Mentality and fear of failure rank first in the top barrier for those who want to start and develop a business in Romania, according to the Romanian Startup Barometer by EY Romania, Impact Hub Bucharest and Startarium. Poor education, fiscal uncertainty, and the current political situation are ranked second, with 12 percent of entrepreneurs questioned in the survey.
Compared with the previous edition, there is an improvement in perceptions about education and access to finance, but this does not mean that these issues have been solved or improved at national level. All the more so as Romania ranks last among the EU countries in the last PISA assessment of the share of graduates.
The third edition of the Start-up Barometer in Romania analyzes the responses of 284 entrepreneurs on access to finance, the regulatory and taxation area, education and training, entrepreneurial culture and coordinated support. Of the total number of respondents, 82 percent run businesses less than three years old and 92 percent said they are founders or shareholders in the company. Most startups are located in the urban area and are active in IT & C, retail, business services, media and advertising, food industry, education and more.
65 percent are 22-35 years of age, 28 percent between 35-50 years, 4 percent under 21, and 3 percent over 50 years. The questionnaire was applied between 15 January and 17 February 2019.
This year, 74 percent of respondents believe that entrepreneurship is not supported by Romanian society and that the main obstacle is the fear of failure, compared to 60 percent in the 2017 edition.
In their business development, the main bottlenecks facing most startup entrepreneurs are the lack of investment capital (45 percent), the limited promotion budget (38 percent), but also the need for new clients that they do not know how to respond (34 percent).
Other study results
Average monthly average personal income dropped to EUR 917
Compared with previous barometer editions, there is a decrease in the personal income of startup entrepreneurs. If in 2017, the monthly average of start-up revenues slightly exceeded EUR 1,000, in 2019 it fell to EUR 917 euros. The percentage of those whose monthly incomes are under EUR 500 is up from 15 percent by 2017.
Over 9 hours per day dedicated to the business
A start-up entrepreneur spends on average 9.2 hours of his business each day, which means he works 15 percent more than a full-time employee in Romania.
Own funds remain the main source of funding for 79 percent of the start-up leaders. However, the study’s results also show a significant increase in the share of state funding, family and friendship, and business angel versus the 2017 edition.
71 percent of entrepreneurs believe that the funds provided by the Romanian state in the specific programs for SMEs represent the form of financing with the greatest impact in supporting business initiatives.
This is demonstrated by the two editions of the Start-up Nation program, which had thousands of young applicants. European funds are a second major source of funding, says 58 percent of respondents. The importance of bank loans increased, compared to the 2017 edition, third, followed by business angels – the fourth long-term funding source, with 27 percent of the options.
Romania’s tax and regulatory environment has deteriorated in the last year for entrepreneurs, 52 percent of respondents think. The main three measures that could improve this environment, according to entrepreneurs, aim at lowering labor taxation, fighting bureaucracy and maintaining the stability of the tax and regulatory environment.
50 percent of the start-up entrepreneurs are planning to launch their businesses in new geographic markets. The largest area of enlargement is the regional one, Europe, with 51 percent of the answers followed by the US market (17 percent). And most of the financial resources are for promotion.
Elon Musk, an entrepreneur, CEO Tesla Motors, is the most inspirational foreign entrepreneur. Second place is Jeff Bezos – American contractor, founder and CEO of Amazon; followed by Steve Jobs (Apple) and Bill Gates (Microsoft). Among the Romanian entrepreneurs, Cristian Onetiu, co-founder of Life Care, is the most mentioned, as well as Marius Ghenea – serial and business angel entrepreneur. There is a major change in entrepreneur options over two years ago, the number of those who say they did not have a model increased from 6 percent to 24 percent, and those who have as a model a Romanian entrepreneur reached 21 percent in 2019, compared with 14 percent in 2017.
Mentoring and discussions with other entrepreneurs are the main source of learning mentioned by start-up entrepreneurs (41 percent). And for 52 percent the most used sources of interaction and inspiration are online communities.
“The third edition of the Startup Barometer gives us solid evidence that we are still confronted with mental-minded obstacles and that the ecosystem is progressing harder because entrepreneurs at the beginning of the road are afraid of failure. Our efforts to provide entrepreneurs with all the resources they need to grow are duplicated by the need to build a culture of accepting failure as a lesson and fear as a stimulus. If we see the exposure of new ideas and their prototype as proof of courage, the repeated attempt as perseverance and risk taking as a way forward, I think we will make a positive impact change and not just in the entrepreneurial environment,” said Oana Craioveanu, CEO and co-founder of Impact Hub Bucharest.
“Romania has a fantastic chance to develop an essential competitive advantage, the culture of innovation, especially in technology. And the expectations are great for the new generation, but also for the governors, to support this extremely positive trend,” said Cristian Carstoiu, Partner, Business Assistance Department, EY Romania.