romania’s tech ecosystem · 2016-07-06 · romania’s software development map mostly...

Bucharest, 2016

Manuel Costescu – State Secretary InvestRomania

Romania’s Tech Ecosystem

22016 The Government of Romania

1. Romania as a regional tech hub

2. Software development in Romania

3. Cost of living

4. The startup ecosystem

Contents

1. Romania as a regional tech hub


Technology is a primary growth driver for Romania – the IT&C services sector is forecasted to reach EUR 4 billion by 2020

1

Source: ANIS (Employer’s Association of the Software and Services Industry in Romania); ARIES; Invest Romania

4.0

2.42.1

2020 (F)20142013

+9%

Software & IT services

IT&C services sector (EUR billions)

CAGR

• Most of the market size is owed to outsourcing

activities, with companies such as Oracle, Amazon,

IBM or Deutsche Bank leveraging Romanian

software development potential at a fraction of the

cost in Western Europe

• With low living costs, high relative salaries and

more capital at the doorstep, the startup

environment is booming – Romanian software

developers are also becoming entrepreneurs,

creating products aimed at a global market in the

main tech hubs of the country (Bucharest, Cluj-

Napoca, Timisoara, Iasi)

Blue Chips: Startups:


Technology’s rise to prominence stems from a good internet infrastructure used by an increasing pool of talented developers

Source: Akamai Technologies; Invest Romania

12.112.412.812.913.914.014.315.215.616.1

ILBERONLCHSE NO DKFI CZ

Top 10 EMEA countries by avg. speed (Q2 2015, Mbps)

• The internet infrastructure has developed along with the developers, who are leveraging the network to offer high quality outsourcing services, although the

focus is now shifting towards product design and, consequently, startups

50.951.753.254.257.359.460.962.871.472.1

HU UKRUBECH FISEILRO NL

Top 10 EMEA countries by top speed (Q2 2015, Mbps)

35.0 48.0 44.0 33.0 39.0 38.059.0

42.0 53.0

60.0 47.0 57.0 49.0 60.0 53.0 53.031.0

48.0 35.0

37.0

FIAU

90.0 88.0

HU

94.0

RO

95.0

IL

95.0 93.0

CH

93.0

DKNL

91.092.0

SE BE

90.0

Top 10 EMEA countries by Mbps Broadband adoption (Q2 2054, % >4 Mbps)

Share between 4 - 10 MbpsShare above 10 Mbps

1

2. Software development in Romania


There are 7,000 IT&C grads in Romania every year, adding to a total of 90,000 with forecasts exceeding the 100,000 mark by 2018

Source: IEEE; Brainspotting; ANIS; ARIES; ZDNet; Invest Romania

1

HIGH

QUALITY

3

COST

EFFECTIVE

2

AVAILABLE

CODING IN

ROMANIA

1 High quality – top 10 worlwide at math and

computer science international olympiads• Romania consistently ranks in the top 10 in

International Olympiad competitions in math and

informatics, better than any other country in the EU

• Romanian universities have been in the top 3 of the

IEEE Design Competition every year since 2001

2 Available – number of engineers/ capita

higher than the US, India, China or Russia• There are 5 polytechnic universities in Romania,

which together with 59 domain specific universities

and 174 private colleges supply over 7,000 IT&C

engineers every year

3 Cost effective – value for money is much

higher than in Western Europe or the US• Avg. annual salary for a software developer working

in Romania is EUR 17,000, with the low living costs

implying a standard of living better than even London

2


The 7,000+ annual IT&C grads specialize in a variety of programming languages, determining the creation of sub-clusters

Source: Brainspotting; Invest Romania

2

Size of bubble is directly proportional to cluster size

Bucharest

Cluj

Craiova

Sibiu

Timisoara

Brasov

Iasi

Romania’s software development map

Mostly specialized developers, rare mix of technologies

2,000

Largest pool of full stack developers; Java, C#, .NET, PHP, Web

1,700

Java, .NET, C/ C++ (embedded developers)

1,100

Large pool of front-end and web developers, telecom engineers

1,100

Pool for C++ and helpdesk engineers

500

Pool for cloud and virtualization experts

500

Automotive software and gaming engineers pool230

Grads/ year Focus


Romania has the largest share of developers priced below USD 20/ hour, making it the cheapest technology hub in the European Union

Source: Yalantis; Invest Romania

67%60%

45% 40% 38% 38% 34% 32% 31% 28%

22%24%

24% 32%25% 21%

20%19% 19% 21%

7%9%

15% 15%17%

14%14%

13% 12% 13%

8% 6%8%

10%10%

9% 9% 9%

7% 7% 12%17% 23% 28% 29% 29%

2% 3%

BG CZ PL

3%

RO

4%

UK NL SEFRES DE

41-50

50+

31-40

<20

21-30

Spread of software developers by hourly costs in Europe, 2015 (%, USD/ h)

2

Increasing government support dedicated to IT&C

• Employees activating in the IT&C sector benefit from an exemption of the 16% income tax

• Companies can also benefit from state aid financing schemes covering salary costs and offering specific benefits

encouraging employment of young graduates


A project’s software development costs in Germany would be on average 47% smaller if developed by engineers in Romania (2015)

Source: Yalantis; Invest Romania

Spread of software development costs based on project complexity (USD/ h)

39 39 44 41 47 52 54 58 56 57

27 2731 29

3336 38

40 39 40

BG CZRO NLPL ES UK FR DESE

High complexityMedium complexity

• While it is true that software developers in Romania account for a fraction of the cost of their counterparts in

countries like Germany, UK or US, the product quality does not diminish – continuous sector growth especially on

services export stands proof

• More and more developers are starting to focus on entrepreneurial ventures as well

2

3. Cost of living


Despite smaller compensation, the standard of living can be very high considering the significant differences in various living costs

Consumer Prices

BUCHAREST vs. LONDON

Rent Prices

Restaurant Prices

Groceries Prices

• 41% lower in Bucharest • 57% lower in Bucharest




Source: Numbeo; Invest Romania

Standard of living equivalency

(EUR 1,700 salary in Bucharest)

• EUR 3,100 salary in Berlin

ensures the same standard

of living

• EUR 5,707 salary in

London ensures the same

standard of living

3

BUCHAREST vs. BERLIN

4. The startup ecosystem


Venture capital is finding its way into the country, with more and more investors reaching out through accelerators and events

Financing status

Tech hubs in Romania

• While 2014 has seen a bounce in VC financing

due to increased number of opportunities, 2015

financing is likely larger, only Vector Watch

raising EUR 5 million in November

• 2016 is off to a great start: financing totaling

EUR 1.1 million has been announced year to

date, as well as an acquisition

• Bucharest is the largest startup hub in the

country (132), as home to tech companies and

VC firms as well as to universities focused on

technology, engineering and software

development

• Cluj (35), Timisoara (16) and Iasi (7) are

catching up, attracting companies like Amazon

and investors from UK, Germany or the US

3,478

2,9843,0554,000

3,185

1,8251,9044,170

2009 2010

5,089

2011

5,303

2012 20142013

+5%

Later Stage VentureStartup

Venture capital financing (EUR, thou)

CAGR

Startup distribution by city

58%7%

17%

3%

15%

Bucharest

Others

Iasi

Cluj - Napoca

Timisoara

Source: European Venture Capital Association; Romanian Startups.com

4


While bootstrapping is still the rule, startups are finding new ways to find pre-seed funding through accelerators and tech focused events

Source: Romanian Startups.com; Invest Romania

Tech eventsAccelerators

• MVP Academy, Spherik Accelerator and Innovation

Labs have incubated over 100 startups, raising in

excess of EUR 1,000,000 in financing at various

stages of development

• Startups are supported through mentors (VCs,

engineers, product managers) as well as with

infrastructure from Bitdefender, Microsoft or Oracle

• Several tech events are in fact precursors for

accelerators, following increased interest from

startups and potential investors (e.g. How to

Web, Techsylvania)

• Most of these events are dedicated to connecting

startups with potential investors, and often

organize pitching contests as a first step

4


• Inner Trends is a web analytics tool that allows developers, marketing and sales

people act upon the activity of web or app users in order to monitor and optimize

traffic

Very few Romanian startups are targeting only the local market, with most aiming at least regionally, if not globally


StoryStartup

• Integrated solution for the development of Internet of Things (IoT) projects through

which developers can connect and remotely manage multiple devices

• The vision of Vector Watch is to change the way people use smart watches and

wearable technologies

• The company offers a wide selection of smart watches with a 30 day battery life

• To develop its platform and its products, the company has raised USD 7m so far

• An alumnus of MVP Academy, AXO Suits is a robotics company developing high-

powered multi-purpose exoskeletons

• Its first product is a medical exoskeleton that will help paralyzed people walk again

• Although not really a startup anymore, Bitdefender is one of the most relevant

entrepreneurial success stories in the Romanian technology ecosystem

• Its products are considered top technology in cybersecurity, and are used worldwide

4


The number of startups receiving growth financing is increasing, with investors scouting the region for disruptive technology

Success Stories

• Francisco Partners has acquired Romanian

born Avangate, a now global e-commerce

solutions provider

• Earlybird Venture Capital, one of the largest

German VC firms, backs Tjobs, a recruiting

startup aiming for EU wide expansion

• HootSuite, a global platform for social media

management dedicated to enterprises, acquired

Romanian startup UberVU for USD 15 – 20m

• Facebook, a global social network, acquired

Romanian startup Liverail, an ad optimization

platform, for USD 400 – 500m

• Seedcamp, one of the most expanded early

stage VC funds in Europe, has invested in 3

Romanian companies only in 2015

(DeviceHub.net, Traderion, UIPath)

• Vector Watch has raised EUR 5m last year from

GECAD, 3TS and several other local investors

VCs that invested in Romanian startups

Startups originated from Romania


4


The ecosystem’s growth is accelerating, with both private investors and the government pooling capital for high growth projects

• Operationally, the investment vehicles work as a co-financing agreement between the European Investment Fund

managing the Government’s funds and private investors, who will also be involved in the investment decisions

• Private investors involved in the funds will have a total committed capital of at least EUR 22 million

• The current timeline estimates that the funds should be operational in the second half of 2016

Source: Invest Romania

4

60%

40%

EUR 40m

90%

10%

Seed and pre-seed

Venture fund

Seed and pre-seed fund

30%

Venture/ growth

70%

EUR 60m

Private investors

European Investment Fund

Projected financing plan through the Romanian Government and the European Investment Fund

EUR 100m

• Through a partnership

with the EIF, the

Romanian Government

plans to raise 3 funds to

finance tech startups

• The largest fund (EUR

60m) will be focused on

venture & growth

financing

• The other two funds

(EUR 20m each) will be

dedicated to seed and

pre-seed financing of

local, emerging startups

romania’s tech ecosystem · 2016-07-06 · romania’s software development map mostly...

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