is becoming so popular that the European Commission intends to promote the sector by creating an European network of crowdfunding platforms.

AngelListBeing a disruptive instrument in the angels investors world, AngelList is an online service which facilitates the meeting between the entrepreneurs and investors.

“Angel investors” “Venture capitalists”

Who Businessmen with wealth over USD 1 mil. Professional investors

The source of funds Invest their own funds in startups Invest institutional funds in more mature companies

The size of investment Usually between USD 10.000-50.000 On average USD 7 mil.

The role of the investor Is not involved in the operational management Actively involved in the business

Rate of success In 52% of the cases the invested money are lost 40% do not succeed

Business angels investors – essential in the emergent phaseAs soon as a company begins to hire people and to develop products and services, usually they need capital injections and the business angels investors can provide the right amount of capital in this stage. They are even incentivized from a fiscal perspective starting 1 January 2014: the Fiscal Code has been accommodated to include facilities for these kind of investors. Holding companies which register profit on the sale of shares or from dividends are exempt from capital gains taxation. Therefore, business angels investors could establish companies with a holding structure in order for the profits to be tax exempted.

Education and business angels networks play also an important role in the development of this instrument of funding: potential business angels must easily gain access to information about this kind of investment opportunity and about investment mechanisms.

Source: The Boston Globe, 2013


It was created in 2010 and provides a data-base with complete information about entrepreneurs and investors. Through this platform, hundreds of companies have managed to find financing until now.



Silicon Valley BankSilicon Valley Bank (SVB) is a well-known bank which funded thousands of start-ups since 1983 (the year of founding). SVB has gained a profound knowledge of start-up assets (usually only intellectual property assets or incipient, new ideas) and start-up’s revenue. The SVB experience remains an example for other banks on how financing new companies can be a feasible and profitable activity.

Cash plus mentorship through US Small Business AdministrationSmall Business Administration (SBA) is a best practice example on supporting risk capital funding (venture capital). The American Federal Agency is one of the oldest and most successful initiatives designed to bridge the gap between venture capital funding and small companies, by providing guarantees up to 90% of the granted loan. In 2012, its finance programs provided US$30.25b in loans to small businesses.

One of the main reasons for the SBA’s success is the way it combines financial support with education. The agency’s national network of experts provides support to entrepreneurs through mentoring, training, legal advice and even assistance with securing government contracts.


Access to traditional bank lending remains difficult for fast-growth companies

At the rapid-growth stage, entrepreneurs can demonstrate a market for their products or services and may already be earning revenues. In theory, more funding options should now be available, including bank loans and venture capital.

Since the financial crisis, however, small companies have continued to face major hurdles in accessing funding in Romania. Banks are under pressure to boost regulatory capital, and this is encouraging them to shrink their assets by reining in lending. Thus, they remain selective in granting financing. In general, they take into consideration companies with a solid financial history, while new companies are not bankable, being perceived as bearing a high risk. Though, the Romanian banks take into consideration the SMEs segment and have a few dedicated financing instruments based on the funds received from international banks focused on this segment, like European Investment Bank and International Finance Corporation.

Government credit guarantee schemes In this dry financing landscape, the government tries to stimulate SMEs loans through state guarantees.Mexico, Turkey, Indonesia, South Korea are just a few states that offer these schemes and the impact is significant. A similar scheme has been introduced in 2012 in Great Britain, and offers lending facilities of over £ 2.5 billion for more than 16.000 companies.In Romania, a scheme for SMEs will function similar to the “First Home” program. The state will offer guarantees up to Lei 2 billion, representing 50% of the bank loan for working capital. Eligible companies must have registered a turnover of up to EUR 50 million in the last fiscal year, be operational active for at least 3 years and have recorded operating profit in the last 2 years. The interest is 3 months ROBOR plus a maximum margin of 3.5%. The credit will function as a line of credit in the revolving system.Also, European funds for startups can be obtained through the JEREMIE project, launched by the European Commission and the European Investment Fund, part of BEI. JEREMIE offers to financial intermediaries financial instruments for SMEs: guarantees, co-guarantees, counter guarantees, equity guarantees, micro-loans, risk capital, securitization instruments, co-investment funds, investment in technology transfer funds. Through these facilities, the partnered financial intermediaries offer SMEs loans and equity participation. JEREMIE, however, does not operate as nonrefundable funding for SMEs.In the European Union, “The Competitiveness and Innovation Framework Programme” (CIP) will be followed during the period 2014-2020 by the program for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME).

Second phase: fast growth

With a EUR 2.5 billion budget, the program will facilitate the access to finance and will encourage the entrepreneurial culture. Of the total financial package, EUR 1.4 billion are allocated to financial instruments. The rest will be spent for funding the Enterprise Europe Network, a platform dedicated to international industrial cooperation and education, in order to develop the entrepreneurial spirit. Access to loans will be easier especially for entrepreneurs to launch cross border activities.

International banks with new loan models for entrepreneurial companiesSome international banks have developed loan schemes intended to new companies. These banks do not offer loans based on guarantees or on company’s income, but on other performance indicators and future potential of the business.

This kind of shift would require banks to develop new competencies and expertise in early-stage business.



Agenţia pentru Implementarea Proiectelor şi Programelor pentru Întreprinderi Mici şi Mijlocii (AIPPIMM)Besides the option of loan guarantees, companies have also the option of accessing nonrefundable financing allocations offered by the Romanian State.

The Minister of Economy through “The Department for SMEs, Business Environment and Tourism” implements programs offering state budget funding for improving the rate of new

Programs for the SMEs2012 2013 2014

Budget (lei) Beneficiaries Budget (lei) Beneficiaries Budget (lei) Beneficiaries

The program for stimulating the establishment and the development of microenterprises by young entrepreneurs – The SRL-D program

21,000,000 - 25,000,000 576 21,000,000 493

The Mihail Kogalniceanu program for the SMEs 70,000,000 12,000 16,115,000 1,635 10,000,000 400

The program for establishment and development of technology and business incubators

1,000,000

300 SMEs and the opening of 3 new

incubators

6,470,000 14 incubators 6,000,000 15 incubators

National program for the development of the entrepreneurial culture among the women managers

500,000 - 500,000 14 - 12

The program for the development of the entrepreneurial abilities among youth and facilitating access to funding – START

10,000,000 92 20,000,000 129 13,000,000 130

The program UNCTAD/EMPRETEC Romania for SME support

350,000 - 0 0 500,000 4 work-shops

De minimis aid scheme - - 0 0 250,000,000 555

business generation and developing SMEs in Romania. Probably the most well known program of this kind is the one focused on young entrepreneurs (younger than 35 years old), the so-called “SRL-D program”.

The program with the most generous budget, the De minimis aid scheme funds up to 90% of eligible expenses as a nonrefundable financial aid for SMEs. For 2014, the maximum value of the state aid is 100.000 EUR/firm, and the registrations have been already closed, recording over 7.000 applications.

Selection of governmental programs offering support to SMEs in 2014 - nonrefundable funds

Source: Agenţia pentru Implementarea Proiectelor şi Programelor pentru Întreprinderi Mici şi Mijlocii, aippimm.ro


Incentivizing venture capital activitiesRisk capital plays an important role in funding companies with larger capital injections than what business angels usually are willing to invest. A venture capital (VC) investment is desired even for the multiplication effect: after receiving a round of funding from a well known venture capital fund, access to loans and other types of funding becomes easier.

However, in the present economic situation, risk capital, like other sources, remains sometimes inaccessible. Between 2011 and 2012, global venture capital investments had decreased by 20%, but there are also some signs of encouragement. For example, among the respondents of the EY G20 Entrepreneurship Barometer 2013, 63% of the Indian entrepreneurs, 48% of the Russian ones and 41% from the Brazilians consider that access to risk capital registered a turnaround.

Venture capital is less present in Romania, but with the right incentives from the state, this kind of funding could develop much more. In India, for example, this kind of investment has doubled from USD 600 mil. in 2006 to USD 1.4 billion in 2012. According to the European Private Equity and Venture Capital Association (EVCA), in 2012 only one risk capital investment was registered in Romania. This was made in the telecommunication sector and was less than EUR 3 million.

In order to support the venture capital investments, the European institutions are thinking of creating a passport system to help venture capital companies invest in different funds and companies from European Union without being obligated to register in every country they want to operate in.

At the same time, some governments support the VC funds to invest in start-ups, like the Australian government which offers USD 104 million to local VC funds. Other countries take into consideration regulatory changes in order for the pension funds and the government funds to invest in VC or fiscal measures to encourage venture capital investments from foreign VC companies.

A bigger role for corporate investments The investments made by the companies from Romania in start-ups should be encouraged to cover the lack of funding options.

This kind of investment represents almost 6-10% from the global risk capital investments. Through this kind of investments, mature companies have access to future technologies and financial returns.

Global Corporate Venturing identified almost 1000 corporate venture capital funds worldwide. Large corporations offer capital or loan funding through their own VC funds, like General Motors (funded in 2010 a subsidiary which invests USD 100 mil.) or Dell (with a USD 100 mil fund for investing in startups).

1000corporate venturing units worldwide

Almost

“If we talk about later stage investments in Romania and in the region, there are private equity and other types of investment funds that have significant sums available. The problem is that the business projects do not reach that stage due to the weak initial seed financing when, as an entrepreneur, you do not have access to bank financing

and the money from the parents, friends and family are not enough. You do not have practically any other efficient solution for funding in order to outgrow this level and reach the venture capital or private equity phase.”

Marius Ghenea, serial entrepreneur (Flamingo, Flanco, FIT, accessNET, Idilis, Pcfun.ro) and business angel



Capital markets are extremely important for the companies which are in the expansion phase. An exponential growth of the company can be powered only through capital markets. After becoming public, a company can finance the strategic acquisitions of other companies, access new markets, strengthen its brand, while the investors who supported it by then, the private equity investors, can receive a good exit opportunity.

Historically, the companies which were listed have accelerated their job creation rate. For example, in the US, 90% of the jobs created by a company were created after it was listed.

In Romania, the stock exchange market is still in the beginning phase, from a liquidity and annual public offers standing point. FTSE, one of the world leaders in setting up and determining stock exchange market indexes, situated the Romanian capital market in the frontier market segment, in the last fall, due to the low liquidity and high transaction costs. In 2013, there were two listings at BVB (Nuclearelectrica and Romgaz) while in 2014 are expected Hidroelectrica and Electrica.

Junior Markets have a vital role in supporting entrepreneursNot every company will be able to make the step from being a private company to the main stock market. Junior exchanges, such as AIM in the UK, can play an important role in bridging the gap by providing a mechanism for accessing public equity investment. Listing on a junior market can also have tax benefits and be a stepping stone to an eventual listing on the main market.

In the last 10 years, many stock exchanges around the world, in both mature and rapid-growth markets, have established junior markets or new platforms to foster capital-raising by high-growth entrepreneurial businesses.

An important factor in the success of this type of market is providing a stimulating system for this investments and an easy access to investments. In Romania, BVB created an alternative transaction system, ATS, but for the moment it did not succeed in attracting local companies.


Faza 3: Expansion

“Loans can be either cheap or expensive, but what really matters is the added value they bring to your busines. If the added valued is significant, it doesn’t matter how expensive the money is.”

Felix Pătrăşcanu studied law to become a judge, but he became an entrepreneur and CEO of a EUR 60 million company, FAN Courier.

“Medium and large companies and the state should be encouraged to buy from companies which are at the beginning of the road, because otherwise the companies will not develop. For example, it may be a best practice recommendation that a percentage of public acquisitions to be granted to start-up companies.”

Bogdan Tudor has been interested in computers since high school. In 2005, he created Class IT company and from 2011 he expanded his business to the US.



Our recommendations

1. Government action: where to focus• Conduct a self-assessment of your entrepreneurial landscape.

This will help to ensure that the correct funding strategies and policy levers are in place and the right type of capital is available at every stage of the entrepreneur’s life cycle.

• Provide mentoring along with capital. Capital without mentorship is lost capital.

• Boost access to funding. Encourage venture capital fund formation, support the creation of specialist banks, sponsor credit guarantee schemes and low-interest start-up loans, and encourage innovative new approaches such as crowdfunding and milestone lending.

• Support stock markets. Stimulate access to capital and a greater potential for exits for entrepreneurial growth companies.

2. The entrepreneur perspective: key issues to consider• Ensure that your capital source is the right one.

Seek the right funding depending on where your company is in its life cycle.

3. A corporate perspective• Set up a corporate venturing unit.

Support and access innovative entrepreneurial businesses through corporate venturing.

• Trade with entrepreneurs. Strengthen your supply chain by purchasing from entrepreneurial businesses or providing loans, trade credit or other forms of support, particularly to those in the early stages of the growth cycle.

Entrepreneurship culture

Entrepreneurship should be perceived as a valid and respected career choice and would-be entrepreneurs need to feel they will not be excessively penalized or stigmatized if they fail.


35%of Romanian entrepreneurs believe that the way they are perceived has improved during last year

Conclusions on entrepreneurship culture59% of the respondent entrepreneurs consider that mentalities and values in Romania do not support entrepreneurship, compared to 43% of the entrepreneurs from the European Union and 29% of G20 countries.

If we take into consideration the responses of those who consider that Romania has a positive culture for entrepreneurs (35%), only entrepreneurs from Italy, France and Japan are less optimistic than Romanians.

Partly or fully agree

36%


6%

Partly or fully

disagree59%

Is entrepreneurship encouraged by the Romanian attitudes and values?

My country has a culture which encourages entrepreneurship % of entrepreneurs partially or totally agree

The perception towards entrepreneurship has improved during the last year in Romania?

55%Media țărilor G20

Japa

n

Braz

il

Indo

nesi

a

Arg

entin

a

Fran

ce

Russ

ia

Sout

h Ko

rea

Saud

i Ara

bia

Italy EU

Ger

man

y

Sout

h A

fric

a

Mex

ico

Cana

da

Rom

ania

Aus

tral

ia

Turk

ey

Indi

a

Uni

ted

King

dom

Uni

ted

Stat

es

Chin

a

90%80%70%60%50%40%30%20%10%

0%

> 40 years old

All entrepreneurs

< 40 years old

Somewhat or greatly deteriorated Neither improved nor deteriorated

Somewhat or greatly improved Don’t know or not applicable

0% 20% 40% 60% 80% 100%

26%

34%

13%

35%

36%

33%

4%

1%

35%

28%

46% 8%

When asked about the change in mentalities on entrepreneurship during last year in Romania, 35% of entrepreneurs believe that it has improved, compared to 26% who think it has worsened.

When analyzing the responses of entrepreneurs by age, however, there is a mismatch in perception between young entrepreneurs and the mature ones. Most young entrepreneurs (46%) believe that the image of entrepreneurs has improved in 2013 compared to 2012, while the highest proportion of mature entrepreneurs (34%) thought that it has worsened.





5%of Romanian entrepreneurs see business failure as a learning experience

Only

Conclusions on entrepreneurship culture

The fear of failure remains one of the significant barriers to approach entrepreneurship. Only 14% of the respondents believe that society tolerates business failure, while 81% believe this failure represents a barrier to future business projects, a career failure or it indicates lack of necessary skills.

This attitude towards failure indicates that Romanian society penalizes insolvency and bankruptcy of companies, both from a regulatory perspective and from the perspective of future financing options from banks and other investors. When the company is not successful, the cost of insolvency should be relatively small.

What do you think about business failure in Romania? Perception of business failure in Romania, EU and G20 Countries

By not overly penalizing honest entrepreneurs who arrive in this situation, while encouraging private creditors to do the same, the government can directly reduce one of the most significant barriers for entrepreneurs. This approach would reinforce the idea that business failure is part of a learning process.

The government sent the new Insolvency Code to the Parliament at the end of 2013, however it has not yet been adopted. It remains to be seen whether or not the form adopted will penalize entrepreneurs who fail.

Source: Entrepreneurs Speak Out, Romania 2013 and EY G20 Entrepreneurship Barometer

Source: Entrepreneurs Speak Out, Romania 2013

“The entrepreneur is a daredevil, a seeker and a fighter who never quits and is always trying to innovate.“

Constantin Boromiz, the Boromir group owner, has started as a mill owner in his native village many years ago, to reach an annual aggregate turnover of EUR 100 million in 2013. He considers himself to be an entrepreneur since he was 7 years old.

34%40%

A b

arrie

r for

futu

re p

roje

cts

A c

aree

r fai

lure

An

outc

ome

of ru

nnin

g a

busi

ness

with

out t

he

appr

opia

te s

kills

An

outc

ome

that

has

no

impa

ct o

n fu

ture

bu

sine

ss p

roje

cts

A le

arni

ng o

ppor

tuni

ty

Don’

t kow

or n

o op

pini

on

30%

20%

10%

0%

24% 23%

9%5% 5%

34%

24%

23%

9%

40%

29%

12%

4%

12%

A barrier for future projects

A career failure

An outcome of running a business without the

appropiate skillsAn outcome that has no impact on future

business projects

A learning opportunity

Don’t kow or no oppinion

26%

21%

20%

6%

23%


5%

5%

0% 10% 20% 30% 40% 50%

3%4%


52%of entrepreneurs consider that communicating success stories has the greatest impact in promoting a culture of entrepreneurship

Conclusions on entrepreneurship culture

Just like in last year’s edition of the barometer and in line with responses of entrepreneurs from European Union, Romanian entrepreneurs believe that improving the communication of entrepreneurs’ success stories and promoting the career opportunities of entrepreneurship would have the greatest impact on the image of entrepreneurship in Romania.

Given the lack of maturity of the entrepreneurship culture in Romania, all other listed measures were also considered important by the entrepreneurs (see below). The only measure not perceived as such by a significant percentage of entrepreneurs concerns the Government’s programs in the area of education, funding and improvement of the entrepreneurship image. The percentage can be explained by a lack of confidence in the effectiveness of state’s measures in the sphere of entrepreneurship.

To improve the entrepreneurship culture in Romania, which would be the impact of the factors listed below in the next three years?

Therefore, in order to improve the image of entrepreneurship, business people believe that messages about entrepreneurs’ impact in the economy, through jobs creation and economic growth, is key. This issue is important, especially in a country like Romania, where the entrepreneur’s role is not yet well known, because of lack of entrepreneurship in the past generations.

The communication and celebration of success stories of Romanian entrepreneurs is even more important. Opening a business must become a viable career option, a serious personal achievement and an opportunity for growth and well-being.

Source: EY Entrepreneurs speak out

“We are at the start of the so-called economy of applications and I believe that at this moment Romanian start-ups with global products may appear. We need some global business success stories, and from that point investors will start to have more courage, and the state will see a real advantage in encouraging entrepreneurs. The absence of success stories is probably one of the most important explanations for not having more entrepreneurs. If there aren’t any success stories, why think about becoming an entrepreneur

High impact Medium impact Low impact Don’t know or no opinion

52% 37% 6%

6%

3%

3%

2%

7%

10%

16%

19%

13%

21%

35%

35%

37%

48%

29%

49%

45%

41%

37%

43%

5%Improve communication around entrepreneurs’ success stories

Promote the career opportunities offered by entrepreneurship

Acceptance of business failure

Government programs providing education, funding and profile raising

Promotion of the role of entrepreneurs in creating new jobs

Promotion of the high risk/high return dynamics of entrepreneurship

0% 20% 40% 60% 80% 100%

and work 20 hours out of 24? Wouldn’t you prefer to go to a corporation where you work 8 hours and have a comfortable life? ”

The online travel agency Vola.ro owner, Daniel Truică, became an entrepreneur during college. In 2006, after four years of entrepreneurship, he started Vola.ro. Now the Vola group is active on the Romanian market, but also in Poland, Ukraine and Vietnam. Daniel estimates that Vola group is worth EUR 27-30 million.


14%of respondents consider that Romanian society does not penalize business failure

Improving the perception of entrepreneurship

The role of public policies in changing the cultural attitudes regarding entrepreneurs The countries that support innovation, the risk taking of starting a business and communication on success stories tend to inspire more people to become entrepreneurs. Because of celebrating entrepreneurial success, The United States ranks first place at entrepreneurship culture, in the EY G20 Entrepreneurship Barometer 2013.

However, Romania is below the EU in terms of perceived risk tolerance. Only 14% of the entrepreneurs who responded think that business failure is seen in Romania as a learning opportunity and that it has no impact on future business projects.

To encourage entrepreneurship, the authorities may play an important role. For example, the European Union provides funding for SMEs to increase competitiveness, from which a significant part is spent on improving entrepreneurship culture. Another initiative at the European level is the European SME Week, which in 2014 will take place during 29 September - 5 October. Through the activities taking place during this week, the European authorities are trying to inspire more people, especially young people, to become entrepreneurs. During the European SME Week in 2012, 1,500 events were held in 37 countries from within the region.

In Romania it is very important for authorities to engage in efforts aimed at changing attitudes towards entrepreneurs, given that entrepreneurship was interrupted in Romania during the communist era, when personal initiative was discouraged and successful businessmen were judged as enemies of the people. Therefore, even 25 years after we renounced the state governed economy and the controlled production system, entrepreneurship is still a young concept, which went, same as the Romanian people, through a process of transition after 1989.

To improve the image of entrepreneurs, the government can support communication of success stories and the job creation role of entrepreneurship. These are two measures seen by Romanian entrepreneurs as having great impact in changing attitudes on entrepreneurs and entrepreneurship.

40%

G20 countries average

50%

60%

Braz

il

Cana

da

Indi

a

Saud

i Ara

bia

Uni

ted

Stat

es

Rom

ania

Aust

ralia

Fran

ce

Sout

h Ko

rea

Italy

Mex

ico

Germ

any

Sout

h Af

rica

EU

Russ

ia

Japa

n

Turk

ey

Chin

a

Uni

ted

King

dom

Arg

entin

a

Indo

nesi

a

30% 29%

20%

10%

0%

Source: EY Entrepreneurs Speak Out, Romania 2013 and EY G20 Entrepreneurship Barometer

The positive attitude towards risk in Romania versus the G20 countries:



Removing the cost and stigma of failure is critical for successIf failure has a high cost, potential entrepreneurs will not choose entrepreneurship. Only 14% of the entrepreneurs say that Romanians and Romanian institutions have a positive attitude towards business failure, while 81% see it as a barrier to future business projects, as career failure or lack of necessary skills.

This attitude needs to be changed, especially since the success rate of serial entrepreneurs is higher than the rate of those entrepreneurs who are at their first business1. This indicates that failure is a valuable learning experience.

Israel provides a good example of how government programs can help to increase risk tolerance: Office of the Chief Scientist (OCS), a state institution of Israel, provides funding with “zero risk”, which means that if the newly created company fails, the funding should not be paid. OCS does not intervene in the management of the company and does not get shares in exchange for funding. Only companies that are successful are required to pay back the loan.

1 P.A. Gompers et al, “Performance Persistence in Entrepreneurship and Venture Capital”, Journal of Finance Economics, Vol 96 No 1, 2010

„In 1992 it was early enough to become an entrepreneur, especially that Romanian economy was in a transition phase to a market economy. I was seen as a strange character, even more as, in the same time, I had a job at a state company, where I was earning my everyday living. Colleagues back then were perceiving me as a little alien.”

Florin Furdui, serial entrepreneur and Country Manager, Portland Trust

„As a young person, you have nothing to lose if you try to be an entrepreneur. You don’t have bank loans, you are healthy, you have no family responsibilities, children, why not try it? You should not be afraid of failure, because if you do not succeed, entrepreneurship will be a great experience, much better than any prestigious school. Think

„Entrepreneurship has become more visible in the media in the last years and the new generation attitudes towards entrepreneurship are changing visibly. After the entrance of corporations in the local economy young people mainly wanted to take jobs in such companies because it offered them a good salary and a secure job, however, now taking the risk of working on your own is no longer perceived as a radical choice.

At the moment, the most visible success stories in the media are online and tech entrepreneurs. Perhaps not unrelated, many young people are interested in these industries when envisaging their first personal entrepreneurial initiative.”

Mihaela Matei, coordinator, EY Entrepreneurship Barometer: Entrepreneurs Speak Out, Romania, 2012 and 2013

Three characteristics of successful government programs to change cultural attitudes 1. Facilitates the creation of networking opportunities for

entrepreneurs, helping them to meet other entrepreneurs and create business connections.

2. They create networking opportunities so that aspiring entrepreneurs can learn from other businesses in other regions.

� 3. They highlight entrepreneurship’s vital role in the community and the broader economy, encouraging people to be proud of this career choice.

“When I started my own business in 2005, the concept of entrepreneur was less common and it was defined as “patron”. “Patronii” had a bad image, being seen as the person who enslaves and exploits, this is why I tried to avoid being identified as an owner. Since then, the evolution was great, entrepreneurs are perceived much better now, even though the image of entrepreneurs in the Romanian society as a whole is not immaculate. As a side effect in some circles to became an entrepreneur is even à la mode.”

Bogdan Tudor became interested in computers in elementary school. In 2005 he created Class IT and in 2011 he expanded its business in the United States.

of the money invested and lost in the start-up as tuition for such a school.“

Felix Pătrăşcanu studied law to become a judge, but he became an entrepreneur and the CEO of a business worth EUR 60 million in 2013, FAN Courier.

Source: EY G20 Entrepreneurship Barometer



Improving the perception of entrepreneurship

The European Union recommends offering a second chance to entrepreneurs who are not successful with their first companyIf the laws governing the institution of insolvency are tough, they can act as a significant entry barrier for entrepreneurship. Studies show that the introduction of a personal bankruptcy law, which Romania does not have at this time, raises the number of those who become entrepreneurs1.

According to the opinion of the European Commission, “A second chance policy that enables formerly bankrupt entrepreneurs restart may represent one of the most promising and under exploited policy options for company creation and job growth.2”

1 J. Armour and D Cumming, “Bankruptcy Law and Entrepreneurship”, University of Cambridge Working Paper, No 300, 2005

2 European Commission, “A second chance for entrepreneurs: prevention of bankruptcy, simplification of bankruptcy procedures and support for a fresh start”, EU Publication Office, 2011”

Women: a confident outlook for business growthWhat is your level of confidence in the economic direction of your headquarter country?

Policymakers need to target support across all sections of societySome segments of the population have little knowledge about what entrepreneurship means, they lack the self-confidence required to start a business on their own or they lack funds. For example, young people are more willing to take the risks of entrepreneurship, but have less access to finances. Also, women have a more optimistic economic outlook than men and repay their loans with a higher probability than men, yet there are less women entrepreneurs than men.

In Romania the state has developed two programs aimed at young entrepreneurs and women. The first, called The Program for the stimulation of start-up and development of Small Enterprises by young entrepreneurs, had a budget of lei 24.300.000 in 2013, while the program dedicated to women managers in 2013 had a budget of lei 500,000. For more details see page 15.

“Many Romanians still do not understand what entrepreneurs are. Many still believe that business should start or must be made by cheating others. Still, others believe that a business is important to get money for a luxurious car, for a large house and to get rid of any financial future problems. Therefore it is important that young people are informed about what being a

Source: EY, 2013

FemaleMale

0%

6%20%

55%46%

10%

No confidence at all

Somewhat confident

Confident

Very confident

Extremely confident

20% 30% 40% 50% 60% 70% 80%

% of entrepreneurs surveyed

33%25%

6%8%

0%1%

businessman (woman) means, what business ethics is and how successful entrepreneurs did manage to succeed. So we should start with education and a change in mindset.”

Vlad Păunescu founded the Castel Film movie studios in 1991. Since then, Castle Films casted and produced over 220 artistic American, European and Romanian movies.



Our recommendations

1. Government action: where to focus• Promote the power of entrepreneurship as the engine of economic growth.

Celebrate entrepreneurs and position them as role models through marketing campaigns and events.

• Removing the stigma of failure. Statistics show that entrepreneurs are more likely to succeed the second time around — promote the view that failure should be viewed as a learning opportunity.

• Creating networking opportunities. Facilitate opportunities for aspiring entrepreneurs to learn from other businesses.

2. The entrepreneur perspective: key issues to consider• Share successful stories.

Communicate the benefits of entrepreneurship by publicizing successes in areas such as job creation and innovation.

• Help the next generation of entrepreneurs. Participate and support formal/informal collaborations and networks to develop entrepreneurs’ ideas and form valuable relationships.

3. A corporate perspective• Sponsor incubators and accelerators.

Corporations can offer sponsorships or other private programs that support entrepreneurs.

• Recognize the contributions and success of entrepreneurs. Highlight inspirational entrepreneurial case studies to emphasize the importance of entrepreneurs.

Tax and regulation

56% of entrepreneurs who answered our survey consider simplification of tax and regulation in Romania would have a major impact in our business environment.


72%of Romanian entrepreneurs consider that the tax and regulatory system deteriorated during the last year

Conclusions on tax and regulationCountries that offer favorable tax rates and simple regulations also have the highest number of entrepreneurs, who return to the state and to the community significant tax incomes and who also create more jobs.

However, in Romania tax and regulation are perceived as a problem by entrepreneurs and 79% of entrepreneurs older than 40 and 61% of entrepreneurs under 40 believe that tax and regulation have worsened in the last year in Romania.

Also, for the open question “what is the most important obstacle for entrepreneurs in starting and developing a business in Romania”, fiscal uncertainty, bureaucracy and the level of taxes achieved the highest cumulative score: 43%.

Did the regulatory and fiscal environment improve for entrepreneurs in the last year in Romania?

Do you consider that the regulatory and fiscal environment improved for entrepreneurs in the last year?

Which is the most important obstacle for entrepreneurs in starting and developing a business in Romania?

Source: EY Entrepreneurs Speak Out, Romania 2013


Somewhat or greatly deteriorated

72%

Neither improved nor deteriorated

15%

Don’t know 1%

Somewhat or greatly improved

12%

Tax level, fiscal uncertainty

and red tape

Lack of entrepreneurship

culture

Difficult access to funding

Political uncertainty and lack of vision in

public policyState of the economy

and development gaps

0%

6%

10%

15%

26%

43%

10% 20% 30% 40% 50%


0% 20%

79%

61%

40% 60% 80% 100%

< 40 years old

> 40 years old 17% 2% 2%

0%27%12%





Conclusions on tax and regulationTwo solutions considered by entrepreneurs as having the greatest impact on the development of entrepreneurship in Romania are ensuring the stability of the regulatory and fiscal requirements (94% of respondents) and also the simplification of laws and regulations (91%).

In the G20 countries, 56% of the business people believe that lowering income taxes especially on small businesses and simplification of regulations and fiscal requirements would play a vital role in increasing the attractiveness of entrepreneurship.

Just as the funding should take into account the stage of development in which the company is, regulators should consider whether the enterprise is in the emerging, the rapid-growth or in the expansion phase.

“Predictability is extremely important. Keeping proportions, America maintained a flat price of gasoline from the ‘50s to the ‘80s-’90s. This meant a lot to the development of the United States. Because transport increases the price of any product you buy. But if the price per gallon is constant, you can make accurate financial projections. Surely, the tax environment can not be 100% predictable, however, you do not want taxes to be changed overnight. ”

Felix Pătrăşcanu studied law to become a judge, but he became an entrepreneur instead and the CEO of a business worth EUR 60 million, FAN Courier.

To improve the long-term development of entrepreneurship in Romania, what measures do you think would have the greatest impact over the next three years?

Source: EY Entrepreneurs Speak Out, Romania, 2013

94% 5%

9%

1%

2%

5%

5%13%

18%

1%

1%

4%

5%

14%

7%

5%

25%

24%

20%

34%

41%

35%

41%

16%

91%

69%

54%

58%

41%

56%

40%

66%

Increase predictibility for tax and regulation

Simplification of tax rules and regulations

Decrease in corporate income tax rates such as payroll, property taxes

Decrease in corporate income tax burden on small businesses

Decrease in personal income tax rate

Increase in tax incentives focused on innovation

Increase in non-tax (cash, subsidies) focused on innovation

Increase incentives for investing in start-ups

Decrease in business registration requirements and costs

0% 20% 40% 60% 80% 100%

High impact Medium impact Low impact Don’t know or no opinion



Conclusions on tax and regulationNavigating through complex rules related to taxation or to industry regulation is a difficult and costly challenge, in terms of time and financial costs. In addition, the lack of clarity and open to interpretation regulations are factors that facilitate the phenomenon of bureaucracy and corruption.

For the companies in the early stages this challenge may prove fatal, since entrepreneurs have a small amount of resources to spend, and need to focus mainly on business development.

Therefore entrepreneurs feel that simplification of tax and regulations is more important (48%) than income tax reduction (26%) and indirect tax levels reduction (12%).

At the same time, the fact that entrepreneurs feel the need for a direct line of communication with the authorities, in order to express their problems and concerns about the regulatory environment, indicates the urgent need that entrepreneurs should be consulted when regulations with business impact are to be issued.

“To have your activity in the private sector is still seen as highly problematic, because of the artificially created difficulties: from an extremely chaotic tax environment, with hundreds of charges and complicated legislation up to the institutions that interpret the law by their own will, and the lack of good manners of the clerk who comes and checks you up for various reasons. All these factors discourage new entrepreneurs and are perceived as significant barriers to entry entrepreneurship.”Florin Furdui, serial entrepreneur and Country Manager, Portland Trust

“From my point of view, the state does not help us at all since many provisions are unclear, and also because you can not get advice regarding the implementation of those rules from anywhere. Every time you come in contact with the state, the interaction is long and bureaucratic. Therefore, we have assumed the cost of having a relationship with the state, even though we are a company that by its dimensions does not need dedicated people for this interaction. Thus we internalized the accounting and HR function, because it is difficult to navigate through the complexities of the Romanian regulatory system, and if you do something wrong, you will be penalized.“Crenguța Roșu, entrepreneur, co-founder of DC Communication, one of the top independent communications agencies on the Romanian market, created in 1995.

Which of the following initiatives would improve the regulatory environment for entrepreneurs?

Which of the following initiatives would improve the fiscal environment for entrepreneurs?

Source: EY Entrepreneurs Speak Out, Romania 2013 Source: EY Entrepreneurs Speak Out, Romania 2013

41%

13%

13%

33%

43%

10%

25%

22%

RomaniaRomania

EUEU

G20 totalG20 total

38%

11%

30%

21%

The opening of a direct line of communication to allow

entrepreneurs to express issues and concerns

More online accessibility of regulations and

accompanying information

Frequent publications of guidance, instructions and Q&As to address new and

pending regulations

Development of a government agency to assist new

businesses in complying with regulations

0% 10% 20% 30% 40% 50%

48%

12%

6%

8%

26%

41%

14%

7%

17%

21%

37%

13%

11%

13%

26%

Simplification of tax rules and regulations regarding calculation of tax liability

Reduction of corporate income

tax burden

Reduction of indirect tax rates

Reduction of personal income tax burden

Development of a government agency to assist new businesses in complying with tax filling requirements

0% 10% 20% 30% 40% 50% 60%



Shaping tax and regulation to encourage entrepreneurship

Policymakers must target tax and regulatory reform at every stage of the growth journey

Just as funding instruments (see the chapter regarding access to financing, page 12) must be adapted, tax and regulation should aim to stimulate the development of companies based on the stage they find themselves in. Policymakers can help the mature companies by introducing deductions from the income tax. For small businesses, however, such a measure would not be effective, as they are not yet profitable. For them, incentives such as lowering the indirect, property and payroll taxes would be more effective.

Also, fiscal and financial facilities would help them in research and development activities.

But for all companies, regardless of the stage of the life cycle, it is very important to simplify existing rules. Compared with other countries, Romanians feel the need for simplified laws to a greater extent than other states, above the EU average, and are overtaken only by Germany, from the European countries analyzed in the study.

Phase 1: Emerging companyCompanies at the seed stage (see graph on page 12) are not yet generating revenues, meaning that income tax is not very relevant at this stage. Although income tax usually dominates the public agenda when speaking of corporate tax, other taxes (payroll for example) and other aspects of the regulatory framework influence to a greater manner new business creation. If the government succeeds to create a friendly environment, this will facilitate the growth of new companies.

If we consider just the number of bureaucratic tasks that a company must meet to comply with fiscal requirements, the conclusion can only be that this represents a very significant barrier to entry into entrepreneurship. According to a survey conducted in the European Union in August 2012, ¾ of the Europeans consider starting a business to be too difficult because of the administrative complexities involved.

“In the last World Bank Doing Business ranking, Romania is ranked on the 136 place out of 185 countries in terms of taxation. This means that as a company you must make on average 41 payments every year and spend 216 hours on average per year to calculate taxes, while the effective rate for taxation (% profit) for a company is 44.2%.

And if you want to establish your company, according to the same ranking, the process takes 10 days. In my case, indeed, only 10 working days passed from the submission of the complete documents to the emission of the company’s certificate of registration. However, this was the case because I had specialized help. If you add up all the time needed to obtain the neighbors’ approval for the company’s office, name reservation, understanding the necessary documents, filling them and the time spent in queue at the Trade Register, it is absolutely understandable why many Romanians feel discouraged to enter this road. To register a company is already a test of strength and motivation for many of them.”

Mihaela Matei, Coordinator of the EY Entrepreneur Speak Out Barometer, Romania 2013 and founder of Postmodern.ro

Source: EY Entrepreneurs Speak Out Romania 2013 and EY G20 Entrepreneurship Barometer

0%10%

20%

30%36%

Japa

nGr

eat B

ritai

nFr

ance

Turk

eyCa

nada

Sout

h Ko

rea

Sout

h Af

rica

Italy

Russ

iaIn

dia

Uni

ted

Stat

esCh

ina

Aust

ralia EU

Arg

entin

aBr

azil

Saud

i Ara

bia

Rom

ania

Indo

nesi

aM

exic

oGe

rman

y

40%

50%

60%

70%

The need for simplification of tax and regulation rules % answered the measure will have a large impact

G20 average



Second phase: Fast growth As they grow, companies must meet various licensing and registration requirements, tax rules, industry standards, labor and employees regulations.For many entrepreneurs, navigating trough the bureaucracy of these tasks at various levels (national, regional, local, etc.) may seem discouraging and may distract them from business’ management and growth.

Optimizing cash correlated with indirect taxesVAT payments may create administrative headaches and cash problems to small companies and to growing companies . That is why some countries, including Romania, have taken action in this regard in order for VAT to be paid to the state when cashed-in.Starting with the 1st of January 2014, a major step forward was made through changes in the VAT collection system. Companies with a turnover of less than lei 2,250,000 (EUR 500,000) now have the liberty of choosing this system or the normal system. Also, only now we truly have a VAT charged at cash-in and not delayed, being removed within 90 days after VAT became chargeable whether or not the amounts had been received.Also, for the companies with a turnover of less than EUR 35,000 per year, a simplified accounting system with a structure of reports more easier to draw can be applied.

Incentives for research and development (R&D)Companies at the start-up stage, particularly those in innovative hightech sectors, need to invest in people, equipment and research. To help with the burden, a number of countries now offer R&D tax credits and tax relief on the costs associated with product development. Some will also allow companies to treat capital expenditure as immediate expenses, rather than amortizing the costs over a period of time. In the U.S. for example, the 2012 Taxpayer Relief Act extended both a provision allowing small businesses to claim an immediate deduction for up to US$500,000 for certain capital expenditures and a 50% bonus depreciation provision for qualified property purchases, which is applicable for all businesses, including early-stage firms. In many countries, however, these tax incentives are underutilized, mainly due to a lack of awareness, high administrative costs or difficulty understanding which expenses qualify for incentives.

Opening a direct communication line would have the greatest impact on improving regulation % answered that this measure will have the greatest impact


With 0.5% of GDP R&D expense, Romania is in the 48th place in the ranking of the most innovative countries globally.In Romania, the companies involved in R&D, or the ones creating intellectual property, may benefit from two fiscal facilities: a) The accelerated amortization (maximum 50% of the

asset’s fiscal value can be amortized in the first year of usage).

b) Additional deductions for the eligible expenditures related to research and development activities, increased since February 2013 from 20% to 50%.

The last feature went relatively unnoticed and not many entities decided to benefit from it. It is time for entrepreneurs who use innovation as the main growth engine to lean on this legal provision and try to get the maximum benefit from it.

Better communication with policymakersAsked which single initiative would do most to improve regulatory environment for entrepreneurs, respondents in Romania, as well as those from EU, point to the ability to have a direct channel of communication with regulators.

The US provides a good example of how governments are creating forums of this kind. In 2011, a White House Initiative, Startup America, set up roundtable events in numerous cities. This provided a forum for entrepreneurs and investors to discuss barriers to starting and growing companies. The initiative resulted in a clear set of recommendations for federal agencies to eliminate regulations.

39%

Russ

iaCh

ina

Sou

th C

orea

Saud

i Ara

bia

Turk

eyIta

lySo

uth

Afric

aM

exic

oJa

pan

Braz

ilGe

rman

yRo

man

iaCa

nada EU

Arg

entin

aAu

stra

liaFr

ance

Indo

nesi

aIn

dia

Grea

t Brit

ain

Uni

ted

Stat

es

0%

10%

20%

30%

40%

50%

60%

70%

80%

G20 average



Conclusions of meetings held by EY with entrepreneurs in Timişoara and Cluj in 2013

During last year’s meetings with entrepreneurs from Cluj and Timişoara, the attending entrepreneurs expressed difficulties they faced and forwarded recommendations in the areas of financing, entrepreneurship culture, tax and regulation, education and coordinated support. The major conclusion of the two meetings was that there are many aspects to be changed, however, the most important issue is the attitude of people entrepreneurs get in contact with or whose actions have an impact on entrepreneurs, from state clerks, bank clerks, to teachers and politicians.

Romanian entrepreneurs speak out:

Entrepreneurship culture• Entrepreneurs have a bad image among Romanians, as a

result of decades in which entrepreneurs were despised and personal initiative was discouraged. This negative image is explainable also through recent years media coverage of negative business models.

• The intervention of Romanian National Council of Audiovisual Content in presenting a balanced picture would be welcomed.

• Also, public national television should have a role in education of entrepreneurship as a career option.

Financing• Drastic simplification in accessing EU funds.• Reduction of the review and approval time for these

funds.• Only one authority to coordinate EU funds.• European funds for development of entrepreneurship

and competitiveness in Romania are usually managed by officials who do not understand the business environment; they are unprepared and are against private initiative and entrepreneurship.

• Loan analysts in banks should be more knowledgeable in financial analysis and also in understanding the business.

• Banking bureaucracy must be reduced also.• Making credit conditions more flexible, as, for now,

Romanian banks do not grant funding to Romanian companies and they do not find any project bankable enough.

• Banks operating in Romania should have a more flexible and adapted strategy to the Romanian market, yet their strategy is not in tune with the dynamics of the Romanian economy.

• Banking costs should be reduced.


Conclusions of meetings held by EY with entrepreneurs in Timişoara and Cluj in 2013

Tax and regulation• Whether we are talking about financial administration,

institutions managing European funds or any other state institution, red tape is one of the most important issues with high opportunity costs which should be reduced drastically, according to entrepreneurs.

• At the same time, it is not enough to simplify procedures and regulations and to reduce the number of taxes and fiscal declarations, it is also urgent to professionalize all state employees.

• Other recommended measures: trainings and hirings based on performance of labor force in public institutions, employment of graduates who have studied public administration abroad, hiring of those with business experience.

• The predictability of the fiscal environment is extremely important, as it would lead to better budgeting forecasts and building appropriate strategies, with long run perspective.

• The tax burden must be lowered, especially labor tax and tax burden for start-ups.

• Also, the insolvency law does not lead to a healthy business environment, favoring fraud and unfair practices.

• The accounting for small enterprises must be simplified.• Fairness should prevail in the state-entrepreneur

relationship: the state must pay its debts to the entrepreneur to the same degree the entrepreneur is required to pay its debts.

• Consultations with the business environment is paramount before changing the tax and regulatory environment; entrepreneurs highlighted that formal consultation with no real outcome are not enough and their point of view should be taken into account.

Education and professional training• Entrepreneurship education should start as soon as

possible, even from middle school, and it must be taught by entrepreneurs, not by teachers who do not understand the personality of the entrepreneur and what business entails.

• The education system must be restructured as soon as possible.

• The legislative framework must be improved in order to allow universities to hire entrepreneurs to teach and share their personal experiences, thus inspiring new business initiatives.

• Studies with entrepreneurship focus not only are not taught by personnel with entrepreneurial experience, but they are based on textbooks presenting foreign case studies.

• Career orientation for children must become functional, while professional training should meet real needs of the labor market. At present there is a significant mismatch between what employers need and the graduates’ set of skills.

• Also, children must receive positive messages in the first years of school.

Coordinated support• It would be very helpful if the support from specialized

associations were aggregated in an online portal in order to raise awareness of what associations, clubs, incubators, accelerators, state aids can do to help entrepreneurs.

• The specialized associations must not only facilitate their own members, but all entrepreneurs, in order to sustain development of the business environment in Romania.

• Entrepreneurs must be more collaborative and clustered in order to make their voice heard and better represent their interests.

Romanian entrepreneurs speak out:



Shaping tax and regulation to encourage entrepreneurship

Phase 3: Expansion At this stage many companies become profitable and therefore subject to income tax. In this regard, to an overwhelming majority, the entrepreneurs whom we interviewed directly, both in the 2012 and 2013 edition of the Barometer, pointed out the flat tax of 16% introduced in 2005 to be the tax measure with the greatest positive impact on business environment. The measure was interpreted as a positive sign from gouvernment by the interviewed entrepreneurs, to which they reacted accordingly.

Many companies at the growth stage start to pursue expansion into overseas markets. This can be a vital step on the growth journey, but it also creates significant regulatory and taxation difficulties. Companies must think about where profits should be taxed and comply with multiple regulatory frameworks in the countries in which they operate. This can be a costly and time consuming process that can eat into the profits generated by tapping into new geographical markets. There is no easy solution to this problem, but some governments have tried to simplify the process and cut down on the regulatory burden.

Businesses that want to expand across the EU can benefit from the EUGO Points of Single Contact. These online portals are designed to help entrepreneurs active in the service sector by setting out information about rules, regulations and formalities and allowing the completion of certain administrative procedures online. More could still be done, however. Better harmonization of tax regulations across the EU would help entrepreneurs to expand internationally.

Tackling labor market rigidityGiven the continuous economic changes taking place in the global market, we believe that the labor market must be flexible to meet the challenges of the global economic crisis and the jobs shortage. From the entrepreneurs’ perspective, flexible working conditions could be achieved by relaxing terms for termination of individual employment contracts, for fixed-term employment and also for working time timetable (e.g. overtime).

The labor legislation in Romania can be characterized as favorable to employees. Through the changes made to the Labor Code and the Law on Social Dialogue in 2011, the state tried to create a more flexible labor legislation by changing certain provisions regarding probation periods, the fixed-term employment contracts or more flexible working hours. The results of these changes are likely to be seen in time.

Tax and regulation issues along the entrepreneurial journey

Pre-seed/seed

• Develop a business model • Seek funding• Utilize online registration

tools and entrepreneur development programs

• Consider IP protection• Determine legal form and

incorporate

Rapid-growth/expansion

• Pay income tax upon generating income

• Pay indirect taxes• Consider international

tax rates and requirements

• Manage large-scale severance and redundancy; consider international labour laws

Start-up

• Continue to seek funding• Obtain necessary federal,

state and local licenses• Navigate complex tax and

regulation regimes• Consider labor laws when

hiring employees• Pay franchise and indirect

taxes

Source: EY G20 Entrepreneurship Barometer



Our recommendations

1. Government action: where to focus

• Simplify the tax system. This would allow entrepreneurs to focus on what they do best: growing their business, generating jobs and driving innovation.

• Make it easier to navigate the tax system. Create a single platform that provides practical and easy to understand guidance.

• Give entrepreneurs a voice on regulation. Include their input on significant regulation, ensure representation on committees and in government by creating a minister of entrepreneurship to represent their views and draft a national strategy of entrepreneurship development.

• Simplify insolvency rules. Revise legislation to help entrepreneurs recover from failure by reducing the cost of business failure.

• Reduce the indirect tax burden. Early stage companies would benefit significantly from relief on indirect taxes such as payroll and sales levies, which often serve as a fixed overhead expense, negatively impacting cash flow and profit and loss.

2. The entrepreneur perspective: key issues to consider• Explore governmental resources.

Seek out and make use of government-funded resources and tools to reduce business start-up time.• Know the R&D incentives.

Be aware of and capitalize on investment incentives for R&D and entrepreneurship to further your business.• Get involved in the development of entrepreneurship environment.

Be active and insert yourself into the consultation processes, particularly on proposed legislation that will impact entrepreneurs.

• Decrease costs of tax compliance. Use the simplified taxation methods to improve cash flow and reduce costs of tax compliance.

3. A corporate perspective• Share your public policy experience.

Your knowledge, learnings and capabilities will benefit entrepreneurial companies.• Drive change.

Lobby government to incentivize corporations to invest in entrepreneurs.

Education and training

There is a direct relationship between investment in education and GDP growth. This relationship should by even stronger if education were better oriented towards the development of knowledge, aspirations and attitudes required to entrepreneurs.


58%of entrepreneurs consider that entrepreneurship education improved during 2013

Conclusions on education and trainingThe only net positive perceptions of Romanian entrepreneurs who answered our survey are related to education. According to the Barometer, entrepreneurship education has improved in the last year in Romania, 58% of entrepreneurs supporting this statement.

Positive perception on entrepreneurship education remains the same when answers are segmented by age, with a higher percentage of young entrepreneurs supporting this perception (70%).

When it comes to entrepreneurship education we must consider not only formal education – business administration, marketing, sales, human resources, communications and PR, finance – but also coming into contact with entrepreneurial models.

Therefore, entrepreneurship education is different from traditional and academic education and it also involves creating unique attitudes which can develop only through contact with entrepreneurial success stories and entrepreneurs. But just as important, young people need to understand not just a romanticized interpretation of entrepreneurship, but also the negative aspects of starting a business.

“I found being an entrepreneur very hard in the beginning, because I did not have strong entrepreneurial education, I especially exceled in operations and IT logic. If I had to choose the best measure that should be taken to support entrepreneurs, this would be to prepare the entrepreneurs in business administration, sales, marketing, finance.


5%

Neither improved or deteriorated

23%

Somewhat or greatly

deteriorated 14%


58%

< 40 years old

> 40 years old

6% 24% 70%

8%51%22%20%

0% 20% 40% 60% 80% 100%

Do you believe that education and training focused on entrepreneurship have improved in the last year in Romania?

Do you believe that education and training focused on entrepreneurship have improved in the last year in Romania? Segmented by age

Education in all these areas is crucial. Helping entrepreneurs with funding is not enough.”

Bogdan Tudor has been interested in computers since high school. In 2005, he created Class IT company and from 2011 he expanded his business to the US.







Conclusions on education and trainingSpecific programs for entrepreneurship and business schools (56% of responses) are for Romanian entrepreneurs the most important forms of education to improve the perception of entrepreneurship as career choice in Romania. At the same time, success stories (18%) of entrepreneurs, as well as mentoring programs (18%) are not perceived as being so important. The measure which received the fewest responses is related to state efforts to educate entrepreneurs, with only 8% of votes.

Compared with entrepreneurs in other countries, we are among the last who see the potential of success stories in entrepreneurship education and the first in terms of the perceived importance of formal tertiary education.

This latter type of education would be best supported by government measures, given that universities in Romania are mostly state owned. However, when asked which would be the most effective form of support provided by the government, entrepreneurs did not choose education as a possible measure.

Entrepreneurs’ perception of promoting success stories of entrepreneurs to students in order to improve the idea of entrepreneurship as a career option

Entrepreneurs’ perception of the effect of specific programs in universities / business schools on the perception of entrepreneurship as a career option

G20 average

0%

10%

20%

30%29%

Saud

i Ara

bia

Sout

h Af

rica

Chin

a

Cana

da

Sout

h Ko

rea

Aust

ralia

Grea

t Brit

ain

Turk

ey EU

Japa

n

Germ

any

Indo

nesi

a

Russ

ia

Fran

ce

Arg

entin

a

Indi

a

Italy

Mex

ico

Uni

ted

Stat

es

Braz

il

Rom

ania

40%

50%

60%

0%

10%

20%

30% 29%G20 average

Braz

il

Rom

ania

Sout

h Ko

rea

Chin

a

Saud

i Ara

bia

Indo

nesi

a

Italy

Germ

any

Turk

ey

Japo

an

Russ

ia

Uni

ted

Stat

es

Mex

ico

EU

Fran

ce

Indi

a

Arg

entin

a

Grea

t Brit

ain

Aust

ralia

Cana

da

Sout

h Af

rica

40%45%

35%

25%

15%

5%

50%




Conclusions on education and trainingOnce you have become an entrepreneur, the advice given by mature entrepreneurs, who have met and overcome mental, operational, financial and all the other usual obstacles on the entrepreneurship road, becomes extremely important.

80% of the surveyed entrepreneurs said that they provide such advice and train other entrepreneurs in an informal or formal way. Also, most of the directly interviewed entrepreneurs said that they provide mentoring. For example, many of them teach in workshops and programs of The Romanian Business Leaders Foundation and also in the youth organization Junior Achievement Romania.

Business angels also coach the businesses in which they invest, while most entrepreneurs try to inspire those around them to take the risk of working on their own.

In addition to direct mentoring, informal meetings with other entrepreneurs in dedicated clubs or networks are very important, as they receive information from other entrepreneurs when they mostly need it.

Business incubators and accelerators in Romania should also offer know-how and coaching.

As an experienced entrepreneur, do you provide training/coaching/mentoring to the young or starting up entrepreneurs?

Source: EY Entrepreneurs Speak Out in Romania, 2013

80%of the Romanian entrepreneurs coach the entrepreneurs who are at the beginning of the road

No 20%

Yes, in an organized manner

23%

Yes, in an informal manner

57%

“Many business incubators and accelerators in Romania, unfortunately, work as real-estate businesses, meaning that they have some space and try to make it valuable by offering it to entrepreneurs. This is not enough. An incubator or an accelerator must provide elements of networking, funding, mentoring and entrepreneurship education.”

Marius Ghenea, serial entrepreneur (Flamingo, Flanco, FIT, accessNET, Idilis, PCfun.ro) and business angel

“I’m mentoring because this is an early culture I have become accustomed to in my professional career. I myself am the product of mentoring received from German and Austrian business people. Now I have 10 companies in which I invested and, in addition to the operational part, the daily conversations with their CEOs focus on mentoring. Sometimes our communication is 20% operational and 80% business sharing experiences and lessons learned in time.”

Businessman Ion Sturza left the Rompetrol group in September 2009 to create the investment fund Greenlight Invest, later rebranded as Fribourg Capital, an investment fund specialized in private equity and venture capital. In December 2013 Sturza inaugurated in Cluj The Liberty technology park and Spherik business accelerator.



Steve Jobs gave up his university studies – Do entrepreneurs need studies?

While there are numerous examples of well-known business personalities who did not finish formal education, research has shown that education generally makes entrepreneurs more likely to succeed. A detailed study using US labor force data found that entrepreneurs on average earn more for every year of formal education1.

In rapid-growth markets, a lack of education is a key barrier to entrepreneurship. A key role for government is to ensure that a country’s citizens have access to good education. This should include formal education and more specific business education targeted at business owners.

On the other hand, educational spending alone does not necessarily lead to more successful entrepreneurs, as often traditional education creates good employees, but not entrepreneurs able to take risks. Therefore, traditional curricula often does not help in the development of entrepreneurial spirit and the expenditures made by the state for this kind of education will not necessarily lead to good results. Researches carried out in EU have shown that as the level of education increases the chances for students to become entrepreneurs fall2.

1 M van Praag et al, Returns for Entrepreneurs versus Employees: The Effect of Education and Personal Control on The Relative Performance of Entrepreneurs vs. Wage Employees, Forschungsinstitut zur Zukunft der Arbeit Discussion Paper, 2009

2 European Commission, Effects and Impact of entrepreneurship programmes in higher education, EU Publication Office, 2012

This determines the conclusion that rigid studies, even if they focus on developing specific skills needed by entrepreneurs, may not lead students to assume the risk of entrepreneurship, innovation and experiment.

Therefore it is necessary that entrepreneurship be taught by entrepreneurs who speak from their own experience, both positive and negative, thus inspiring this career choice among students. That is why 52% of Romanian respondents consider a better communication of success stories of entrepreneurs as the best method for changing perceptions towards entrepreneurship in Romania.




Focus on the youngEarly exposure to entrepreneurship in the education syllabus helps children to develop the skills and values that will be required for entrepreneurship later in life. In some countries, schools will bring in role models and set up games and competitions that give students the chance to find out what it is like to run a business. Very often, students respond well to this because learning about entrepreneurship involves a more hands on approach compared with some other traditional academic subjects.

When referring to secondary education (primary and middle school), about 33% of entrepreneurs in the European Union estimate that it has improved in the last three years. This perception reflects the increased interest in Europe for entrepreneurship education during the recent years, stimulated by the rising unemployment in the member countries. Vocational education, such as vocational schools, also experienced an improvement in the European Union during the same period, according to 34% of European respondents - a good sign considering the de-professionalization at this level and acute shortage of craftsmen in Romania.

The European Union makes the entrepreneurship education a compulsory subject within secondary educationStimulating entrepreneurship is one of the four long-term objectives of the EU’s current vision for education, called Education and Training 2020. Already in 14 out of 27 EU countries, students are taught about entrepreneurship as an element of a compulsory subject during secondary school — most often in the social sciences. In Romania, Poland and Lithuania, a specific course in entrepreneurship is mandatory. In Romania, this discipline became compulsory in 2010.




The entrepreneurship subject is too new in the education curricula in Romania to be able to assess the results. Nevertheless, previous research shows that starting young can have a huge impact. It reports that between 15% and 20% of students who participate in a mini-company program in secondary school go on to start their own business. For the general population, the figure is typically three to six times lower.

In Romania, the entrepreneurship education subject consists of significant elements of entrepreneurship, how can students choose their professional path and career, what are the qualities and skills of successful entrepreneurs, market opportunities analysis, business valuation and business ethics, and notions about the business plan and business risk.

General and specific competencies to be obtained by the students attending the subject promote the following values and attitudes:• Independence in thinking and action

• Positive relationships with the others

• Responsibility in the entrepreneurship activity

• Free will

• Economic efficiency

The European Union plan for entrepreneurshipThe European Union Action Plan sets that study of entrepreneurship should be integrated at the primary level, secondary level, vocational and tertiary education by 2015.

The objective seems very ambitious, given that not all EU countries have yet a specific strategy for entrepreneurial education.

“The government and the country strategy are essential in supporting entrepreneurship, particularly when referring to education. If the education strategy on entrepreneurship education is not properly designed, future generations will not have a sound basis becoming entrepreneurs. Drafting the education strategy should be a responsibility not only for the Ministry of Education,

but also for the Ministry of SMEs, Ministry of Labor and other ministries. If you make entrepreneurship education in the early years of school, young adults may knowingly decide to choose the path of entrepreneurship.”

Marius Ghenea, serial entrepreneur (Flamingo, Flanco, FIT, accessNET, Idilis, PCfun.ro) and business angel



Our recommendations


• Support young people who chose an entrepreneurial career. Create public programs for those who are looking to start a business and need to develop specific entrepreneurship and business skills.

• Encourage lifelong learning for entrepreneurs. Many of the skills that entrepreneurs need cannot be learned in a classroom. Create more opportunities for peer-to-peer learning, through mentorship programs and entrepreneur support clubs.

2. The entrepreneur perspective: key issues to consider• Look for the educational opportunities that suit your needs.

This may range from an MBA to taking a short course to develop a specific skill or fill a knowledge gap.• Seek out and learn from other entrepreneurs.

Your idea may be unique, but you are more likely to succeed if you tap into the experience of others. • Give back to help others.

Good entrepreneurship education programs rely on input from current entrepreneurs. Mentoring also actively assists the next generation of entrepreneurs and introduces new talent into existing networks.

3. A corporate perspective

• Expand internship programs to provide more hands-on experience. EY researches showed that approximately 60% of entrepreneurs gained skills and competencies in a corporate environment.

• Mentor entrepreneurs. Encourage leaders from your corporation to provide entrepreneurs with valuable knowledge and insights.



Coordinated support

Funding, education, entrepreneurship culture and taxes - all must encourage entrepreneurship, while specialized organizations, including government ones, have to optimize the way in which the entrepreneurship environment develops harmoniously at all relevant levels.


40%of entrepreneurs consider that coordinated support in Romania has improved in 2013.

Conclusions on coordinated supportMost of the Romanian entrepreneurs consider that coordinated support provided by specialized organizations such as clubs and associations of entrepreneurs, informal networks of entrepreneurs, government agencies, business incubators and accelerators, has improved in the last year.

By taking into consideration the age groups, as well as perceptions about financing, entrepreneurial culture and entrepreneurship education, young entrepreneurs are more optimistic: nearly 50% consider specialized organizations offer better support than a year ago.

When asked how could the government help them, most of the Romanian entrepreneurs chose credit schemes for small entrepreneurs, with a percentage significantly higher than at EU level. The other two measures chosen by Romanian entrepreneurs have a strong financial component, while supporting education did not receive any vote. This result recalls the great need for funding of the Romanian entrepreneurs, who believe that access to financing is difficult or very difficult (88% of answers).

Neither improved or deteriorated

31%

Somewhat or greatly

deteriorated 11%


40%

Can’t tell 18%

0%

> 40 years old

< 40 years old

20% 40% 60% 80% 100%

15% 31% 35% 20%

15%48%30%6%

0% 5% 10% 15% 20% 30% 35%25%

Romania

Small business lending schemes

Government start-up/other programs, including grants

Loan guarantees

Government-sponsored university incubators

Entrepreneurial workshops

Industry-specific training programs

Support tailored to female entrepreneurs

Sponsored industry/entrepreneur forums and networking

Educators

Small business administration support

EU

Did the coordinated support provided by specialized organizations improve over the last year in Romania?

Which of the following forms of support provided by the government would be most effective for entrepreneurs?

Did the coordinated support provided by specialized organizations improve over the last year in Romania? By age




Somewhat or greatly deteriorated

Neither improved nor deteriorated


Don’t know or not applicable



Conclusions on coordinated supportCredit schemes for small entrepreneurs are perceived as the most important measure of government support for entrepreneurs in Romania, well above the EU average, with 29% of responses.

In the European Union the most favored measures are government programs for start-ups and loan guarantees, ranking in the second and third place in the preferences of Romanian entrepreneurs.

When asked about the action/organization that would have the greatest impact, entrepreneurs point to the government, through its programs dedicated to start-ups and entrepreneurs.

These answers show the need of Romanian entrepreneurs to be supported by the state. Government programs may relate to grants, credit or equity financing, tax breaks, and even networking and mentoring opportunities.

However, on a par with government programs, entrepreneurs indicate that clubs and associations of entrepreneurs have the same importance on the long term in developing entrepreneurship. Incubators/accelerators rank only the forth place in the preferences of Romanian entrepreneurs, probably because few are truly functional in Romania at the moment. Only 1% of responses goes to chambers of commerce.

“It is hard to believe that many capitalists of major importance would appear from only one generation of entrepreneurs, therefore small and medium entrepreneurs, the backbone of the economy, must be supported in Romania. And the support does not necessarily have to come from the central authorities, but also from the local ones through: optimization of association requirements, creation of industrial platforms for SMEs, improvement of training and other measures which can make a difference for small and medium entrepreneurs.”

Businessman Ion Sturza left the group Rompetrol in September 2009 to create the investment fund Greenlight Invest, later rebranded as Fribourg Capital, specialized investment fund in private equity and venture capital. In December 2013 Ion Sturza inaugurated the Liberty technological park and Spherik business accelerator in Cluj.

0%

10%

13%G20 average

Italy

Fran

ceSo

uth

Kore

aCa

nada

Germ

any

EUSo

uth

Afric

aIn

done

sia

Braz

ilAu

stra

liaTu

rkey

Russ

iaUn

ited

Arab

Em

irate

s

Mex

ico

USA

Japa

nGr

eat B

ritai

nCh

ina

Indi

aA

rgen

tina

Rom

ania

20%

30%

Credit schemes for small entrepreneurs would be the most effective support measure from the government % of responses

In order to improve the long-term development of entrepreneurship in Romania, which of the following organization/initiative do you think would have the greatest impact?

0% 2% 4% 6% 8% 12% 14% 16% 18%10%

Romania

Government start-up/other programsEntrepreneur clubs and associations

Teaming/mentor programs Business incubators & accelerators

Entrepreneurial workshop/support meetingsUniversity incubators

Industry-specific training porgramsVenture capital associations

Corporate and non-governmental advisorsEducators

Chambers of commerceSmall business administrations

Other

UE




Conclusions on coordinated supportWhile in Romania the initiatives most attended to by entrepreneurs were meetings (formal or informal) and workshops for entrepreneurs (48% of entrepreneurs), most entrepreneurs (63%) in the European Union chose to be part of entrepreneurial clubs and associations.

Meanwhile, the Romanian entrepreneurs look forward to attend most to entrepreneurship meetings and workshops, take part in governmental programs for start-ups and other governmental programs.

48%of entrepreneurs participated in meetings and workshops for networking and knowledge sharing

Which of the following initiatives have you used or do you intend to use in the following 3 years?

- Romanian entrepreneurs

Which of the following initiatives have you used or you intend to use in the following 3 years?

- EU entrepreneurs


Entrepreneurial workshops/support meetings

Entrepreneurs clubs and associations

Industry specific training programs

Teaming/mentor programs

Chamber of commerce

Corporate and non-governmental advisors

Educators

Business incubators

Small business administration

Government start-up/other programs

Government agencies

Incubators/accelerators in universities

0% 20% 40% 60% 80% 100%

I use or have used them I plan to use them Don’t know or no opinion

30% 23%

25% 30%

24% 35%

55%56%

59%

69%75%

86%66%

78%80%

20%20%

20%

14%14%

7%

27%17%

48%45%

41%

25%24%

20%

17%11%

7%

7%5%1% 19%

Entrepreneurial workshops/support meetingsEntrepreneurs clubs and associations

Industry specific training programsTeaming/mentor programs

Chamber of commerceCorporate and non-governmental advisors

EducatorsBusiness incubators

Small business administrationGovernment start-up/other programs

Government agenciesIncubators/accelerators in universities

0% 20% 40% 60% 80% 100%

I use or have used them I plan to use them Don’t know or no opinion

48% 23% 29%63% 17% 20%

32% 24%47%44%

38%58%53%

60%66%

62%

28% 25%42% 20%

23% 20%31% 16%

18% 23%21%

22%26%

19% 61%36%

12%16%

38%20%



Growing an integrated ecosystem

Successful entrepreneurial ecosystems comprise many essential components that must function well as a whole. For example, funding is not effective without mentoring; same is financing without a risk-taking culture. Also, entrepreneurs will consider excessive tax burdens and bureaucracy a too high barrier to entry, regardless if the other elements are fulfilled.

This ecosystem must serve the needs of all stages of entrepreneurship — otherwise the chain is broken and companies do not reach maturity. While early-stage ventures can be supported through business incubators, for example, companies that have moved beyond the start-up phase need other types of support, such as help accessing capital markets or internationalizing their business. Along the way, support should also be in place to help link small businesses with larger, established companies.

Enabling entrepreneurs to learn from large corporations France’s SME Pact is a joint venture between OSEO (the French Government’s innovation agency) and 14 business organizations.

Its objective is to stimulate entrepreneurial growth by acting as a bridge between entrepreneurial businesses and large companies, through commercial contracts and R&D collaborations.

Large multinationals sign the SME Pact voluntarily and commit to increasing their collaboration with entrepreneurial businesses.

Enterprise Europe NetworkEnterprise Europe Network (EEB) is an instrument from the EU’s strategy on entrepreneurship, economic growth and job creation.

This network includes more than 600 organizations supporting entrepreneurship in 50 countries.

In addition to the advisory offered on regulation and European standards, EEN organizations support business generation and their development by access to finance, technology transfer, intellectual property, international collaborations, R&D funding, exports, both in the EU and outside.

The entrepreneurial development framework: five pillars that foster entrepreneurship

Coordinated supportMentors, advisors, networks and clubs,Business incubators, clusters, parks and business centers

Access to funding:• Seed

• Start-up

• Expansion

• Capital growth

Tax and regulation• Taxation incentives

• Ease of starting a business

• Business-friendly legislation/policies

Education and training• Pre-university education

• University education

• Entrepreneurship-specific training

• Informal education/lifelong learning

Entrepreneurship culture• Tolerance of risk and failure• Preference for self-employment• Innovation and research culture• Celebration of self-made wealth




Clusters create a thriving environment for entrepreneursClusters of companies in a particular geographic area drive and stimulate the entrepreneurship initiative. As it happens in Silicon Valley or, keeping proportions, on the Dacia Mioveni platform, the fact that interconnected firms, suppliers and related industries appear in proximity to each other, facilitates the exchange of ideas and resources.

Clustering is a natural phenomenon on which governments can capitalize to streamline investments. For example, there was talk about the existence/emergence of an IT cluster in Cluj in the last years. Such an ecosystem can not be controlled, because it evolves naturally, but it can be helped through government measures. For example, at a certain time, such a cluster can hit certain legislative and regulatory barriers that government can help to overcome.

Several regional hubs or clusters are emerging or expanding within the EU, including a number of technology hubs that are gaining momentum. Some key examples include the following: • London ‘s Tech Investment City Organization which has

helped to develop the area known as Tech City, or “Silicon Roundabout.”

• Berlin ‘s Communication, Media and Creative Industries Cluster which gathers more than 27,000 companies employing more than 220,000 employees.

Regarding Bucharest, the emergence of an R&D in Magurele, by means of ELI-NP project of the largest laser in the world is a promising project. The project will reach a total investment of EUR 356 million and it will involve 13 European Union member states.

Conditions that define a healthy ecosystem for entrepreneurs

• The ecosystem is tailored around its own unique environment.

• It operates in an environment with reduced bureaucratic obstacles, in which government policies support the unique needs of entrepreneurs and tolerate failed ventures.

• It actively encourages and invites financiers to participate in new ventures.

• The ecosystem is reinforced, not created from scratch, by government, academic or commercial organizations.

• It is relatively free from, or is able to change, cultural biases against failure or operating a business.

“We have no chance to replicate Silicon Valley in Romania, as it is impossible for New York, Geneva or Toronto to replicate it. Silicon Valley is a unique phenomenon which now functions as a huge vacuum of ideas and money. We could talk at Liberty Technology Park in Cluj about a Silicon Valley as it was 20-30 years ago when the emphasis was on high added value production. This is the model we try to implement in Cluj, because IT outsourcing can’t be the future, as well as lohn clothing production was not.

We will select promising projects, we will incubate, accelerate, mentor them, and then we’ll go to Silicon Valley to showcase them.”

Ion Sturza left Rompetrol Group in September 2009 to create the investment fund Greenlight Invest, later rebranded as Fribourg Capital, a specialized investment fund in private equity and venture capital. In December 2013, Ion Sturza inaugurated the Liberty Technological Park and Spherik business accelerator in Cluj.




Entrepreneurs rely on contacts, mentors and associations Entrepreneurs meet in clubs, associations, workshops, support meetings, informal support and mentoring. This reflects a prevailing tendency for entrepreneurs to rely heavily on relationships with groups of people in similar businesses or those with advanced or relevant experience.

Networks, mentoring programs and workshops are naturally easier to facilitate when participants are all in close geographic proximity. In a self-perpetuating process, such groupings then become magnets for entrepreneurs. However, these networks become more powerful when they can draw on more established and experienced entrepreneurs who are willing to act as role models and advisors.

Universities have a key role in coordinating government-funded activityUniversities are another vital part of many entrepreneurial ecosystems. Recent research shows that the impact of university innovation increases with geographic proximity to the university.

For example, a university with a strong biotech faculty will typically correspond with greater biotech-related entrepreneurial activity nearby. An OECD study concludes that governments should enact policies that directly link university research and start-up formation. These include providing funds for joint research, facilitating technology transfer and coordinating seed funding for university spin-offs.

How Israel became an incubator for entrepreneursIsrael is one of the world’s most innovative and entrepreneurial economies. The state has invested heavily in entrepreneurship and innovation, and now there is a start-up for every 1,844 inhabitants, the highest density of start-ups in the world.

Besides help them begin, the state also helps them grow. For example, Israel has more companies listed on NASDAQ than whole Europe.

In 2008, Israel received 2.5 times more venture capital investments per capita than the United States.

About 45% of Israelis go to university, one of the world’s highest attendance levels.

Israel’s informal culture de-emphasizes status and age but recognizes talent and drive.

Israel’s infrastructure supports entrepreneurship with venture capital, R&D funding, and a large number of scientists and engineers.

Incubators can help businesses, customers, suppliers and strategic partners become self-sufficient Business incubators help turn ideas into businesses by providing much more than office space and seed capital in return for equity. They teach and mentor entrepreneurs while introducing new contacts, investors and networks.

Incubators can be highly relevant in countries where entrepreneurship is not a tradition, such as Romania and where contact networks, entrepreneurship education and funding systems are not yet advanced.

“Our main reason for optimism is that we see more and better coagulation of the tech community, whether we are talking about entrepreneurs, designers, programmers or specialists from nearby areas. Better communication between them will lead to close cooperation. Our role is to support them in their efforts, while facilitating our hub to connect other technology hubs around the world.The help that we offer specifically for entrepreneurs who are just starting out is an affordable workspace, as residents or co-workers. Also we organize weekly events for the community. These events are designed to bring closer experienced people - entrepreneurs or specialists in the area of technology, business angels and potential investors - and those who want to create or to grow a start-up or even to engage in one.

We facilitate one-on-one meetings with these experts and generate contexts in which start-ups get feedback from potential investors and serial entrepreneurs in mentoring sessions to improve their products.The need for feedback is an important one, but the fear of failure still floats over the attempts to expose entrepreneurs to an audience, whether specialized or uninformed. Also, the small number of angel investors is a loophole that makes the transition from one stage of financing to the next difficult. But despite the challenges, we believe in the potential for further innovation and commercial success of start-ups made in Romania.”

Daniel Dragomir, CEO TechHub Bucharest, community and coworking space for tech entrepreneurs



Our recommendations


• Create clusters to accelerate entrepreneurship. Nurture clusters of entrepreneurial companies in a single location to boost existing strengths, provide scale, improve productivity and enhance international visibility.

• Build stronger links between different players in the ecosystem. Create facilities and events that allow networking to flourish. Clubs, associations, workshops, support meetings, informal support and mentoring all help.

• Support and improve incubators and accelerators. They form a vital link between aspiring entrepreneurs and existing businesses, funding bodies, mentors and support agencies.

2. The entrepreneur perspective: key issues to consider• Capitalize on networks.

Be proactive about connecting with available networks, and seek out a mentor or form a board of advisors.• Give back.

Share ideas, useful contacts and basic advice: it can make a huge difference.• Join an incubator or accelerator.

This generates exposure and feedback for the business, and that helps to build the company.• Choose your location carefully.

Clusters can accelerate your growth through synergies with similar firms, suppliers, research centers and universities.

• Not-for-profit organizations play an important role. It is important to seek the assistance of not-for-profit organizations, like The Romanian Business Leaders Foundation.

3. A corporate perspective

• Access innovation. The creation of corporate incubator or accelerator programs can help provide entrepreneurs with access to resources, testing facilities, pilot customers and funding.

• Connect with entrepreneurs. Sponsoring and participating in events help to connect a range of people to the entrepreneurial ecosystem.



Methodology

Abreviations

For the second edition of The Entrepreneurs Speak Out – Entrepreneurship Barometer, our analysis of the entrepreneurship environment in Romania was articulated around five enablers: access to funding, tax and regulation, education and training, entrepreneurship culture and coordinated support – defined by the G20 Young Entrepreneurs’ Alliance in Toronto, Canada (20-22 June 2010).

• AIM - Alternative Investment Market is a sub-market of the London Stock Exchange, allowing smaller companies to float shares with a more flexible regulatory system than is applicable to the main market.

• AIPPIMM – The Romanian agency that implements projects and financing programs for SMEs

• ATS – The alternative transaction system is a sub-market of the Bucharest Stock Exchange

• EBRD – European Bank for Reconstruction and Development

• BVB – Bucharest Stock Exchange

• R&D – Research and development

• CIP - Competitiveness and Innovation Framework Programme of European Union

• CEO - Chief Executive Officer

• COSME - EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises

• EIB – European Investment Bank

• EIM – Independent organization of research and consultancy

• ELI-NP – Center of research Extreme Light Infrastructure – Nuclear Physics

• EUGO – European network of points of single contact, e-government portals for entrepreneurs active in the service sector

• EUR – EU countries currency (Euro)

• EVCA – The European Private Equity and Venture Capital Association

• FTSE - Subsidiary of the London Stock Exchange, global leader in indexing

Our analysis is based on four building blocks: a perception survey conducted with 106 Romanian entrepreneurs between 7 November 2013 - 16 January 2014, qualitative interviews with relevant entrepreneurs, macroeconomic indicators, and an analysis of Government’s leading practices.

• G20 – Forum for the governments and central bank governors from 20 major economies. The members include 19 individual countries—Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russian Federation, Saudi Arabia, South Africa, Turkey, United Kingdom, United States—and the European Union

• SMEs– Small and medium enterprises

• IPO - Intial public offering

• IT – Information technology

• JEREMIE – Joint European Resources for Micro to Medium Enterprises is a joint initiative developed by the European Commission in co-operation with the European Investment Bank Group and other financial institutions in the framework of the 2007-2013 programming period in order to make cohesion policy more efficient and sustainable

• OCS – Office of the Chief Scientist – one of the Israel’s entrepreneurship programs

• OECD - Organisation for Economic Co-operation and Development

• OSEO - Private enterprise with public service delegation, which finances French SMEs

• PE – Private equity

• GDP – Gross domestic product

• PR – Public relations

• SBA – Small Business Administration

• SVB - Silicon Valley Bank

• VAT – Valued added tax

• EU – European Union

• USD – United States Dollar

• VC – Venture capital



Demographics

Other 4%

Shareholder (involved in the

business) 46%

Shareholder (not involved in the

business) 1%

President/Chairman of The Board

19%

CEO/Vice-President/Executive Director

35%

18-29 years old 7%

30-40 years old 30%

> 40 years old 63%

Position in the company

Age



IT 19%

Business services

13%

Media & advertising

9%

Financial services 7%

Construction 5%

Food 5%

Hospitality 4%

Automotive 4%

Chemicals 3%

Transportation 3%

Heavy industry 3%

Healthcare 3%Oil & Gas 2%

Other services 8%

Electrical equipment 2%

Textile industry 1%Agribusiness 1%

Furniture 1%Energy 1%

Commerce 12%

> EUR15mil 28%

< EUR1mil 25%

Between EUR10-15mil

9%

Between EUR5-10mil

15%

Between EUR1-5mil

23%

Demographics

Industry

Company’s income

Electrical equipment 2%


Bogdan Ion Country Managing Partner

Our leaders at EY Romania

Project team

Anamaria CoraPartenerHead of Assurance

Florin Vasilică Partener Head of Transaction Advisory

Elena Badea Head of Market Enablement

Dragoș Radu Partener Head of Legal

Constantin Măgdălina Knowledge Management Officer

Mihaela Matei Special Projects Communication Officer

Coordinator of EY Entrepreneurs Speak Out Entrepreneurship Barometer

Saulius Adomaitis Partener Head of Advisory

Venkatesh Srinivasan Partener Head of Tax and Legal

Thank you!We would like to thank all the entrepreneurs who responded to our survey, those who shared their thoughts with us, as well Wall-street.ro and Romanian Business Leaders for their support.

EY | Assurance | Tax | Transactions | Advisory

EY Romania

EY Moldova

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization of member firms of EY Global Limited, each of which is a separate legal entity. EY Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com

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