Horizon 2020 entrepreneurial ecosystem – initial findings ... PSF... · Horizon 2020 Policy Support Facility The Romanian entrepreneurial ecosystem – initial findings from Background

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The Romanian entrepreneurial ecosystem –initial findings from Background Report

Alfred RadauerLaura Roman Technopolis Group 28 July 2016

Page 2Horizon2020 Policy Support Facility

The structure of the background will follow proven structure for similar PSF analyses…

1. SMEs and innovation in Romania2. Business and start-up environment

a. General business environmentb. Access to financec. Start-ups and start-up ecosystem

3. Key policy documents on start-ups and spin-offs4. Support mechanisms for the start-ups and spin-offs

a. Support from national sourcesb. Support from the ERDFc. Funding from H2020 vs. ERDF fundsd. VC schemes

Page 3

SMEs and Innovation performance


Business demographics

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2008 2009 2010 2011 2012 2013

Population of active enterprises (numbers by year)

Zero 1-4 employees 5-9 employees 10 employees or more Total

Overall positive trends since 2010, there is a growing trend for enterprises with 1-4 employees, which made up 70% of all businesses in 2013


New businesses dynamics

Source: Eurostat

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2008 2009 2010 2011 2012 2013

Birth rate of new enterprises, %

Zero From 1 to 4 employees

From 5 to 9 employees From 10 employees or more

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013

Survival rates, %

Survival rate 1 Survival rate 2 Survival rate 3

New enterprise formation has picked up in 2013, well-above pre-crisis levels for enterprises with 1-4 employees;The survival rates of new enterprises have been very volatile


Small Business Act Fact Sheet

n Romania's non-financial business economy has not yet fully recovered from the crisis. n In 2014, SME value added and SME employment were still around

12 % and lower, respectively, than before the crisis. n In 2014-2016 the number of SMEs is expected to increase by 6.2

%, around 190 000 new SME jobs are predicted and SME value added is projected to grow annually by 8.5 %.

n Implementing the SBAn Romania's SBA performance is below the EU average. However, it

excels in entrepreneurship, where it is the EU leader.n The main challenge lies in poor and still declining results in skills

and innovation.Source: SBA Fact Sheet Romania, http://ec.europa.eu/growth/smes/business-friendly-environment/performance-review_en#t_0_2


Innovation performance of enterprises

n Romania – a modest innovatorn innovation performance decreased overtime relative to EU average

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

2008 2009 2010 2011 2012 2013 2014 2015

Romania Latvia Bulgaria Croatia EU


Innovation performance scores

0.180

0.392

0.111

0.070

0.084

0.045

0.149

0.193

0.273

0.521

0.575

0.466

0.490

0.426

0.473

0.556

0.526

0.573

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Summary Innovation Index

Human resources

Research systems

Finance and support

Firm investments

Linkages & entrepreneurship

Intellectual assets

Innovators

Economic effects

EU Romania

• Weakest relative performance: Linkages and entrepreneurship

• The firm investments and finance and support dimensions are further weak points.

Page 9

Business and Start-up Environment


Romania’s global competitiveness (WEF, 2016)

n Romania is ranked 53 globally, among 140 economies.

n Weak framework conditions: Infrastructure and institutions

n Business sophistication and innovation: low

3.73.6

5.4

5.5

4.5

4.34.14

4.6

4.6

3.73.2

Institutions

Infrastructure

Macroeconomic environment

Health and primary education

Higher education and training

Goods market efficiency

Labor market efficiency

Financial market development

Technological readiness

Market size

Business sophistication

Innovation


Doing Business in Romania

n Romania Ranked 37 out of 189 countries in WB Doing Business Report 2016

Topics DB 2016 Rank DB 2015 Rank

Starting a business 45 37

Dealing with construction permits 105 101

Getting electricity 133 132

Registering property 64 63

Getting credit 7 6

Protecting minority investors 57 54

Paying taxes ✓ 55 53

Trading across borders 1 1

Enforcing contracts ✓ 34 33

Resolving insolvency ✓ 46 46

Source: WB Doing Business 2016; ✓= recent Doing Business reform, making it easier to do business


Digital Entrepreneurship Scoreboard performance

n Romania ranks – only – 28th among EU countries.n It is part of the group of countries that are catching up.

Source: DESI 2016


Integration of Digital Technology: Business digitization

n Businesses in Romania are adopting different digital technologies to enhance productivity, such as sharing internal information electronically or using RFID, eInvoicing, Social Media and Cloud.

Source: DESI 2016 based on Eurostat - Community survey on ICT usage and eCommerce in Enterprises


Romania in the start-up manifesto (I)

n Start-Up Manifesto created by nine entrepreneurs as „To-Do“ list (14-page roadmap, 22 action points) of actions „...to make it easier for European start-ups to thrive right here in Europe“.

n Monitoring data for Romania reveals..n Economic hardship as driver for entrepreneurial culture, resilience and

self-sufficiencyn Considerable technical skills / resourcesn Strong culture of programming, innovation and incubation emerging

n Hotspots: Universities in Bucharest, Timisoara, Cluj-Napoca, Iasi and Constanta

n Numerous incubators, co-working spaces and eventsn Modest, but growing start-up fugues

n Barriers: lack of start-up funding, bank lending and equity investment, as well as a relatively small domestic consumer market

Source: Start-Up Manifesto, http://www.europeandigitalforum.eu/startup-manifest-policy-tracker/


Romania in the start-up manifesto (II)

n The overall results are hence favourablen Attributed to reforms in 2014 (particularly with respect

to SME policy)



Romania in the start-up manifesto (III) –Dashboard results

n Most actions completed in fields (0.) to (3.)n In institutional/regulatory framework (0.)n Education and skills (exception: “make teachers digitally confident and competent”) (1.)n Access to talent (however, no data – for all countries – on aspect “to make it easy for

companies to hire outside of their home) (2.)n Access to capital (except aspect “tax share options as capital gains, not income, to attract

talent to start-ups” (3.)

n Weaker performance for field data policy, protection & privacy (4.)n Only “some actions” for aspects “revise and normalise data protection laws” and “make

governments thing digitally”n No action for aspect “remove the requirement for data providers to store information in any

given country”

n Similar in the field “thought leadership” (5.)n Only some action to appoint a “Chief Digital Officer”

n No action with respect to creating a “best practices” repository.



Romanian Start-Ups – A snapshot (I)

n According to romanianstartups.com there may be as many as…n 325 identified (registered) start-upsn 10 incubatorsn 49 eventsn 15 co-working spacesn 623 founders

n Some results of the start-up monitor provided by Ernst & Young and Impact Hubn Survey of 301 start-ups (age <3 yrs.)n For 69% of respondents most important sources of finance own funds,

including salary paid by other organisations and private loansn Major barriers: bureaucracy (unclear laws, lack of information, blown-up

laws); n 15% would like to access European funds, and 13% Romanian state-funds

for start-ups within the next 12 months


Romanian Start-Ups – A snapshot of successful “exits“ (II)

Source: romanianstartups.com


Venture Capital Investments in Romania 2009 –2014

221

119

66

28

70 78

23

17

14

10

16

19

0

5

10

15

20

25

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014

Investments [€ million] Nr. of companies [n]

Source: EVCA (2015): Central and Eastern European Statistics 2014


Bucharest as start-up hub – EDCi (I)

n Bucharest ranks 30/35 in Europe for start-ups being

n „... handicapped by low scores for capital, culture, market andother themes. Perhaps surprisingly, however, it ranks top of the

digital infrastructure theme: most areas have good broadband, asmuch of the country skipped copper and went straight to fibre.“


Bucharest as start-up hub – EDCi (II)

n Key features according to the EDCin Startup Hub Europe’s research reveals that Bucharest has over

170 startups. These companies have secured €13.1m worth of funding in the past decade.

n Increasing number of accelerators.n Good broadband (including fibre) is quite widespread.n Low cost of living.n Angel, seed and venture capital funding are all relatively scarce.n Bureaucracy that encumbers the startup process.n Bucharest is home to three Universities, producing a reasonable

degree of tech talent.

Source: EDCi, https://digitalcityindex.eu/city/7


Selected findings of the exploratory study on the Romanian entrepreneurial ecosystem (I)

Area Strengths Weaknesses

Human capital

Science, Technology, Engineering and Mathematics (STEM) graduatesHigh school and college graduates’ rates.

Business community dissatisfaction with the quality of education.Low capacity to attract and retain talent Low quality of management and entrepreneurial education

Finance A large variety of institutions and organizations offering access to financial capital: like banks, microcredit institutions, VC funds, business angels, private equity, crowdfunding, European funds.

Barriers to access finance capital like high costs of debt financing and collateral guarantees. Small amount of money invested by PE and VC. Unequal distribution of funds across country regions with the highest density in Bucharest.

Source: UEFISCDI (2015): Romanian Entrepreneurial Ecosystem, http://ree.uefiscdi.ro/


Selected findings of the exploratory study on the Romanian entrepreneurial ecosystem (II)


Support High speed connectivity 4G Mobile networks.

Low satisfaction towards utility services and transport servicesLow diversity in expertise outside the private sector, like NGO.

Culture High social status associated with entrepreneurs. Large percentage of adults intending to start a business (entrepreneurial intentions) Media attention given to entrepreneurship.

Tendency towards employment rather than self- employment (entrepreneurship) due to lack of opportunities to finance a business. Low proclivity for risk.Small number of opportunity-driven entrepreneurs.



Selected findings of the exploratory study on the Romanian entrepreneurial ecosystem (III)


Policy New instruments to support SMEs, according to the principles included in the European Small Business Act.

Low level of trust in public institutions.

Markets Proportion of total sales that are exported directly or indirectly.Foreign and domestic market size.

Data missing for diaspora networks and early customers.


Page 25

Key policy documents on start-ups and spin-offs


Key policy documents include…

n The Romanian National Strategy for Research, Development and Innovation

n Business Angels’ Law n SMEs Law n Government Strategy for SMEs development and

improving Romanian business environment – Horizon 2020 n Business Incubators Law

Page 27

Support mechanisms


Romanian National RDI Strategy 2014-2020

n Vision focused on three pillarsn Business firms as promoters of innovationn RDI as opportunity for talented peoplen Significant progress in priority areas

n Smart specialisation directions and prioritiesn Bio-economyn ICT, Security and Spacen Energy, Environment and Climate Changen Eco-Technologies and Advanced Materials

n Huge stakeholder consultation process to develop the programme (as in the preceding one)

n Strong efforts to connect to international funding (e.g., H2020)

Source: Ispas, I. (2016): Romanian profile in P2Ps; http://www.cdi2020.ro/


ERDF Funds – Competitiveness Operational Programme (COP) linking up with H2020...

n Aimn to address the challenges stemming from the low support for research,

development and innovation (RDI) and the under-developed information and communication technologies (ICT) services and infrastructure by investing in these areas.

n Two main prioritiesn A1. Research, development and innovation supporting economic competitiveness

and the development of businesses (total budget € 952.57 million)n A2. Information and communication technologies for a competitive digital

economy (total budget € 630.2 million)

n Development areas for ICTn e-government, interoperability, cyber-security, cloud computing and social

networks, n use of ICT in education, health, social inclusion and culture n e-commerce, clusters and developing innovation through ICTn further deployment of the broadband infrastructure for the whole country

Source: COP, http://ec.europa.eu/regional_policy/en/atlas/programmes/2014-2020/romania/2014ro16rfop001; EC(2016): EU funds working together for jobs and growth, p. 11


The REE (Romanian Entrepreneurial Ecosystem) page by UEFISCDI provides orientation for funding sources...

n Venture Capitaln 3TS Capital Partnersn TechAngels Romanian Earlybird Venture Capital

n Crowd fundingn 7 Romanian crowdfunding platforms

n Other national funding sourcesn Programme to stimulate the creation of micro-enterprises by new entrepreneursn National multiannual programme to develop entrepreneurship culture among

manager women from SMEsn UNCTAD/EMPRETEC Romania to support SME creationn National multiannual programme to create and develop technological and

business indicatorsn National multiannual programme to support crafts



The first impressions...

n No lack of institutions and toolsn Numerous publications and data (however, for start-ups maybe not

as complete as for general RTDI)n Shows a strong (interest in) debate on relevant issues

n Considerable efforts placed on planning, e.g. of strategiesn However, is it also done the right way? And are the right things done?

n Ambitious and developing start-up scene

n à Are there particular issues, the experts/stakeholders want to be covered in the background report?

Page 32

Annexes


Some results from the mid-term evaluation ofthe 2007 – 2013 Romanian RTDI strategy (I)

n Romania has a fully-fledged research policy systemn Any kind of improvement does not require implementing new

systems and processesn The foresight process was too ambitious

n too much focused on opportunities and the content of research and related thematic priorities rather than on challenges, shortcomings, and bottlenecks in the Romanian RDI system

n Broad re-production of FP7 priorities has created issues: n strong belief in thematic priorities (ICT, energy, environment, life sciences,

etc.) rather than in structural approaches aiming at the strengthening of institutions

n National Plan includes the widest range of topics, in total 148. In doing so, there was de facto no priority setting, rather a reproduction of existing thematic profiles.

n Fallacy of adopting best available policies by adopting European programmes

Source: Ohler, F. et al (2012): Mid-Term Evaluation of the National Strategy and of the National RD&I Plan 2007-13


Some results from the mid-term evaluation ofthe 2007 – 2013 Romanian RTDI strategy (II)

n By focusing on European programmes, FP7 has received the highest attention as a role model for RDIn By contrast, RDI related programmes from the Structural Funds were

hardly considered an opportunity to extend national budgets and range of action

n The National Strategy 2007-2013, the National Plan and numerous related systems and actions suffer from overstretch of expectations.

n Issue of trust – reliability of fundingn Extensive data collection and reporting, but moderate

policy intelligence.n Developing agency functions with determination, but only half way

Source: Ohler, F. et al (2012): Mid-Term Evaluation of the National Strategy and of the National RD&I Plan 2007-13


Digital Public Services: eGovernment users

n 8% of Romanian internet users have exchanged filled forms with the public administration online,whereas overall in the EU 32% of internet users have done so.

Source: DESI 2016


This material has been developed in the scope of the Horizon2020 Policy Support Facility. It reflects the views only of the authors, and the European Commission cannot be held responsible for any use which may be made of the information contained therein.

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Horizon 2020 entrepreneurial ecosystem – initial findings ... PSF... · Horizon 2020 Policy Support Facility The Romanian entrepreneurial ecosystem – initial findings from Background