Romania’s startup ecosystem gains trust in Europe

With around EUR 10 million invested in Romanian startups so far this year, GapMinder is maintaining its focus on innovative entrepreneurs that are shaping the post-pandemic economy. GapMinder VC founding partner Dan Mihaescu talked to Business Review about the evolution of the fund’s portfolio and the likelihood of a new unicorn startup appearing on the local market.

By Ovidiu Posirca

How did GapMinder VC do this year in terms of investment volumes and exits on the Romanian startup market?

GapMinder has had a very good 2021, with about EUR 10 million invested this year alone. But the evolution of the companies in our portfolio has been even more impressive. The easiest to point to is probably FintechOS’s USD 60 million funding round, the second largest Series B among Romanianborn companies.

A few Series A rounds have either been raised or are soon to be finalised by some of our portfolio companies. And there are already many excellent progress stories in our portfolio that are not yet visible and will stay under the radar for a few more quarters.

Do startup valuations risk going into bubble territory?

No, at least not yet! I wonder what bubble territory even means in the startup world. Have a look at valuations in the US. They’ve been

talking about a bubble for more than 10 years now.

What is happening on the Romanian market is that more and more capital is trying to find a place for investments, and that is also beneficial for the startup ecosystem at large.

Is the sharp increase in inflation having an impact on financing terms for entrepreneurial firms?

Inflation has certainly impacted macroeconomic stability and the investment climate in Romania. As such, the business environment continues to be unstable and unpredictable, keeping us all on our toes. However, while inflation does increase investment risks, it also makes it all the more necessary for investors to diversify their holdings and preserve

their portfolio value. The best way to protect against inflation is to invest in what makes you the best and the most in-demand. future. Businesspeople must build sustainability, support digital acceleration, and seek cross-industry collaboration as part of that future. Startups and investors both have key roles in building it.

GapMinder will continue to execute its strategy and focus our investments on B2B platforms enabled by deeptech, to accelerate the digital transformation of proven business models.

How do you approach a potential startup investment and which elements are at the top of your agenda when assessing a financing deal?

Unlike very early-stage investors, who have fewer numbers to look at – which is why they focus more on founders’ background and

their ability to build, on team chemistry and complementarity, on the value of the solution, and so on –, Seed or Series A investors also look at a company’s speed of traction. At this stage in a company’s development, we are not just talking about potential; we are talking about speed of growth. GapMinder VC is looking for founders who have the ambition, knowledge, energy, and courage to go global and make Romania stand out in the global tech arena! Will EU funds play a bigger role on the local startup market considering the gradual implementation of the RRF?

We shall see. On September 27, the European Commission approved Romania's recovery

and resilience plan, thus unlocking EUR 14.2 billion in grants and EUR 14.9 billion in loans to Romania, which totals 12 percent of GDP. According to Standard & Poor's, Romania stands as a key beneficiary of grants under the RRF and 2021-2027 Multiannual Framework, which combined have a total value exceeding 20 percent of GDP over the next six years.

By comparison with other Central European countries, Romania does not have a great track record in absorbing EU funds.

Coming back to your question, it is a bit too early to say anything before we see the details of the plan’s implementation.

What is your outlook for startups next year and what are GapMinder’s plans for 2022?

The startup ecosystem in Romania is growing stronger every year, and it has grown to be trusted and sought-after in Europe. The pandemic crisis, as well as the other significant global issues we are dealing with, have not only sparked innovation, but they have strengthened collaboration. Investors and entrepreneurs are constantly developing systems and processes to establish lucrative and rewarding partnerships. Businesspeople have learned resilience, which, together with agility, creativity, innovation, and joint effort, will be key in the future. In 2022, the world will be reinventing itself for a post-pandemic always learning. On the other hand, while they dream big, they do not always know how to plan big – either because they don’t yet have enough entrepreneurial experience or simply because they do not see themselves working with people who are equals or senior to them.

However, Romania is merely at the beginning of this great journey, and the wonderful thing about beginnings is that we have more to learn than to unlearn, which is a very good position to be in.

What are the strong points of Romanian entrepreneurs and where is there still room for improvement?

Romanian entrepreneurs are innovative and dedicated – they put a lot of creativity and energy into their ideas. They are eager to make a meaningful contribution, which sparks their ingenuity and propels them forward. They are determined, courageous, and Can local entrepreneurs develop a new startup that might reach a valuation north of USD 1 billion?