Serial entrepreneur and angel investor Radu Georgescu, whose name is linked to companies such as Gecad and Avangate, says the pace of development and execution of a business is much faster in the West than in Romania. Online startups may find it hard to obtain financing here, but so it is everywhere.
How attractive are Romanian online businesses to foreign investors?
It does not matter so much if you are from Romania or another European country, China or Russia in terms of how attractive your idea is to an investor. Attractiveness comes from the business model (product, development, technology, services, targeted market, clients, monetization, profitability) and execution (the team, respecting deadlines and so on).
Romania is a market where entrepreneurship has only just started to speed up; there has to be a larger and larger pool of startups where one can invest. However, since most of the companies are at the beginning, investing money involves a very high risk and very few manage to attract financing of over EUR 500,000 or EUR 1 million from investment funds. Most projects worth investing in need EUR 30,000, EUR 50,000 or EUR 100,000.
What are the most widespread methods of financing for Romanian online entrepreneurs?
These are the three Fs (friends, family and fools) and angel investment, because many local online projects are very much at the beginning, when risks are still very high and business models are still not proven as being viable.
What criteria are taken into consideration by investment funds and business angels when they decide to invest in an online business?
The criteria are the viability of the business model, the innovation that the product or service brings, capitalization, profitability and the team.
What is the success rate in obtaining financing among online companies in Romania? How many of them die for lack of investors and perspectives?
The success rate is low, but this is the case everywhere. Don’t imagine that in Silicon Valley it is different, and that every idea receives financing. Most projects, some of which have not even reached the stage of being constituted into a company, die because they started on the wrong foot. Either they did not gather enough information on the market and clients, or they did not select a good team to be in charge of the project, or how to capitalize on the idea was not well thought through, or any other reason for which a startup can die in the first months or the first year since it was founded. If the idea, the product and the business are viable, and if the entrepreneur is looking for financing, there are more ways to attract the attention of investors.
When is it a good idea for an entrepreneur to approach a business angel and when an investment fund?
There are several stages in the life of a business that are appropriate or not for a certain type of financing. It is up to every business when it needs financing and how much it can self-finance. An angel investor enters the life of a company in the first stages, when the risks are higher and the cost of financing is in direct proportion to that. An angel investor will invest a maximum EUR 100,000 and will take up to 20-25 percent of the business. An investment fund will enter a business at another stage, when the company has already proven the viability of the business model, it is usually profitable and the risk of failure is lower. The fund will invest more money and hold a smaller percentage in the firm.
How is the entrepreneurial culture in Romania different from that in the West?
As I have been present in Silicon Valley for a long time, I can say there are two major differences between here and there – speed and the environment. First of all, the pace of the development and execution of a business is much faster over there. Secondly, what is different is the environment in which one can evolve as startup and an entrepreneur – financing, human resources qualified at all levels, even the climate, infrastructure, and the available services (lawyers, accountants, auditors, office rentals for startups and many other things). The rest are details.
Radu Georgescu’s current investments
Avangate – a multinational with Romanian pedigree, which supplies e-commerce solutions. Avangate aims to reach USD 1 billion in sales and float on the stock exchange by 2015.
Gecad Net – software solutions and security company, with a portfolio of over 1,200 clients from domains such as telecommunications, financial services, construction, energy, oil and gas, and others. In 2009, Gecad Net posted a turnover of EUR 3.2 million.
Axigen – an integrated email, calendaring and collaboration platform currently distributed by over 300 partners from 100 countries, which manages the email traffic for more than 11,000 companies.
Phoenix – a spinoff from Axigen, it is a cloud storage solution for migrating data and applications.
ROL.ro – developed by ROL Online Network, was launched in 1998 as the first online web portal in Romania and comprises more than 40 websites specialized in entertainment, news, business and e-commerce.
Otomed Medical Center – private center of audiology, speech therapy and psychology.