The Romanian startup scene is on the rise, with 2022 seeing a 12x increase in the volume of venture capital deals over the course of 5 years. Domestic startups attracted a significant amount of capital during the past year, solidifying the success and growth of the ecosystem. The volume of the venture deals involving Romanian startups went from a modest €8.2M in 2017 to an impressive €101.7M in 2022, a “How to Web” Romanian Venture Report shows.
“Venture deals involving Romanian startups stood up to 2022’s strong headwinds coming from the global tech scene and the economy in general. Coming out of 2022 we see strong signals that such deals can actually turn into a much-wanted bet in one’s portfolio to say the least.” Alexandru Agatinei, CEO of How to Web, points out.
The numbers in the Romanian Venture Report don’t come as a surprise given the credit that the broader CEE region has in terms of VC funding’s growth. CEE is currently one of the fastest-growing regions for VC funding in Europe, growing 7.6x since 2017.
73 deals in 2022 secure Romania’s fifth position in CEE’s VC funding rank
The total volume of deals (73) in 2022 rose close to the level of the previous year’s volume – €101.7M compared with €116.9M in 2021.
However, according to the Romanian Venture Report, it is worth mentioning that 2021’s performance accounts for FintechOS €51M series B – meaning that when discounting such outliers, 2022 still outperformed 2021 – €101.7M compared with €65.9M in 2021.
The data supports Romania’s fifth position in the top CEE countries by VC funding raised in 2022, according to CEE Startups 2022 report by Dealroom. Romania comes right after Croatia, Poland, Estonia and The Czech Republic, which hold for 70% of the total volume.
In terms of the total number of transactions, there is also a slight increase on average by 5% from 2021’s 71 deals to 2022’s 73 deals recorded.
Series A volume skyrockets by more than 300% compared to the previous year
2022 was the best year so far in terms of series A transactions for the period going back to 2017 – both in terms of volume and in the number of transactions.
The volume of series A deals tripled compared with the previous year, going from €15.3M in 2021 to €63M in 2022. The number of series A deals more than tripled as well, from 3 in 2021 to 10 in 2022. The first 3 transactions of 2022 – DRUID, Digitail and OutThink – account for more than 30% of the total transaction volume of 2022, the report shows.
In effect, the average deal size for series A deals increased by 23.4%, from €5,103.3K in 2021 to €6,296K in 2022 – which doesn’t come as a surprise when looking at the regional trends in which CEE has shown resilience through 2022 so far, especially in early-stage investment, as seed and Series A average round sizes continue to increase.
The report also shows that pre-seed volume went down by 13.2%, reaching €2.8M compared to the previous year’s €3.3M. The number of pre-seed deals remained steady, from 20 in 2021 to 19 in 2022. In effect, the average deal size for pre-seed deals decreased by just 8.6%, from €163K in 2021 to €149K in 2022.
At the same time, the volume of seed transactions also decreased by 4.3%, reaching €45.3M compared to €47.4M in 2021.
However, 2021’s volume of seed transactions accounts for FlowX’s €7M seed round – among the largest seed rounds in Europe at that time. So, if this is taken into account, then there isn’t a gap at all between the seed volume of 2022 compared to 2021, but actually, a significant 13.1% increase appears, from €40.1M in 2021 (discounting FlowX €7M round) to €45.3M in 2022, the report states.
While 2022 did not record outliers as in 2021’s FintechOS €51m series B and FlowX €7M seed, it did register more significant rounds and more diverse in terms of the investment type.
Additionally, the volume of first round transactions doubled, while the volume of follow on rounds increased by 36% compared to the previous year.
With €49.3M raised as first-rounds in 2022, this represents a 109% increase in volume compared to €23.6M of 2021’s first rounds, the report shows.
With a considerable 25.7% increase in the number of first rounds transactions – from 35 in 2021 to 44 in 2022, this came along with an impressive increase of the average deal size of first rounds by 66.3%, from €673.9K in 2021 to €1,120.4K in 2022.
Regarding follow-on rounds, the report noticed significant gaps compared to the previous year. With a volume of €60M raised as follow-on rounds in 2022, this represents a 35.7% decrease in volume compared to €93.4M of the follow-on rounds’ volume in 2021.
In effect, the average deal size for follow-on rounds showed either:
- a 14.3% decrease when accounting for FintechOS series B in 2021, from €2,593.2K in 2021 to €2,222.4K in 2022
- an 83.7% increase when discounting FintechOS series B in 2021, from €1,210.1K in 2021 to €2,222.4K in 2022
And this occurred irrespective of the fact that the number of follow-on rounds recorded also dropped, on average, by 24% – from 36 in 2021 to 27 in 2022, the report adds.
Top deals and stars in 2022
Top deals of 2022 were Druid, Digitail, OutThink, Bware Labs, Sessions, Bunnyshell, Machinations, NeuroLabs, making up €54M, representing almost half (48.6%) of the total transaction volume of 2022. Other notable transactions involved Cyscale, AdServio, evoMAG, Ogre AI, YAROOMS, adding another €11M in volume.
The report also notes that there were another 3 companies that could not be disclosed, raising more than €11.5M in total, with the split for all these: 12 deals between €2-5M, 2 deals between €5-10M, and 2 deals between €10-15M.
RPA, cybersecurity, and health industry lead the way
The report also shows that the industries these top deals represent are very diverse and pose a great potential for the years ahead: RPA (Robotic process automation), Cybersecurity, Health, Dev tools, Productivity tools, Gaming, HR, E-commerce, Energy, Education.
These verticals are promising to invest and develop in, as they align with the common themes we have seen across CEE. The region is now home to promising startups in many other segments including disruptive technologies such as Security, Enterprise Software, E-commerce and Fintech.
Additionally, Web3 and Gaming startups deserve close attention in 2023 as they are mutually reinforcing in CEE, leveraging the renowned expertise of the region.
Here, Romania also finds itself in the top 5 hubs by enterprise value with approximately €253M in Web3. Finally, Gaming and Web3 startups are aiming for efficiency to deal with challenging times in 2023.
Acquisitions and conclusion
The report also highlights the acquisition of Adore Me by Victoria’s Secret in a $400M deal and the €20.5M investment in Amber Labs by Emona Capital, both closed in the second half of 2022 (November and October respectively).
Additionally, as the report does not account for investments in service providers, exits, buyouts, IPOs and the like, those transactions didn’t make it to the analysis.
2022’s developments highlight the potential and maturity of the ecosystem, attracting more investors and entrepreneurs to the country, and as the startup scene continues to flourish, it is expected to bring further economic growth and innovation to Romania.
Thus, by now there is no secret that Romania is where diamonds in the rough appear more often than ever before, “How to Web” concludes in its report.