It’s been well over a year since the Covid-19 pandemic disturbed the Romanian startup and investment ecosystem. Some companies had to shut down due to lack of digitalization, others had virtual communication difficulties, while senior players kept their ground. A recent RocaX Study about the early-stage investments depicts the market, the demand, and the angel investors volume on the 2020 scene.
While the first wave of 2020 seems to have brought in questions, the study shows that the second part was more about solutions. Let’s discover how the Romanian startup scene evolved during a challenging and uncertain year.
Startup-wise, the ecosystem saw a concern for a tighter investment criterion for the players, both companies and investors, during the pre-seed and series A. But when one window closes one always must open a digital door. Both the RocaX study and the HowToWeb report show growth in deals in the seed volume.
I am new here; will you show me around?
The numbers show that while the industry was trying to find an equilibrium, newcomers on the startup stage did not suffer. The study shows it might be because angel investors perceived short market disruptions as an opportunity for €500K funding projects to adapt and grow in a recovering industry.
Companies in a later stage found it harder to reach their targets in a depressed market. This does not mean it was impossible. Romanian innovators, UiPath, FintechOS, and TypingDNA, continued to evolve due to international investors. This placed Romania in the most funded ecosystems of Europe, mainly due to UiPath’s funding that surpassed all the other startups combined.
To let numbers do the talking, we also looked at the EY Romanian Tech Startup Ecosystem report. This shows a growth in local early-stage seeds – crowdfunding platforms like Seedblink, angel investors, and local funds, in the last year, compared to the same period a year earlier. There were around €14M invested between 2019-2020, compared to €25M during the outbreak of 2020-2021.
Game-changing verticals that stand out BC and AC
BC (before Covid-19) funding was directed to e-Commerce startups, with three out of five rounds dedicated to this niche. AC (after Covid-19), e-Commerce, FinTech, and Enterprise SaaS continued to grow, while two verticals attracted smaller funding. Digital Health took off with a telemedicine momentum and EdTech digitized the classrooms.
In Romania, the digitalization of medical institutions wasn’t a new topic, but it took over the innovation stage. Medical professionals were faced with adopting new tools when restrictions were in place. This accelerated the technology demand and offer. It also pushed cybersecurity in the big trend league worth looking into in 2021. Romania was selected to host the new European Cybersecurity Industrial, Technology, and Research Competence Center to draw attention and more funding.
As VCs preferred to sustain fewer, more developed, companies, angel investors took to investing in more risky ventures. In the HealthTech niche, SanoPass and Peditel are some of the names with big plans for 2021. While in the EduTech niche, a few start-up names standing out are Kinderpedia and Code of Talent, sustained by RocaX, but also Edus and Brio.
“Kinderpedia has offered its end-to-end communication and management solution free of charge to all institutions that found themselves in need. Their solution allows parents to track their children’s kindergarten or school schedule, and to get notified if something, such as a new Covid case or schedule change, appears, etc.,” shared Bogdan Pasca, Investment Analyst, and Theodor Genoiu, Research Analyst from RocaX.
Disruption is but a step forward in 2021
For 2021 the study depicts an enthusiasm in the Romanian startup ecosystem. Angel investors have supported digital events in 2020 and this might also continue in 2021. There might be a funding gap, but the outlook is positive. The market seems ready to build more partnerships between early-stage VCs and angel investors.
The medical crisis could be looked at like the right opportunity to take a step forward into growing the ecosystem. Entrepreneurs do not have the liberty of waiting, but of accelerating investments in technology and digital solutions with the purpose of innovation.
“Uncertainty is usually there, but right now there is much more market risk. However, for those who deeply know an industry or a niche, that uncertainty turns into opportunity, as they can understand the needs of that market. As such we expect to see new winners in legacy industries which have fallen behind from a technological standpoint,” shared Bogdan and Theodor.
One looks at the global market in a crisis and one can see the growth of new companies. Uber, Airbnb, WhatsApp have all used the fertile ground of the last financial crisis. These former startups have used the disruption to build resilience and set new growth plans, which will take into account a crisis response.
A global crisis survey shows that 7 out of 10 organizations plan to accelerate digital transformations in the following year. They intend to adapt their corporate strategies to take into account interruptions. Asked what are the three main steps a startup can take to be ready for uncertain events, the RocaX analysts shared the following.
Tech companies are more adaptable because they observe the new needs that have been created. They find gaps and aren’t afraid to pivot, and they improve, scale, or move on. “What’s the feedback from the pilot test? Is your solution a vitamin pill or a pain killer to the customer? If it’s just a partial solution to the problem, improve the product. If it solves their need, don’t be afraid to scale it. Don’t be discouraged by neutral or negative market feedback. Move on to the next pain point. You are likely to have learned something new anyway,” concluded the RocaX members.