With over 19 years experience in legal advice with a focus on international M&A, private equity/entrepreneurs, corporate work, Cristina Daianu is one of the most experienced professionals in Romania in her line of work. A Dentons partner for the past 12 years, she is also the Head of Emerging Growth and Venture Technology at the Bucharest office. For these reasons, BR wanted to sit down with Cristina Daianu and see what she has to say about Romania as a potential destination for venture tech.
Everyone is aware about the boom in the technology sector and the mirage of Sillicon Valey entrepreneurs, attracting spectacular investments in their companies. But what is the reality in the CEE region, and more specifically, in Romania?
The CEE region (Romania included) has developed a booming tech start-up scene, having ambitious founders and very talented developers. Romania ranks second in the region (after Poland) by number of developers. The CEE region has also created 8 unicorns (out of which 2 are of Romanian origin) – serving as an anchor and inspirational role-model for the next generation of founders. The year 2020 has accelerated digitalisation to an unprecedented pace, and thus, the already rapidly changing ecosystem evolved even more during these past months.
Despite the CEE becoming the fastest emerging region in Europe in terms of capital invested, compared to the Western markets, this region (and particularily, Romania) is still in its early phase of development. This context actually creates opportunities since the pre-seed/seed tickets are at a still affordable value.
What technology sectors could be the winners in the long run? Who will be chosen for funding?
The investors (especially the early stages) are looking for the real disruptor in the market, the one that will do things differently and that can be scaled globally. Sectors like automation, IOT, e-gaming, e-commerce and fin-tech are now booming and expected to grow in the next years.
Furthemore, it is always more than the business concept itself, but- especially in the seed phases- it is the „charisma”, drive, reliability of the founders that will make the difference in a pitch for investment. The aptitude to show cooperation with a future investor is also a valuable asset. In later stages (already Series A funding), investors are not just looking for great ideas anymore, but also a strong strategy for turning that idea into turnover.
Is Romania a good destination to establish a start-up or should Romanian entrepreneurs look at other markets for starting a venture?
It is one of the most frequently heard questions and there is no black and white. There could be certain advantages for establishing a start-up in California, UK or Singapore such as logistics, proximity to certain key clients and most importantly, funding options. However, starting a business in Romania presents the advantage of the known territory. It really needs to be analysed on a case-by-case basis, depending on the mid-term plans, possible investment or even exit scenarios. Experienced global firms such as Dentons, having a very large international footprint and solid expertise in VentureTech, are best placed in order to make an assessment of the legal framework as well as hurdles and benefits of each location in question.
How is the VC market expected to evolve in Romania?
Some of the large international VC funds have already invested in Romanian-origin businesses, contributing to some of the success stories on the local scene. However, there are a handful of local players that also funded many of the smaller deals (seed phase/ series A) and that will create the perfect bridge to exits to larger funds.
The first 6 months of 2020 turned better than expected, totalising approx. 20 million Euros in 30 deals (compared to 2019, which counted in total approx. 40 million Euros in funding deals). This year also marked the launch of the first equity crowdfunding platform (Seedblink), which had more than 17 campaigns in the first 10 months of the year.
While the market matures, there are still many good opportunities, which of course need to be selected carefully. It is a question of not too long until Romania will become one of the most interesting destinations to shop in the technology scene in Europe.
Are there any notable changes in local legislation that could impact the venture tech sector?
The current context is market by constant change, trend which is also reflected within the regulatory framework (both at EU and Romanian level). In terms of local legislation, there are some key aspects that should be considered:
- The legislation regarding alternative investment funds has been adopted (Law 243/2019), which introduces new requirements regarding the authorisation and functioning of these funds.
- On the acquisition side, Law 223/2020 adopted this month, finally simplifies the acquisition of shares in Romanian limited liability companies (by repealing the 30-days opposition term for creditors and thus speeding up the transaction ).
- Various funding programs could be tapped by tech start-ups, such as the Startup-Plus or Startup-Nation Programs. There are many alternatives, depending on the specific activity performed by each company.
- A positive sign was the promotion of the Romanian capital market to the status of Secondary Emerging Market by the British multi-asset index provider FTSE Russell. However, legislation putting on hold privatisations for 2 years (Law 173/2020) has slowed down prospective IPOs/other transactions involving state-owned companies.