the romanian entrepreneurial ecosystem background report ax 17 002 en n romania... · the romanian...
TRANSCRIPT
The Romanian Entrepreneurial Ecosystem
Background Report
Horizon 2020 Policy Support Facility
EUROPEAN COMMISSION
Directorate-General for Research and Innovation Directorate A mdash Policy Development and Coordination Unit A4mdash Analysis and monitoring of national research and innovation policies
Contact (H2020 PSF Specific Support to Romania) Ana-Cristina Moise Unit A4 - Ana-CristinaMOISEeceuropaeu Contact (H2020 PSF coordination team) Romaacuten ARJONA Chief Economist and Head of Unit A4 - RomanARJONA-GRACIAeceuropaeu Steacutephane VANKALCK H2020 PSF Head of Sector Unit A4 - StephaneVANKALCKeceuropaeu Diana SENCZYSZYN H2020 PSF Team Leader Unit A4 - DianaSENCZYSZYNeceuropaeu
RTD-PUBLICATIONSeceuropaeu European Commission B-1049 Brussels
EUROPEAN COMMISSION
The Romanian Entrepreneurial Ecosystem
Background Report
Horizon 2020 Policy Support Facility
Written by
Alfred Radauer and Laura Roman
Technopolis Group Brussels Belgium
November 2016
Directorate-General for Research and Innovation 2017 EN
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This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
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Table of contents
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT 8
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA 9
21 Business demographics 9
22 Innovation performance 14
23 General business environment 17
24 Access to finance 18
25 Implementation of the Small Business Act (SBA) 18
3 START-UPS AND THE START-UP ECOSYSTEM 19
31 Entrepreneurship ecosystem performance and start-up activity 19 311 General entrepreneurship activity 19 312 Start-up Activity 21
32 Digital economy performance 24
33 Entrepreneurship in the education system and skills 26
34 Start-up forums events and competitions 27
35 Business and technology incubators technology transfer facilities and
clusters 28
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM 29
41 RampI governance amp smart specialisation 29 411 Main features of the research system 29 412 Governance of the RampI system 29 413 The National RDI Strategy and Implementation Plan 2014ndash2020 31 414 Smart specialisation 32
42 Policy framework for start-ups and SMEs 33 421 Overview 33 422 The Government Strategy for SMEs and the Business Environment ndash
Horizon 2020 33 423 SMEs law (law nr 3462014 on stimulating the establishment and
development of small and medium enterprises) 33 424 Business Incubators Law (nr 1022016) 34 425 Business angels law (Nr 1202015) 36
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND
SPIN-OFFS 37
51 Public direct funding and ldquosoftrdquo support 37
52 Fiscal measures 38
53 Structural Funds and support for participation in H2020 38 531 Cohesion funding for SMEs and innovation in 2007-2013 38 532 European Structural and Investment Funds 2014-20 and links to
Horizon 2020 39
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS 40
61 Loans 40
62 Venture capital schemes Business angels 40 621 Venture Capital 40 622 Business Angels 42
63 Crowdfunding 42
64 Microfinance 43
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
EUROPEAN COMMISSION
Directorate-General for Research and Innovation Directorate A mdash Policy Development and Coordination Unit A4mdash Analysis and monitoring of national research and innovation policies
Contact (H2020 PSF Specific Support to Romania) Ana-Cristina Moise Unit A4 - Ana-CristinaMOISEeceuropaeu Contact (H2020 PSF coordination team) Romaacuten ARJONA Chief Economist and Head of Unit A4 - RomanARJONA-GRACIAeceuropaeu Steacutephane VANKALCK H2020 PSF Head of Sector Unit A4 - StephaneVANKALCKeceuropaeu Diana SENCZYSZYN H2020 PSF Team Leader Unit A4 - DianaSENCZYSZYNeceuropaeu
RTD-PUBLICATIONSeceuropaeu European Commission B-1049 Brussels
EUROPEAN COMMISSION
The Romanian Entrepreneurial Ecosystem
Background Report
Horizon 2020 Policy Support Facility
Written by
Alfred Radauer and Laura Roman
Technopolis Group Brussels Belgium
November 2016
Directorate-General for Research and Innovation 2017 EN
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the internet (httpeuropaeu)
Luxembourg Publications Office of the European Union 2017
PDF ISBN 978-92-79-65259-2 doi 10277715950 KI-AX-17-002-EN-N
copy European Union 2017 Reproduction is authorised provided the source is acknowledged
Cover images copy Lonely 46246900 2011 copy ag visuell 16440826 2011 copy Sean Gladwell 6018533 2011 copy LwRedStorm 3348265 2011 copy kras99 43746830 2012 Source Fotoliacom
EUROPE DIRECT is a service to help you find answers
to your questions about the European Union
Freephone number () 00 800 6 7 8 9 10 11
() The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Table of contents
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT 8
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA 9
21 Business demographics 9
22 Innovation performance 14
23 General business environment 17
24 Access to finance 18
25 Implementation of the Small Business Act (SBA) 18
3 START-UPS AND THE START-UP ECOSYSTEM 19
31 Entrepreneurship ecosystem performance and start-up activity 19 311 General entrepreneurship activity 19 312 Start-up Activity 21
32 Digital economy performance 24
33 Entrepreneurship in the education system and skills 26
34 Start-up forums events and competitions 27
35 Business and technology incubators technology transfer facilities and
clusters 28
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM 29
41 RampI governance amp smart specialisation 29 411 Main features of the research system 29 412 Governance of the RampI system 29 413 The National RDI Strategy and Implementation Plan 2014ndash2020 31 414 Smart specialisation 32
42 Policy framework for start-ups and SMEs 33 421 Overview 33 422 The Government Strategy for SMEs and the Business Environment ndash
Horizon 2020 33 423 SMEs law (law nr 3462014 on stimulating the establishment and
development of small and medium enterprises) 33 424 Business Incubators Law (nr 1022016) 34 425 Business angels law (Nr 1202015) 36
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND
SPIN-OFFS 37
51 Public direct funding and ldquosoftrdquo support 37
52 Fiscal measures 38
53 Structural Funds and support for participation in H2020 38 531 Cohesion funding for SMEs and innovation in 2007-2013 38 532 European Structural and Investment Funds 2014-20 and links to
Horizon 2020 39
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS 40
61 Loans 40
62 Venture capital schemes Business angels 40 621 Venture Capital 40 622 Business Angels 42
63 Crowdfunding 42
64 Microfinance 43
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
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bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
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The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
EUROPEAN COMMISSION
The Romanian Entrepreneurial Ecosystem
Background Report
Horizon 2020 Policy Support Facility
Written by
Alfred Radauer and Laura Roman
Technopolis Group Brussels Belgium
November 2016
Directorate-General for Research and Innovation 2017 EN
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the internet (httpeuropaeu)
Luxembourg Publications Office of the European Union 2017
PDF ISBN 978-92-79-65259-2 doi 10277715950 KI-AX-17-002-EN-N
copy European Union 2017 Reproduction is authorised provided the source is acknowledged
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EUROPE DIRECT is a service to help you find answers
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Freephone number () 00 800 6 7 8 9 10 11
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Table of contents
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT 8
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA 9
21 Business demographics 9
22 Innovation performance 14
23 General business environment 17
24 Access to finance 18
25 Implementation of the Small Business Act (SBA) 18
3 START-UPS AND THE START-UP ECOSYSTEM 19
31 Entrepreneurship ecosystem performance and start-up activity 19 311 General entrepreneurship activity 19 312 Start-up Activity 21
32 Digital economy performance 24
33 Entrepreneurship in the education system and skills 26
34 Start-up forums events and competitions 27
35 Business and technology incubators technology transfer facilities and
clusters 28
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM 29
41 RampI governance amp smart specialisation 29 411 Main features of the research system 29 412 Governance of the RampI system 29 413 The National RDI Strategy and Implementation Plan 2014ndash2020 31 414 Smart specialisation 32
42 Policy framework for start-ups and SMEs 33 421 Overview 33 422 The Government Strategy for SMEs and the Business Environment ndash
Horizon 2020 33 423 SMEs law (law nr 3462014 on stimulating the establishment and
development of small and medium enterprises) 33 424 Business Incubators Law (nr 1022016) 34 425 Business angels law (Nr 1202015) 36
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND
SPIN-OFFS 37
51 Public direct funding and ldquosoftrdquo support 37
52 Fiscal measures 38
53 Structural Funds and support for participation in H2020 38 531 Cohesion funding for SMEs and innovation in 2007-2013 38 532 European Structural and Investment Funds 2014-20 and links to
Horizon 2020 39
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS 40
61 Loans 40
62 Venture capital schemes Business angels 40 621 Venture Capital 40 622 Business Angels 42
63 Crowdfunding 42
64 Microfinance 43
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
LEGAL NOTICE
This document has been prepared for the European Commission however it reflects the views only of the authors and the Commission cannot be held responsible for any use which may be made of the information contained therein
More information on the European Union is available on the internet (httpeuropaeu)
Luxembourg Publications Office of the European Union 2017
PDF ISBN 978-92-79-65259-2 doi 10277715950 KI-AX-17-002-EN-N
copy European Union 2017 Reproduction is authorised provided the source is acknowledged
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Table of contents
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT 8
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA 9
21 Business demographics 9
22 Innovation performance 14
23 General business environment 17
24 Access to finance 18
25 Implementation of the Small Business Act (SBA) 18
3 START-UPS AND THE START-UP ECOSYSTEM 19
31 Entrepreneurship ecosystem performance and start-up activity 19 311 General entrepreneurship activity 19 312 Start-up Activity 21
32 Digital economy performance 24
33 Entrepreneurship in the education system and skills 26
34 Start-up forums events and competitions 27
35 Business and technology incubators technology transfer facilities and
clusters 28
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM 29
41 RampI governance amp smart specialisation 29 411 Main features of the research system 29 412 Governance of the RampI system 29 413 The National RDI Strategy and Implementation Plan 2014ndash2020 31 414 Smart specialisation 32
42 Policy framework for start-ups and SMEs 33 421 Overview 33 422 The Government Strategy for SMEs and the Business Environment ndash
Horizon 2020 33 423 SMEs law (law nr 3462014 on stimulating the establishment and
development of small and medium enterprises) 33 424 Business Incubators Law (nr 1022016) 34 425 Business angels law (Nr 1202015) 36
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND
SPIN-OFFS 37
51 Public direct funding and ldquosoftrdquo support 37
52 Fiscal measures 38
53 Structural Funds and support for participation in H2020 38 531 Cohesion funding for SMEs and innovation in 2007-2013 38 532 European Structural and Investment Funds 2014-20 and links to
Horizon 2020 39
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS 40
61 Loans 40
62 Venture capital schemes Business angels 40 621 Venture Capital 40 622 Business Angels 42
63 Crowdfunding 42
64 Microfinance 43
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
Table of contents
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT 8
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA 9
21 Business demographics 9
22 Innovation performance 14
23 General business environment 17
24 Access to finance 18
25 Implementation of the Small Business Act (SBA) 18
3 START-UPS AND THE START-UP ECOSYSTEM 19
31 Entrepreneurship ecosystem performance and start-up activity 19 311 General entrepreneurship activity 19 312 Start-up Activity 21
32 Digital economy performance 24
33 Entrepreneurship in the education system and skills 26
34 Start-up forums events and competitions 27
35 Business and technology incubators technology transfer facilities and
clusters 28
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM 29
41 RampI governance amp smart specialisation 29 411 Main features of the research system 29 412 Governance of the RampI system 29 413 The National RDI Strategy and Implementation Plan 2014ndash2020 31 414 Smart specialisation 32
42 Policy framework for start-ups and SMEs 33 421 Overview 33 422 The Government Strategy for SMEs and the Business Environment ndash
Horizon 2020 33 423 SMEs law (law nr 3462014 on stimulating the establishment and
development of small and medium enterprises) 33 424 Business Incubators Law (nr 1022016) 34 425 Business angels law (Nr 1202015) 36
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND
SPIN-OFFS 37
51 Public direct funding and ldquosoftrdquo support 37
52 Fiscal measures 38
53 Structural Funds and support for participation in H2020 38 531 Cohesion funding for SMEs and innovation in 2007-2013 38 532 European Structural and Investment Funds 2014-20 and links to
Horizon 2020 39
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS 40
61 Loans 40
62 Venture capital schemes Business angels 40 621 Venture Capital 40 622 Business Angels 42
63 Crowdfunding 42
64 Microfinance 43
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
Table of figures Figure 1 Size distribution of Romanian companies 2013 9
Figure 2 Company birth rate by size in 10
Figure 3 Companiesrsquo one-year survival rate by size in ) 11
Figure 4 Companiesrsquo three-year survival rate by size in ) 12
Figure 5 Companiesrsquo five-year survival rate by size in ) 13
Figure 6 Innovation scoreboard performance Romania 14
Figure 7 Innovation Scoreboard performance of selected countries 15
Figure 8 Innovation Scoreboard performance by dimensions 16
Figure 9 Global Competitiveness Index Performance Romania 17
Figure 10 Number of start-ups established pa between 1996 and 2015 for which there
are records in crunch base 21
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later [n ] 22
Figure 12 Romaniarsquos performance in DESI 2016 and EU average 24
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016 25
Figure 14 Structure of the Romanian RDI system 30
Figure 15 Private equity statistics Romania by investment volume and by number of
companies invested in 41
List of tables
Table 1 Number of Romanian enterprises by size ) 9
Table 2 Doing business in Romania 17
Table 3 Adoption of Start-up Manifesto recommendations in Romania 23
Table 4 Entrepreneurship and management education programmes in Romania 27
Table 5 Type of private investments in Romania 2014 and 2015 (meuro) 41
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
List of Acronyms
ABRDI Advisory Body for Research Development and Innovation
COP Competitiveness Operational Programme
DESI Digital Economy and Society Index
EBAN European Trade Association for Business Angels Seed Funds and Early Stage Market Players
EC European Commission
ECSEL Electronic Components and Systems for European Leadership
EDCI European Digital City Index
EEA European Economic Area
EIF European Investment Fund
ERA European Research Area
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EVCA European Venture Capital Association
FDI Foreign Direct Investment
FP7 European Framework Programme for Research nr 7
GDP Gross Domestic Product
GEM Global Entrepreneurship Monitor
H2020 Horizon 2020 Framework Programme for Research and Innovation funding
ICT Information and Communications Technology
IT Information Technology
JEREMIE Joint European Resources for Micro to Medium Enterprises
MESR Ministry of Education and Scientific Research
NASRI National Agency for Scientific Research and Innovation
NCSR National Council for Scientific Research
NCSTIP National Council for Science Technology and Innovation Policy
NCSTP National Council for Science and Technology Policy
NRDI National RampD Instittue
NGO Non-governmental Organisation
NP2 Second National Programme for Research
NP3 Third National Programme for Research
NS National Strategy
OP Operational Programme for structural funds management
PCT Patent Cooperation Treaty
PE Private Equity
PISA Programme for International Student Assessment
OOO Purchasing Power Parity
RampD Research and Development
RDA Regional Development Agency
RDI Research Development and Innovation
ReNITT Romanian Network for Innovation and Technology Transfer
RIO Research and Innovation Observatory of the European Commission
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
RIS3 Regional Innovation Strategies for Smart Specialisation
RON Romanian New Leu currency
RTDI Research Technology Development and Innovation
S3 Smart Specialisation
SAFE Survey on the Access to Finance of Enterprises
SBA Small Business Act
SME Small and Mediume Enterprises
STEM Science Technology Engineering and Mathematics
UEFISCDI Executive Unit for Funding Scientific Research and Development and Innovation
VC Venture Capital
WITS World Integrated Trade Solution
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
8
1 INTRODUCTION ndash GENERAL ECONOMIC ENVIRONMENT
The Romanian economy has experienced stable growth during the past three years GDP growth
has topped 3 since 2014 (Eurostat) and it is projected that annual GDP growth will remain between 3-4 for 2016 and 2017 Growth has principally been driven by strong exports in the agricultural sector and there have been positive trends in industrial production in 2013 and 2014 as well (European Commission 2016) Romaniarsquos international investment position has also steadily improved however imports are expected to increase due to the growth of internal demand
Real GDP per capita in Romania has grown since the country became an EU member state reaching euro7200 per capita in 2015 from a level of euro6000 per capita in 2007 (Eurostat) Regarding purchasing power parity GDP per capita (PPS) reached 57 of the EU28 average in 2015 though remained second lowest in the EU after Bulgaria (Eurostat)
The current account deficit decreased in recent years in Romania reaching 1 of GDP in 2015 (a move back to imbalance from the more balanced picture of a current account deficit of 02 in 2014) Exports and imports of goods and services have increased and combined amounted to 41
of GDP in 2014 (World Bank WITS Database) The balance of goods deficit has decreased while the services sector has seen a rising surplus in the past years driving the improved trade balance
Foreign direct investments (FDI) have been the main sources of external funding for the Romanian economy In 2014 total stock of foreign direct investments reached euro601Bio (National Bank of Romania 2015) However the FDI stock reached 100 of GDP in peer economies (Czech Republic Hungary Poland and Bulgaria) while FDI amounted to below 40 of GDP in Romania in 2014 FDI inflows were 2 of GDP in 2014 in Romania as opposed to an average of 4 of GDP in
peer economies (see European Commission 2016)
The labour market is reported to be stable and forecast to improve gradually Unemployment remained broadly steady at 68 in 2015 but is expected to decrease to 65 in 2017 In 2008 the year before the economic crisis hit also Romania unemployment was at a low of around 55 (see European Commission 2015)
While employment has been growing real challenges are posed by emigration including outgoing
highly-skilled workers an ageing population and low birth rates Currently Romaniarsquos competitiveness is based on low costs (including for the labour force) and trade performance However in terms of non-cost competitiveness further issues that hamper Romaniarsquos competitiveness include limited efficiency of the public administration and business environment
as well as the severe under-utilisation of human capital and pockets of poverty in rural areas
Based on desk research and secondary statistics the following chapters will provide background on the several topics including
Business administrative and legal environments for start-ups
Instruments to support the start-up ecosystems such as incubators and accelerators
Access to finance for start-ups (business angels VCs banks diaspora etc)
Public governance and coherence of various ecosystems (role of ministries agencies NGOs indicators and measures of performance)
An overview of overall start-up activity in Romania
The available data and publications on several of the aforementioned topics ndash including
entrepreneurial culture broadband penetration retaining talent (being a strength or a weakness) or sources of funding (available or not) ndash is complicated and at times even contradictory
These differences can only partly be resolved ie by noting the unit of analysis For example it can make a significant difference as to whether broadband penetration is assessed for Romania as a whole or only for the city region of Bucharest However these discrepancies cannot be resolved through desk research The differences should be noted as a constraint of the research
methodology and it will be up to the country mission(s) to determine which sources are the most reliable
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
9
2 INNOVATION PERFORMANCE AND SMES IN ROMANIA
21 Business demographics
Currently Romania is experiencing a period of economic growth that is higher than EU average According to some forecasts the country will continue on the upswing in the coming years Growth has been robust since 2013 driven by strong exports and strong industrial production in 2013 and 2014 and the gradual recovery of domestic demand as of 2014 (European Commission 2016) Since 2010 the development of the number of Romanian businesses has grown in 2011 the total number of businesses outgrew the pre-crisis level which was due in part to an exceptional growth of individual entrepreneurs in 20111 However the number of individual entrepreneurs also
continually grew in the following years while the number of companies was either stable or decreased slightly since 2010 (see following Table 1)
In 2013 of the total of nearly 700000 Romanian companies 49 were comprised of individual entrepreneurs Another 36 had between one and four employees while companies with between five or nine employees and companies with 10 or more employees each made up around 7 of Romanian companies
Figure 1 Size distribution of Romanian companies 2013
Source Eurostat
Table 1 Number of Romanian enterprises by size )
) Authors suspect a statistical artefact for companies with zero employees as there was a break in time-series in 2011 This might explain the abrupt increase in numbers of companies with zero
employees in 2011
Source Eurostat
Figure 2 shows the company growth rates by firm size2 Especially the birth rate of companies with no employees fluctuated considerably during the 2008-2014 period analysed The birth rate among
all company sizes was in 2008 at nearly 15 and decreased to a low of 87 in 2010 In 2013 the
1 It remains to be seen though whether this growth actually occured or whether there was a change in methodology in compiling the statistics 2 Birth rate the number of enterprise births in the reference period (t) divided by the number of enterprises active in t
Nr of employees 2008 2009 2010 2011 2012 2013 2014
Total 512753 498127 450168 609827 647325 689983 696142
0 96381 96201 90501 252961 291580 333275 341817
1 to 4 298070 295108 259563 250089 248379 249508 251810
5 to 9 61797 54524 50552 53838 53601 54240 50398
10+ 56505 52294 49552 52939 53765 52960 52117
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
10
birth rate exceeded 2008 levels with 2218 while in 2014 decreasing again to 1019 The decrease in 2009 and 2010 affected all company sizes and can be attributed to the economic crisis during these years However while the birth rate remained relatively stable in the following years
for companies with one or more employees it changed considerably for individual entrepreneurs Here the growth rate was at a low in 2012 with 161 before jumping to a high of 3657 in
2013 followed by a second low in 2014 with a rate of only 1147
Figure 2 Company birth rate by size in
Source Eurostat
One year ndash 2013 ndash seems particularly volatile as shown in Figure 3 Again the highly volatile development may be due to the dynamic development of the survival rate of individual entrepreneurs
Nr of
employees
2008
[]
2009
[]
2010
[]
2011
[]
2012
[]
2013
[]
2014
[] Total 1466 948 871 1300 1226 2218 1019
Zero 2827 2159 1901 1833 1610 3657 1147
1 to 4 1443 784 689 1125 1113 1068 1077
5 to 9 545 374 477 548 541 525 549
10 + 273 247 346 342 348 318 349
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
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Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
11
Figure 3 Companiesrsquo one-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Similar developments can be observed in the three-year and five-year survival rates albeit with a
marked delay due to the way the rate is calculated (see following Figure 4 and Figure 5) Statistical
artefacts may be observed
Nr of employees
2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 8843 8379 7826 15024 8230 7507 9125
Zero 8113 7269 7096 21914 7886 6760 9221
1 to 4 9180 8981 8325 9758 8672 8532 8722
5 to 9 9406 9249 8917 9076 8937 8828 8898
10 + 9301 9325 8924 9183 9034 9034 8889
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
12
Figure 4 Companiesrsquo three-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 This effect is seen over time as well Therefore the figure only shows survival rates for companies with more than 1 employee
Source Eurostat
Nr of employees 2008 []
2009 []
2010 []
2011 []
2012 []
2013 []
2014 []
Total 6586 6493 5494 6282 8822 9055 5206
0 5735 5570 4770 8609 12543 12200 4523
1 to 4 6927 6946 5792 4892 5867 6636 6183
5 to 9 7592 7260 6249 5459 6127 6440 6187
10+ 7463 7505 6327 5750 6207 6398 5916
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
13
Figure 5 Companiesrsquo five-year survival rate by size in )
) Authors suspect a statistical artefact for survival rates higher than 100 for companies with zero employees as there was a break in time-series in 2011 Therefore the figure only shows
survival rates for companies with more than 1 employee
Source Eurostat
According to Eurostat in 2013 there were 172 young high growth enterprises or ldquogazellesrdquo (growth by more than 10) when measured by growth of employment and 281 when measured by
growth of turnover3
According to the 2015 Small Business Act Fact Sheet for Romania the countryrsquos non-financial business economy has not yet fully recovered from the crisis In 2014 SME value added was 12 lower than before the financial crisis In 2014-2016 the number of SMEs is expected to increase by 62thinsp and around 190000 new SME jobs are expected to be created The SME value added is then
expected to grow annually by 85thinsp (European Commission 2015)
In 2009 6 of international active Romanian SMEs used financial support schemes which ranked the country in 11th place in the EU28 (DG Enterprise and Industry 2010) According to a study from 2011 on internationalisation of SMEs Romania was found to have only limited public support measures fostering internationalisation (DG Enterprise and Industry 2011)
3 Note data was only available for 2013
Nr of employees 2009 []
2010 []
2011 [] 2012 [] 2013 []
2014 []
Total 5384 4511 3887 3652 4071 6066
Zero 3977 3760 3226 3111 4778 8268
1 to 4 5760 4800 4161 3856 3619 4354
5 to 9 6148 5465 4598 4203 4037 4157
10+ 6113 5479 5288 4696 4276 4358
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
14
22 Innovation performance
The European Innovation Scoreboard 20164 ranked Romania in last place among the EU28 The group of EU28 modest innovators includes only Bulgaria (27th place) and Romania (28th place) Until 2010 the innovation performance as measured by the scoreboard index increased from 024
to 026 but then decreased significantly ndash likely due to fall-out from the financial crisis ndash until today reaching a score of 022 in 2013 and 018 in 2015 (see the following Figure 6) Relative to the EU the development of Romaniarsquos innovation performance followed a similar trend Over time the relative performance has worsened from almost 50 in 2008 to 344 in 2015
Figure 6 Innovation scoreboard performance Romania
Source European Innovation Scoreboard 2016 ndash Database
The recent drop in innovation performance especially stands out when comparing Romania to the developments in the EU or in selected countries like the Czech Republic Hungary Poland Portugal or Slovakia For the most part this group of countries also experienced a decrease however all
recovered or stabilised their performance in the following years This is in contrast to the continuing drop that Romania experienced in 2013 2014 and 2015 In general all aforementioned countries outperform Romania with regard to innovation with the Czech Republic being the most
successful with a score between 041 and 045 followed by Portugal with scores between 039 and 041 Hungary performed relatively steadily between 034 and 036 while Slovakia increased its performance in recent years from 031 to 035 thus nearly closing the gap with Hungary Poland the last selected country for this comparison ranks also before Romania in the Scoreboard with scores between 028 and 029 The EU average is between 049 and 052 often twice as much as the score calculated for Romania (see Figure 7)
4 The European Innovation Scoreboard ndash previously referred to as the Innovation Union Scoreboard ndash provides a comparative analysis of innovation performance in EU Member States other European countries and regional neighbours It assesses relative strengths and weaknesses of national innovation systems and helps countries identify areas they need to address Accessed via httpeceuropaeugrowthindustryinnovationfacts-figuresscoreboards_en
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
15
Figure 7 Innovation Scoreboard performance of selected countries
Source European Innovation Scoreboard 2016 ndash Database
According to the Scoreboard and on the level of dimensions and indicators Romania performs well below EU average on most dimensions and indicators Additionally Romania performs similarly to the EU average for a number of indicators in particular
Youth with upper secondary level education
Exports in medium amp high tech products and
Employment in fast-growing firms in innovative sectors
The weakest relative performance in terms of dimensions is linkages and entrepreneurship while in terms of indicators the weakest relative performance is observed for PCT patent applications and in particular for PCT patent applications in societal challenges
Over time performance has increased the most for the innovation dimension ldquohuman resourcesrdquo aspect (44) At the indicator level high growth could be observed for license and patent
revenues from abroad (17) as well as Community designs (14) The strongest declines in
performance were observed in
Venture capital investments (-23)
Sales share of new product innovations (-21)
Non-RampD innovation expenditures (-17)
SMEs innovating in-house (-17)
SMEs with product or process innovations (-17)
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
16
Figure 8 Innovation Scoreboard performance by dimensions
Source European Innovation Scoreboard 2016 ndash Database
At a regional level according to the Regional Innovation Scoreboard all Romanian regions are again categorized as modest innovators as there are only minor differences between the regions
The performance of all regions also decreased between 6 and 33 The most successful region is Bucharest ndash Ilfov (RO32) which slightly exceeds or is close to the EU28 average in the three indicators Tertiary Education knowledge-intensive employees and mediumhigh tech exports
However the Central European Corporate RampD Report 2016 produced by Deloitte painted an encouraging picture of innovation for the upcoming years (Deloitte 2016) The report predicts a rising interest in research and development which is anticipated to lead to greater
support for RampD activities in Romania The number of companies investing in RampD is increasing partly due to the Romanian Government starting to implement incentives to stimulate RampD spending In the Deloitte survey a significant percentage of respondents planned to invest more in RampD activities than the previous year Promisingly while 37 of respondents spent between 1 and 5 of their turnover on RampD in 2015 22 spent over 5 Furthermore 73 of respondents believed that RampD spending increases the competitiveness of their products or services
In terms of protecting knowledge survey respondents chose a variety of methods including using a company secrets policy (65) patent utility design (41) trademarks (37) copyright (27) or industrial design (12) Furthermore over two-thirds (69) of respondents collaborated with third parties on RampD projects (ibid) The rates for patents are however unusually high which leads to question issues like selection biases in the survey
While the Innovation Union Scoreboard paints a volatile picture of Romania in some respects it should be noted that the Scoreboard is a synthetic composite indicator for innovation performance
Re-weighing and redefining the factors of such composite indicators can lead to a potentially different situation and ranking For example according to Edqvist amp Zabala-Iturriagagoitia (2015) in a paper from the Lund University (Sweden) if one were to look at the productivity of the innovation system (innovation output compared to input) Romania would be one of the top-three
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
17
leading countries in Europe in 2015 A closer look at the individual factors making up composite indicators is therefore warranted
23 General business environment
Romania is an economy in transition The country performs well with regard to the macroeconomic environment (54) health and primary education (55) and to some degree also Higher Education
and Training (45) as can be seen in the following Figure 9 Weaknesses are institutions (37) and infrastructure (36) but also business sophistication (37) and innovation (32) (see Figure 9)
Figure 9 Global Competitiveness Index Performance Romania
Source World Economic Forum Global Competitiveness Index
According to the World Bank Doing Business index Romania ranks in 37th place worldwide just ahead of Bulgaria which is ranked 38th (out of 189 total countries assessed) Portugal is ranked 23rd Poland 25th Slovakia 29th and the Czech Republic 36th In Romania strengths are the
simplicity of trading across borders (rank 1) and obtaining credit (rank 7) Especially with regard to obtaining credit Romania performs better than the other European countries while with regard to trading across borders Romania is tied with 16 other countries ndashmost of them EU countries ndash as well as the US Australia and New Zealand It is also relatively easy to enforce a contract (rank 34) while starting a business (rank 45) and resolving insolvency (rank 46) is already more difficult Romania ranks poorly with regard how easy it is to dealing with construction permits (rank
105) and gaining access to electricity (rank 133) (see World Bank Doing Business 2016)
Table 2 Doing business in Romania
Source World Bank Doing Business Ranking 2015 and 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
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
18
24 Access to finance
Data on the access to finance by European firms and SMEs is available through the pan-European
SAFE5 survey (Doove et al 2015) Based on the SAFE survey access to finance is not considered
the most important problem facing Romanian SMEs as they ranked this issue with a score of 61
(on a scale of 1 to 10) Arguably this is a higher score than the EU average of 47 A larger
number of Romanian SMEs rank finding customers (28 of SMEs) availability of skilled staff
(18) and costs of production of labour (13) and regulation (12) as more problematic than
access to finance (11) This is potentially in line with the World Bank Doing Business Report
presented above which ranks Romania at a high position (7th) for ease of obtaining credit (see
figure above)
The surveyed Romanian firms largely rely on credit lines and overdrafts (relevant for 61 of SMEs
while the EU-average is 54) The prevalence of bank loans is somewhat lower than the EU-
average (relevant for 39 of SMEs in Romania and for 49 of SMEs for the EU-28 average)
About 500 participating Romanian firms provided responses that show that Romania is at the top of
all EU-28 countries with respect to using ldquoother loansrdquo as one of the finance channels analysed
(18 of SMEs said to have used ldquoother loansrdquo in Romania and the indications are that a further
16 find ldquoother loansrdquo relevant as source of funding the respective average figures for the EU-28
are 10 and 13)
According to the recent economic forecast for Romania provided by the European Commission access to financing for SMEs is limited due to both supply- and demand-side constraints Access to loans is hampered as SMEs are perceived as risky for banks due to their high share of non-performing loans (European Commission 2016)
The mapping provided by the Romanian agency for innovation funding (see UEFISCDI 2015) found
that a large variety of Romanian institutions and organizations offer access to financial capital such
as banks microcredit institutions VC funds business angels private equity crowdfunding and
European funds However the funds do not cover all stages of the innovation process that a start-
up or a company undergo Barriers to access of finance also include the high costs of debt financing
and collateral guarantees as well as only small amounts of money invested by private equity and
venture capital (see section 6 of this report) Furthermore the unequal distribution of funds across
regions was considered to be a barrier (with the highest density of funds in Bucharest)
In terms of accessing EU structural funds Romanian SMEs are also more reluctant A survey by the
Romanian Council of SMEs shows that over 81 of SMEs state that they do not intend to access
structural funds in the future At the same time the rate of success of the companies who do try to
obtain such funds is very low According to the same survey only 018 of the companies that try
to access funding obtained an approval of their project (see CNIPMMR 2016)
The Global Entrepreneurship Monitor6 mentions that financial support for entrepreneurship is a
pressing problem when looking at public sector support measures (see Chapter 311 below) This
picture is to a large degree consistent with the RIO 2015 report for Romania which states that
ldquohellipthe SME sector consists to a large extent of lsquosubsistence organisationsrsquo (see Georgiou et al
2016) For example in 2016 over 71 of SMEs were financing their activities from their own
sources (see CNIPMMR 2016) This figure has nevertheless decreased from the peak of 91 of
all Romanian SMEs being entirely self-financed in 2013 (see Uritu and Popa 2015)
25 Implementation of the Small Business Act (SBA)
The annual Small Business Act (SBA) fact sheets published by the European Commission track the
progress of the Member States in implementing the SBA For Romania the performance relative to
the EU-average for 2015 is as follows for the different SBA principles
Principle 1 ndash Think Small First The assessment is that while the legal framework for this principle exists fundamental elements still need to be put in place particularly with respect to inter-ministerial and departmental coordination
5 See European Commission 2016 Access to finance httpeceuropaeugrowthaccess-to-financedata-surveys_en 6 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
19
Principle 2 ndash Entrepreneurship Romania is said to excel in entrepreneurship and to be ldquoleading the EU in this areardquo All indicators for this area are above EU-average For example early stage entrepreneurship has a score of 1135 vs the EU-average of 78
Principle 3 ndash Second chance Romania scores below EU-average particularly with respect to the
time to resolve insolvency It is however reported to be better in terms of degree of support for a second chance
Principle 4 ndash Responsive administration With respect to this principle Romaniarsquos performance is mixed It is above EU average in terms of time and cost to start a business or to transfer property but is lagging in terms of fast-changing legislation complexity of administrative procedures and costs for enforcing contracts
Principle 5 ndash State aid and public procurement Romaniaacutes results are in line with those of the EU-average There has been criticism with respect to the weak institutional framework for tenders in public procurement resulting in issues such as corruption frequent overlap of responsibilities with the authorities etc
Principle 6 ndash Access to finance The results are in line with the EU-average having experienced a strong improvement since 2008 Still there are problems with a credit crunch and high interest rates due to non-performing loans
Principle 7 ndash Single market Performance is below average on this principle particularly because of poor application of the single market directives
Principle 8 ndash Skills and Innovation This is identified as the most challenging principle in the SBA with all sub-indicators lagging behind the EU average The SBA fact sheet criticizes the poor innovation capacity but also issues such as purportedly underdeveloped broadband infrastructure
Principle 9 ndash Environment Romania scores only slightly below EU average regarding this aspect
Principle 10 ndash Internationalisation This is again a challenging aspect according to the SBA fact sheet All sub-indicators ndash such as time or cost required to importexport number of documents required for importexport ndash are below EU-average (but improving over time)
3 START-UPS AND THE START-UP ECOSYSTEM
31 Entrepreneurship ecosystem performance and start-up activity
311 General entrepreneurship activity
In this chapter we take a general look at entrepreneurship activities and attitudes towards
entrepreneurship drawing on three sources the Global Entrepreneurship Monitor (GEM) a recent
study published by the Romanian Executive Agency for Higher Education Research Development
and Innovation Funding (UEFISCDI) and the results of a study by EYImpact hub study
(ldquobarometerrdquo) on Romanian start-ups
According to the Global Entrepreneurship Monitor (GEM)7 country profile for Romania there are
several notable trends namely
The early-stage entrepreneurial activity rate in Romania in 2014 is 1135 of the adult working age population Early stage entrepreneurial activity consists of those entrepreneurs that started a business less than three months ago (so-called lsquonascent entrepreneursrsquo) and those who have been in business for more than three months but less than three-and-a-half years (42 months) This rate is slightly higher than it was in 2013 (101) and it is higher than the rate registered in Croatia Hungary and Poland and is similar to the rate in Lithuania
The share of nascent entrepreneurs decreased to 533 in 2014 from 794 in 2013 This
rate is similar to Croatia Hungary Lithuania and Poland The share of young business entrepreneurs increased to 617 in 2014 from 420 in 2013 which is the highest value among the efficiency-driven economies in the European Union
The opportunity-driven early-stage activity rate ie the rate of those claiming to act because there is a good opportunity and not out of necessity increased to 796 in 2014 in comparison to the rate measured in 2013 (68) This value is higher than is the rate in
Croatia Hungary and Poland but lower than Lithuania (901) The necessity-driven early-stage entrepreneurship rate is 328 similar to the rate registered in 2013 The ratio of
7 See Global Entrepreneurship Monitor httpwwwgemconsortiumorgcountry-profile103
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
20
opportunity motivated and necessity motivated early-stage entrepreneurs increased compared to 2011 (from 139 in 2011 to 243 in 2014)
The typical Romanian entrepreneur is male between 25 and 44 years old has a secondary
or post-secondary degree and a household income principally in the upper third tier
In Romania early-stage entrepreneurial activity appears to be more oriented towards the transforming sector (3131)8 followed by the extractive sector9 (2689) Only 1557 of early-stage entrepreneurs use very latest technology while 2582 new technology Most early-stage entrepreneurs (620) hire between one and five employees
In terms of qualitative issues GEM notes
The entrepreneurial framework conditions could be improved in the areas of government policies entrepreneurial education in primary and secondary school and entrepreneurial
finances The highest rated conditions are the internal market dynamics and professional and commercial infrastructure
According to national experts interviewed within the GEM in Romani financial support is a large problem The most important institutional success in the view of national experts are the financial support framework conditions in Croatia Hungary and Lithuania as well as government programs in Poland and the economic climate in Romania The most frequent
recommendation for fostering entrepreneurship in case of each analysed country is the support of government policies In Romania the second most frequent recommendation is the financial
support for entrepreneurship followed by the improvement of entrepreneurial education and training
In 2015 the Romanian Executive Agency for Higher Education Research Development and
Innovation Funding (UEFISCDI) conducted an exploratory study regarding the Romanian
Entrepreneurial Ecosystem Among the study conclusions (see UEFISCDI 2015)10
Romanian strengths concerning Human capital are STEM graduates and high school and university graduation rates Weaknesses included the business community is not satisfied with the quality of education that it is difficult to attract and retain talent and that teaching of management and entrepreneurial skills can be improved
A strength of the Romanian general support of the ecosystem was the high quality of 4G
mobile connections while weaknesses included the quality of utility services and transport services and a low diversity in expertise outside of the private sector (eg NGOs)
Another strength is access to finance given the large variety of sources of financing available (banks venture capital funds business angels European funds) ndash see Chapter 24
The Romanian culture attributes a high social status to entrepreneurship in general A large percentage of adults intend to start a business (entrepreneurial intentions) and the media
attention given to entrepreneurship is high A weakness of the culture is the tendency towards employment rather than self- employment (entrepreneurship) due to a lack of opportunities to finance a business There is also a low proclivity for risk and only a small number of opportunity-driven entrepreneurs
With regard to overall policy there are new instruments to support SMEs according to the principles introduced by the European Small Business Act However there is also a low level of trust in public institutions
Concerning markets there are several strengths including a high proportion of sales that are exported directly or indirectly as well as the foreign and domestic market sizes Weaknesses include little data for diaspora networks and early customers
The study also established an overall Romanian Entrepreneurial Ecosystem index Romania
scored a 45 out of 10 suggesting that the Romanian entrepreneurial ecosystem is weakly
developed According to the study the average Romanian entrepreneurs tend to be self-made and
are not encouraged or supported by the ecosystem Most survey respondents declared that they
were encouraged and supported by families and friends in starting up their business while just a
few considered advising others to enter the entrepreneurship field The networks established
among entrepreneurs were not strong enough to lead to a self-sustaining environment
Furthermore the authors noted that even though the financial policies and non-financial support
will encourage more people to enter entrepreneurship this would not result in an increasing
8 For example manufacturing and construction 9 Such as farming forestry fishing and mining 10 Includes an interactive map of the Romanian Entrepreneurial Ecosystem at httpreeuefiscdiro
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
21
number of start-ups Very few entrepreneurs access public funding and people continue to be
discouraged by corruption political uncertainty and lack of transparency
The EY start-up barometer was conducted in 2015 among 301 Romanian entrepreneurs who ran
businesses of up to 3 years (EY and Impact Fund 2016) The main purpose of the barometer was
to understand the extent to which there are positive framework conditions for supporting the
entrepreneurial ecosystem Its main findings include
The majority of start-up entrepreneurs who responded are young as 66 of them were 25-35 years old 15 were under 25 while 19 of them over 35
Half of the entrepreneurs were running the business for less than 1 year
69 of them used own funds to start the business (savings personal loans salaries) while 11 used European funds
The most important source of learning for the entrepreneurs was the mentoring and discussions
with other entrepreneurs (48)
When asked about barriers to starting and developing a business 28 of the entrepreneurs believe bureaucracy is the highest obstacle About 17 consider access to financing and 16 the entrepreneurial culture as the highest barrier while 12 argue that it was the fiscal framework
The majority of entrepreneurs (78) believe that the fiscal measures with the highest positive impact on their business would be the reduction in labour taxation and the simplification of the
legal framework for start-ups
312 Start-up Activity
An analysis of crunch base11 data (a reputed international service collecting information on start-
ups) indicates at first sight the existence of more than 321 Romanian start-ups with crunch base
records However crunchbase also contains firms and organisations in Romania that have been
founded in the 20th and 19th century For a number of organisations and firms the respective
incorporation year is not available Crunchbase data indicates that some 19 out of 20 of the 321
identified firms may be still active
Figure 10 Number of start-ups established pa between 1996 and 2015 for
which there are records in crunch base
Source crunchbase
Analysing only firms that have indicated an incorporation date of 1996 or after leaves about 240
firms Figure 10 shows the evolution of the establishment of the number of start-ups between 1996
and 2015 During this period there was a steady increase of start-up activity with single digit
11 Crunchbase is a database containing data on industry trends investments and news about companies globally see httpswwwcrunchbasecomhomeindex
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
22
numbers of start-ups being established each year in Romania until 2006 and then two-digit
numbers pa later on The financial crisis may be only visible in 2009 (when 13 start-ups were
incorporated as opposed to 20 in the previous year) The number of start-ups founded pa peaked
in 2013 when 32 such firms were established The decrease during 2014 and 2015 may be due to
some new start-ups not having yet been registered in crunchbase
The crunchbase data underlines also the dominance of the Bucharest region as the Romanian start-
up hub Figure 11 Some 140 start-ups (or 59 of all Romanian start-ups with a foundation year of
1996 or later) were set up in the capital city Ranked second is ClujCluj-Napoca which accounts
for 32 or 13 of the start-ups in the analysed period followed by Iasi (5) and Timisoara (4)
All other Romanian cities account together only for 19 of the start-ups with no city in this group
hosting more than 6 start-ups
Figure 11 Cities in Romania hosting Romanian start-ups founded 1996 or later
[n ]
Note Figures represent percentages of total start-ups by cities out of total start-ups n = 239 Source crunchbase
While the overall number of Romanian start-ups since 1996 paints a generally good picture the
situation looks less positive when analysing total funding volume in crunch base For 280 of the
321 start-ups there seem to be no investments on file in crunch base The average total funding
into the remaining 40-some Romanian firms is rather low About a quarter had total funding of at
most US$40000 The median value for total funding on file is US$110199 meaning that about
half of the identified start-ups obtained less and the other half more than that value The 75th
percentile is at US$1m which translates into only about 14 firms with total funding of US$1m or
more The largest total funding was US$7m
Taking a closer look at the individual investments made in the upper 25th percentile we note
The largest funding of US$7m was provided for two firms
Bitdefender is a well-known international IT-security firm that was set up in 2001 in
Bucharest and produces antivirus software
Hubgets is a collaboration platform (collaboration-as-a-service) that was set up in 2012
in Bucharest
There seems to be a cluster of firms that is related to the most active Romanian VC fund on file
in crunchbase GECAD group GECAD epayment received US$2m of total funding GECAD Net appears three times with total funding of US$1m which could perhaps be due to triplicate repetition of the same company in crunchbase
Romania does therefore not have a unicorn start-up company According to GPBullhound there
are currently (2016 value) 47 European unicorns however none of Romanian origin (see Bullhound
2016)12 No other sources suggest the existence of a Romanian unicorn
12 The Bullhound definition used for a unicorn is only tech companies with a bias towards internetsoftware companies falling into the macro-sectors eCommerce audience software gaming fintech market places or augmented realityvirtual reality companies headquartered in Europe (including Israel and including firms that
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
23
The size distribution of start-ups according to crunchbase shows that most of the firms are small in terms of employment About 60 have between 1 and 10 employees a further 26 have in between 11 and 50 employees Only some 6 have more than 100 employees These figures
relate only to a subset of the 235 firms for which company sizeemployee count information is available
Crunchbase lists 30 Romanian investors though the information on these investors seems
incomplete For example there is only information on total funding provided for seven investors
The date of incorporation is only available for 16 investors According to crunchbase the
breakdown of investors by investor type reveals
4 accelerators 1 business angel group 2 incubators 9 individuals
3 micro-VC firms 1 non-equity programme 3 venture capital funds 7 uncategorised investors
Two investors stand out among those listed in crunchbase
The accelerator MVP Academy in Bucharest has a total of 26 investments and total funding of
US$59813
GECAD group in Bucharest a VC fund has with a total of 23 investments The total funding provided by GECAD amounts to US$353m
All other investors on file in crunchbase have reported zero to a maximum of two investments However the micro VC firms are reported to have made investments of US$7m (Romanian-American Enterprise Fund) US$668100 (Fundatia Post Privatizare) and US$100000 (Mentor Fund)
The Start-up Manifesto created by nine entrepreneurs as a ldquoTo-Doldquo list aimed to kick-off policy actions to make it easier for European start-ups to thrive in Europe The monitoring data for Romania reveals that economic hardship was a general driver for entrepreneurial culture resilience and self-sufficiency in Romania This has led to a strengthening of the business sector a wealth of technical skills and resources and a flourishing start-up community Optimistically the policy tracker13 predicts a strong culture of programming innovation and incubation emerging In line with the EDCI findings below universities in Bucharest Timișoara Cluj-Napoca Iași and Constanța
provide regular sources of talented people and drive tech innovation Also in line with EDCI findings the biggest barriers are described as a lack of start-up funding bank lending and equity
investment as well as a relatively small domestic consumer market
Table 3 Adoption of Start-up Manifesto recommendations in Romania
Category Rank Percentage
Overall adoption of manifesto recommendations 9 68
Institutional framework 2 88
Skills and education 1 90
Access to talent 5 60
Better access to capital lower barriers to success 17 65
Data policy protection and privacy 16 46
Thought leadership 20 56
Source The 2016 Start-up Nation Scoreboard
With regard to the success of Romania in introducing the proposed policy measures Romania ranks 9th overall with a 68 coverage rate of policy measures introduced The most successful policy
fields were skills and education (ranked first with a coverage of 90) and institutional framework (ranked second with a coverage of 88) followed by access to talent with a fifth rank (coverage of
relocated to the US pre-IPO or at a mature stage) which were founded in the year 2000 or later companies with equity valuation of gt US$1b in the public or private markets The accuracy of the data use is limited to disclosed data and on data as of April 2016 13 httpwwweuropeandigitalforumeustartup-manifest-policy-tracker
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
24
60) The policy fields of access to capital (rank 1765) data protection and privacy (rank 1646) and thought leadership (rank 2056) can still be improved
Romania has had the most success attributed to its institutional framework In the area of
education and skills consisting of five subcategories Romania completed several notable
activities Regarding access to talent Romania completed most recommended policy actions in three subcategories but none in the category ldquoMake it easy for companies to hire outside their home countries in the EUrdquo which was also the case in all other countries monitored Concerning access to capital Romania completed most policy actions in four out of five categories Some actions were completed in the last subcategory Romania does not score well overall in terms of data policy protection and privacy Here only in one policy field most actions are completed
while in two policy fields some were completed In one policy field (ldquoRemove the requirement for data providers to store information in any given countryrdquo) no actions were undertaken Regarding the last category thought leadership out of four subcategories most actions were completed in two and in one subcategory some were completed However in the area ldquoCreate a best practices repositoryrdquo no actions were undertaken
32 Digital economy performance
Figure 12 Romaniarsquos performance in DESI 2016 and EU average
Source Digital Economy and Society Index (DESI)
The Digital Economy and Society Index (DESI)14 is a composite index that summarises relevant indicators on Europersquos digital performance and tracks the evolution of EU member states in digital competitiveness The index is structured around five dimensions
Connectivity ie the access to broadband infrastructure and its quality
Human capital ie the skills needed to take advantage of the possibilities offered by a digital society
Use of internet ie the variety of activities performed by citizens already online
The integration of digital technology ie the digitisation of businesses and their exploitation of the online sales channel
Digital public services meaning the digitisation of public services focusing on government
Compared to the EU average in 2016 Romaniarsquos performance in these five dimensions were below
average Closest to the average was connectivity followed by the use of the internet in Romania
while for the dimensions integration of digital technology human capital and digital public services
Romania was less successful (see Figure 12) Still compared to 2015 Romania increased its
performance in all five dimensions especially in digital public services and human capital (see
Figure 13)
14 httpseceuropaeudigital-single-marketendesi
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
25
Figure 13 Romaniarsquos performance in DESI 2015 and DESI 2016
Source Digital Economy and Society Index (DESI) httpseceuropaeudigital-single-marketenscoreboardromania
The European Digital City Index (EDCI)15 ranks Bucharest in 30th place out of 35 total cities after those like Tallinn Warsaw Bratislava or Ljubljana but before Rome Zagreb or Athens
According to the EDCI Bucharest is being handicapped by low scores for capital culture and market With regard to capital the availability of early and late-stage funding as well as to crowdfunding could be improved The entrepreneurial culture lacks the willingness to take risks digital engagement with entrepreneurial topics as well as multicultural diversity The low amount of local online transactions local demand for digital services and the small size of potential mobile-based markets lead to the low ranking in the category market
However the Romanian capital ranks highly with regard to digital infrastructure Most areas of
Bucharest have good broadband as much of the country skipped copper and went straight to fibre At the same time this digital infrastructure is being underused at present Online activity is relatively low compared with other European cities The growth rate is exceptionally high suggesting that the market environment for digital entrepreneurs will improve significantly in the
near future Bucharest ranks also highly with regard to skills (6th place) mostly due to low labour costs but also because of good access to ICT employees
In Bucharest there are a few accelerators and also a number of co-working spaces One theme
acknowledged by the EDCI is the difficulty to raise capital due to bureaucratic barriers There are a number beneficial factors for start-ups in Bucharest including low living expenses in the city as well as the three universities producing a high degree of talent According to Start-up Hub Europe data there are currently more than 170 start-ups in Bucharest
In terms of accessing EU-funding for ICT there is a slight increase in participation from FP5 to FP7
and again the prevalence of the Bucharest region in attracting funding The Digital Agenda
Scoreboard 2013 notes
ldquoOrganisations from Romania participated in 98 projects (05 of total) and coordinated one
project over the period 2007-2012 for total euro189M of EC funding1 (03 of total funding)
Romanian participation in the ICT Programme has increased from ~015 in FP5 to 03 in
FP6 and in FP7 so far
Over the period 2007 ndash 2012 51 organisations participated to the programme
SMEsrsquo participation is quite high (21) whereas larger enterprises account for 16 of total funding a low but increasing figure (15 in 2011 and 10 in 2010)
Research participation is very focused on a few organisations such as the universities of Bucharest and Cluj Napoca
15 httpsdigitalcityindexeu
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
26
In terms of funding the strategic objectives receiving the highest shares are Future Networks and Internet Software Services and internet connected objects ICT for Health and for Energy-Efficiency
The Bucharest region attracts half of the total Romanian funding with other hubs being around
Cluj and Timisoarardquo
These figures should be seen in the wider context of Romanian FP participation A report of the Romanian Ministry for National Education details Romanian participation in FP7 between 2007 and 2013 It is found that Romania participated in 684 projects (332 of the total of 19920 projects) with 858 participants (or 082 of the total number of participants of 103889 by 2013) (Ministry of National Education 2013) Romanian success rates were lower than the EU average and also
lower than the rates reported for other Eastern European countries such as Slovakia or Poland
In terms of access to the SME instrument and Romanian participation in the instrument in 2015 a presentation by Schade (2015) from the European Commission noted that there were 41 proposals in Phase 1 in March 2015 and 12 Romanian proposals in Phase 2 However one proposal (in phase 1) was above the quality mark and only three had lsquopartnersrsquo above the quality mark Schade concludes that mobilisation for the scheme in Romania is satisfactory but that the wrong companies apply
33 Entrepreneurship in the education system and skills
The RIO report 2015 for Romania highlighted the situation of entrepreneurship in the education system in the chapter on ldquoentrepreneurship skills and STEM policyrdquo (see Gheorghiu et al 2016) Key findings included
Romanian expenditure on education at all levels is at 32 of GDP putting it in last place in the EU The authors see a direct link with poor PISA results (second worst performer in the EU in 2012)
Universities compete in a red ocean of high-income urban young students which have a
predominant preference for social sciences (58 of the students graduate in social sciences)
However an aspect in which Romania has been doing better than the European average is the growth rate in new STEM graduates as a share of the relevant age population With respect to new graduates (ISCED 5) in science and engineering per thousand population aged 25-34 the indicator has experienced a growth rate of 71 slightly above the EU over the period 2007-2012
Universities have seen a growing interest in business and management education The Romanian
Entrepreneurship Ecosystem Report published by UEFISCDI in 2015 mentions that the quality of these management and entrepreneurship programmes is rather low without any important international recognition (see UEFISCDI 2015) Overall the report also mentions that while quantitative indicators show that Romania is in the top third of countries (for instance in World Economic Forumrsquos Human Capital Report 2016) the country ranks in the bottom half of countries in terms of quality of education (ibid)16
According to the mapping done by UEFISCDI in 2015 there are also regional disparities in the provision of entrepreneurial education with four out of the five Romanian MBAs being located in Bucharest Furthermore there are a total of 36 specific Entrepreneurship and Business Administration Programs for Tertiary Education most of them located in Bucharest (see figure below)
A paper presented at the 2016 at the 10th International Technology Education and Development Conference by Leovaridis et al (2016) in Valencia discussed the entrepreneurial education in
Romanian universities and concluded
ldquoThe results of our research show a consistent and constant concern of Romanian universities for entrepreneurship education but that is offered strictly for students from the economic faculties where we identified a wide and varied range of courses in the entrepreneurship area covering all skills necessary for a start-up entrepreneur Unfortunately this type of courses are completely missing in the curricula of non-economic faculties even at advanced level of Master although non-economic faculties
graduates may also want as a next step in their careers to start a business in the area in which they graduated (although more than half of Romanian students would
16 see World Economic Forum (2016) Human Capital Report httpswwwweforumorgreportsthe-human-capital-report-2016
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
27
prefer in a greater extent to be entrepreneurs and not employees after graduation and most would like to start their own business in the next two years only about a quarter of Romanian students believe that the faculty is preparing them lsquoin a large extentrsquordquo to
do this)rdquo
Several independent private programmes have also started to develop in order to provide hands-on training for entrepreneurship Furthermore student associations have attempted to bridge the gap in practice-based and hands-on training for young entrepreneurs which is why several of them organise summer schools entrepreneurship seminars or business contests in partnership with experienced entrepreneurs or the private sector
Table 4 Entrepreneurship and management education programmes in Romania
Region Total nor of programmes
Bachelor programmes
Masterrsquos programmes
MBA Joint degree
MBA
Bucharest-Ilfov 13 3 6 0 4
North-West 6 1 4 0 1
West 3 1 1 1 0
Centre 3 1 2 0 0
South-West 3 0 3 0 0
South 1 0 1 0 0
South-East 4 2 2 0 0
North-East 3 1 2 0 0
Total 36 9 21 1 5
Source UEFISCDI 2015
One field where the quality of the Romanian education system performs above average is the IT
domain For example in the 2014 edition of the Romanian IT Talent Map indicated ldquoRomania has long been acknowledged as one of the best destinations for IT companies due to the large amp talented pool of IT graduates and professionals lower costs than in Western Europe amp US and more pronounced business culture similarity to the Western Europe countries amp US than more distant
countries in Asia geographic and time zone proximity to Western Europe and widely spread English skillsrdquo (Brainspotting 2014)
The 2015 edition of the same publication continues (Brainspotting 2015) ldquoThe IT amp C sector has been proudly named the sector with zero unemployment and this achievement is mainly due to the great quality of the talent pool high numbers of IT graduates the expansion of current companies and the birth of many start-upsrdquo
34 Start-up forums events and competitions
The private platform and network ldquoRomanianstartupscomrdquo can be considered a hub for the
collection and dissemination of information on start-up events in Romania Romanianstartups lists
49 ldquoeventsrdquo with status ldquolaunchedrdquo one ndash probably outdated ndash with status ldquoprojectrdquo However the
dates associated with some of the events do not make it clear whether some events were one-off
occurrences or whether there are recurring events
Notable events by Romanianstartups include
How To Web (annual conference) is supposedly the biggest tech innovation and entrepreneurship conference in South Eastern Europe taking place 1-2 November 2016
Start-up Weekend Bucharest which takes place at the premises of TechHub Bucharest (28-30 Oct 2016)
Dev(Talks) proclaimed biggest IT conference in Romania (6 September 2016)
Start-up Grind a monthly event in Bucharest
Start-up Grind Cluj-Napoca
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
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CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
28
Startcelerate taking place in the premises of Microsoft Romania and operated by the London-based investment platform Startcelerate which aims to connect start-ups with investors
Romanianstartupscom does not only cover events under the events section but also awards ndash
such as Gapes e-commerce Award ndashhackathons (eg the FinTech Camp Hackathon which took
place in June 2016 for the first time) or regular discussionmeeting roundtables like the weekly
OpenConnect in Bucharest (a weekly open meeting for discussion among entrepreneurs organised
in a cafeacute)
UEFISCDI organised an ldquoInnovation Cafeacuterdquo twice a year in 2013-2015 in order to facilitate the
general framework for venture and equity capital financing and the development of public-private
partnership funding instruments There has been no edition of the Innovation Cafeacute in 201617
35 Business and technology incubators technology transfer facilities
and clusters
The functional review of the Romanian RDI system by the World Bank in 2011 lists the technology
transfer infrastructure as a weak link of the sector (see World Bank 2011) There is a network for
innovation and technology transfer (Remit18) with 45 accredited members (see Gheorghiu et al
2016) Among these are 12 technology transfer centres 12 centres for technological information
15 technological and business incubators Four scientific and technological parks complement the
ReNITT (ibid) Some of the key problems identified in the public structures for technology transfer
is their low capacity to promote commercialisation and their funding models which are oriented on
being ldquofully financed from deal based fees and commissionsrdquo (World Bank 2011) In addition
these publicly funded structures have not acted as innovation brokers as very few universities and
research institutes have specialised personnel to cater for RampD commercialisation or IP protection
issues This situation has been highlighted as a top priority for improvement by the 2011 RDI
Functional Review (see World Bank 2011) In the meantime steps have been undertaken to
strengthen the framework for operation of business incubators However the RIO report for
Romania notes the activities of the public transfer centres ldquoare still rather modest efforts are
being made to enhance their institutional capacity by a project financed by structural funds and
through the introduction of the profession of innovation manager into the national classification of
occupationsrdquo (Ibid)
While the public sector structures have not become attractive enough for start-ups and the private
sector has not managed to bridge the gap between the RampD sector and the businesses an active
network of newly founded private incubators andor accelerators has been developing These
centres cater to start-ups in the main cities of Romania especially Bucharest Romanianstartups19
lists seven ldquolaunchedrdquo ldquoincubatorsacceleratorrdquo and one with ldquoprojectrdquo status Under a separate
heading the site lists also 14 active co-working spaces (plus an additional one at ldquoprojectrdquo stage)
Most of these are located in Bucharest and Cluj-Napoca The UEFISCDI website on the Romanian
Entrepreneurial Ecosystem contains an interactive map of respective ldquobusinessrdquo facilitators20
Romanian clusters must also be noted The Romanian cluster association which acts as a national
umbrella organisation lists 45 cluster organisations throughout the country Most of these are
dedicated to an industry21 Notable in the context of this assignment are probably in particular
those focussed on ICT eg Cluj IT ICT ndash Regional Competitiveness Pole Oltenia Cluster or New
Media Iasi According to another source there may be even more clusters than the ones listed on
the Romanian cluster association in fact as many as 92 (see Leucuta 2016) Some of these
clusters might be worthwhile to look into as many developed organically and have been also
successful in attracting funding for collaborative RampD projects (see Roman 2014)
17 See UEFISCDI httpuefiscdigovroPubliccat799Cafeneaua-de-Inovarehtml and httpwwwcafeneauadeinovarero 18 See httpsiteroinnoromodule=infoampid=7 19 [1] httpwwwromanianstartupscom [2] See httpwwwromanianstartupscomaccelerators-incubators 20 See httpreeuefiscdiro 21 See httpclusteroeuinstitutions
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
29
4 POLICY FRAMEWORK IN SUPPORT OF ENTREPRENEURIAL ECOSYSTEM
41 RampI governance amp smart specialisation
411 Main features of the research system
Major characteristics of the Romanian RDI system according to the 2015 RIO report include (Gheorghiu et al 2016)
The Romanian RDI system is highly centralised
There are roughly the same number of ldquoappliedrdquo and ldquofundamentalrdquo research organisations The main RampD organisations are 42 national RampD institutes (NRDIs) which were formerly the historical communist-era sectoral institutes The NRDIs operate under the Ministry of Education
and Scientific Research (MESR) In addition there are some 100 universities and some 60 research centres of the Romanian Academy that perform self-declared ldquofundamental researchrdquo This structure resonates still with the communist-era structure where ndash for example ndash in communist countries there was a stronger division between education (the task of universities) and research (the task of the Academy institutes)
The public RampD system is predominantly characterised through institutional funding The funding of the Academy institutes and the NRDIs is reportedly not highly transparent not based
on performance and correlates with the number of research staff respectively employed
There are very few private research organisations Several attempts were made to privatise some of the public research institutes However ldquoin a chronically underfinanced system where public funding streams continue to be independent the survivors are usually the organisations which receive some form of institutional financingrdquo The private sector investment in RampD is very low and SMEs engage very little in RampD and innovation activities (see section 22) Large multi-
national companies present in Romania usually also do not engage in RampD in a more elaborate manner However it is also reported that state-of-the-art private sector innovation has been emerging particularly in the context of ICT and ldquois attributable to the countryrsquos engineering excellence and international competitivenessrdquo in this field
More modern research infrastructure and an expanding pool of young scientists remain underused Structural funds funding has helped update the research infrastructure and was also significant in boosting the number of PhDs However anecdotal evidence suggests that these
two resources remain under-utilised given meagre project funding and hiring practices in universities and research institutes that favour insiders over competitive outsiders
The issue of brain drain Brain drain is a critical issue due to the less motivating career prospects particularly in research and higher education
In terms of the research system performance Romania is characterised as ldquoisolatedrdquo as a research nation by the World of Research 2015 Report (see Elsevier 2016) An increase in the international collaboration patterns of universities would prove highly beneficial for the systemrsquos performance
Further key features of the Romanian research system include (ibid)
A lack of mobility among researchers and high degree of single-author publications and little
international collaboration About 60 of active researchers have never published with an
affiliation outside Romania
Romania has however a slightly larger inflow of researchers than outflow The researchers
coming for short-stay positions are the ones with the highest field-weighted citation impact
The Natural Sciences domain is the field where Romanian researchers are most active in
absolute volume while in relative terms ndash particularly engineering and technology
There are however several universities that perform well The most prolific research institution is considered the Babes-Bolyai University of Cluj with the highest impact among top 5 prolific
universities Other notable institutions are University Politehnica of Bucharest University of Bucharest Gh Asachi Technical University of Iasi and Politehnica University of Timisoara which are regionally spread out across Romania
412 Governance of the RampI system
The Ministry of Education and Scientific Research (MESR) is the central governmental body coordinating and designing RDI strategies in Romania The governance system has two advisory
councils for the Ministry of Education and Scientific Research according to the National Strategy on RDI 2014-2020
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
30
The Advisory Body for Research Development and Innovation (ABRDI) is the main consultative body of the ministry It covers topics such as applied research innovation technology transfer and international cooperation
The National Council for Scientific Research (NCSR) oversees basic and frontier research
matters
Figure 14 below depicts the structure of the Romanian RDI system)
Figure 14 Structure of the Romanian RDI system
Source A Curaj Stairway to Excellence Country Report Romania (2015) cited in Gheorghiu et al 2016
The RIO 2015 report on Romania underlines the fragmentation of the system and the lack of inter-ministerial coordination with respect to RDI (see Gheorghiu et al 2016) The body founded for that purpose ndash the National Council for Science and Technology Policy (NCSTP) ndash has been inactive since its inception some 10 years ago The NCSTP is to be superseded according to the National
Strategy for RDI 2014ndash 2020 by a National Council for Science Technology and Innovation Policy
(NCSTIP) but as of early 2016 this body was not yet active A clear challenge seems to be frequent changes in policy as evidenced by a rapid succession of a number of ministers for education and research
Public funding of RDI is done with annual budgets mainly through the National Authority for Scientific Research and Innovation which is coordinated by the Ministry of Education and Scientific Research
The main implementing agencies are
The Executive Agency for Higher Education Research Development and Innovation Funding (UEFISCDI) which operates under the MESR UEFISCDI is the main implementing organisation for the National Plan for RDI 2007ndash2013 (still operational budget of euro 131m in 2013) and the National Plan 2015ndash 2020 (total budget foreseen from national and EU funds amounts to up to euro33b for the period) These funds are open to all RampD performing actors
The National Authority for Scientific Research and Innovation (NASRI) is responsible for the
implementation of the ldquoNucleurdquo programme which allocates institutional funding (budget euro 705m in 2013) to the National RampD Institutes (NRDIs)
The ldquoIntermediary Body for RDIrdquo is part of NASRI It administers the implementation of the RDI-directed priority axis of the Operational Programme Competitiveness and the Operational Programme Human Capital
For the Romanian Academy institutes there is separate funding in the national budget available The foreseen budget for the Academy was around euro64m in 2014 the overall budget for the
Academy ndash given all sources available ndash was around euro101m
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
31
Public universities receive some institutional funding only for educational activities RampD funding for universities (both private and public) occurs through participation in the competitive project programmes that are open to all RampD performing actors
413 The National RDI Strategy and Implementation Plan 2014ndash2020
The main guiding document for the funding of the Romanian RTDI system is the National Strategy for Research Development and Innovation 2014ndash2020 which is the third such national multi-annual strategy developed It was enacted by government decision Nr 929 of 21 October 2014 The strategy is accompanied at the operational level by National RDI programme PNCDI 2014ndash2020 abbreviated NP3 (ldquoNational Plan 3rdquo) approved by government decision nr 583201522
NP3 is the main implementing programme for the National RDI Strategy The NP3 document details
how the strategic objectives are to be achieved how the funding is organised how the results are to be evaluated as well as the governance structure employed
The RDI strategy has the following main three goals
The increase of the competitiveness of the Romanian economy through innovation The increase of the Romanian contribution to the progress of the knowledge base The increase of the role of science in society
The NP3 plan translates these strategic goals into further operational goals with respective sub-
goals Most notable is the rather ambitious target to increase public expenditures for RampD as a share of GDP to 1 of GDP by 2020
Like its predecessor the National Programme 2 (NP2) from 2007ndash2013 the development of NP3 was predated by extensive public consultations and foresight exercises This process took place in 2013 (see Gheorghiu et al 2016) The process of the foresight exercise was outsourced by the ministry to a consortium of 11 main partners with 141 associated partners For NP2 the respective
process led to a programme design that emulated at national level many of the features of FP7 (eg competitive calls in thematic programmes etc) The structure of NP3 seems similarly complex albeit with a stronger focus on the topic of smart specialisation (see also below) These complex and extensive foresight processes are one piece of evidence that the RDI system and its actors are open to strong debate on issues of interest
NP3 has five programme lines that provide competitive project funding (ibid)
1 Development of the national RDI system with four sub-programmes on human resources
(supporting for example PhD projects and ndash as novelty ndash industrial PhDs projects at
reintegration of diaspora researchers mobility projects for young researcher teams etc) projects on institutional performance on RampD infrastructures and on support structures like technological services etc
2 Increasing the competitiveness of the Romanian economy through RDI has probably the highest relevance in the context of this assignment It has two sub-programmes
a Sub-programme 21 provides funding for experimental development projects
technology transfer projects innovation vouchers the creation of clusters innovative solutions
b Sub-programme 22 supports technology transfer broker services
3 European and international cooperation This programme line has six sub-programmes that support participation in H2020 and other forms of international research collaboration
4 Fundamental and frontier research This programme line funds bottom-up research projects
and frontier projects institutes of advanced studies and exploratory workshops
5 Research in strategic fields of interest such as nuclear physics space or on river-delta
systems
The calls of NP2 (and therefore presumably also NP3) were rather competitive with success rates for certain programme lines and calls reported at 13 (ibid) However they are not as competitive as FP7 The Technopolis Group 2012 evaluation of NP2 provided an ambiguous picture of NP2 (see Technopolis Group et al 2012) For example there were frequent and unexpected budget cuts
especially due to the 2009 economic crisis period which did not only affect the launch of new calls
22 wwwcdi2020ro
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
32
but also led to cuts in the budgets of already running projects This led to a certain level of unpredictability and dissatisfaction in the RDI system
The Romania RIO 2015 report states in the context of NP3 (Gheorghiu et al 2016)
The public funding allocated for RampD in 2015 ndash that is soon after the formal adoption of the NS ndash was more than twice below the level to which the policy-makers had just committed themselves The national implementation plan NP3 was delayed for almost a year and its adoption was surrounded by controversy over the agency administering the main competitive funding streams More recently however the allocated RampD budget for 2016 increased by almost a third over the previous year Furthermore the new head of the MESR under the technocratic government instated at the end of 2015
was directly responsible for coordinating the elaboration of the National Strategy
Apart from NP3 the National RDI Strategy 2014ndash2020 is also implemented through other measures including structural funds operational programmes
The Operational Programme Competitiveness Priority Axis 1ndash Research technological development and innovation in support of economic development and business development
The Operational Programme Human Capital mainly through Priority Axis 6 ndash Education and competencies
The Operational Programme Regional Development Priority Axis 1 ndash Promoting technological transfer
The Operational Programme Rural Development component on lsquoInvestment in agriculture and rural developmentrsquo
The sectoral plans of various branch ministries
The Research Plan of the Romanian Academy and its institutes
Other sectoral policies (coordinated by NCSTIP but not specified in the Strategy)
414 Smart specialisation
The National Strategy for RDI 2014ndash2020 has four smart specialisation fields defined (S3) as an outcome of the foresight process as well as an additional three specialisations that were introduced by political decision The ensuring seven specialisation are directly relevant to the continentacutes
societal challenges (Gheorghiu et al 2016)
Bioeconomy based mainly on the considerable agricultural potential of the country
ICT currently the most dynamic RDI sector in Romania
Energy and environment in connection with the challenges of energy efficiency
water resources and substitution of critical materials
Eco-technologies which focuses on new-generation vehicles and equipment the generation of bioresources depolluting and waste reuse
Space and security
Energy production and
New materials (their entire spectrum)
Smart specialisation is hereby supported ldquothrough a mix of instruments intended to apply to a broad range of activities considered relevant to the improvement of Romaniarsquos competitiveness
Together with the smart specialisation approach the policy mix represents an effort to deal with research and innovation in an integrated manner Thus for example the Strategyrsquos main
programmes will cover such things as company-initiated innovative projects ideally in partnership with public research organisations or other research-providers competence centres and the technology transfer infrastructure more broadly innovation incubators research infrastructures and so onrdquo (ibid)
The National Strategy for RDI 2014ndash2020 was subject to an S3 peer review in Dublin in July 201423 There are also regional development plans for the eight regions in Romania (as well as
23 See httpgooglZYk97i
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
33
corresponding strategy documents) Several regions have also started a process of developing a RIS3 strategy For instance the West Region in Romania has produced the most sophisticated of the strategies following a participatory process and based on evidence collection and international
advisory However the main difficulty in implementing the regional RIS3 is the lack of coordination between the national level funding instruments and the regional strategies The RIO 2015 report
states that ldquoa genuine regionalisation process still remains uncertain in Romaniardquo (See Gheorghiu et al 2016)
While there are eight ldquodevelopment regionsrdquo these have limited administrative powers Each region has nonetheless a Regional Development Agency (RDA) which develops a Regional Development Plan (RDP) These agencies operate under the Council for Regional Development The
significance of the RDAs stems from the fact that they are intermediary bodies for the Operational Programme Regional Development (OP RD) and therefore administer structural funds allocated via the operational programme About 20 of the structural funds are earmarked for RDI predominantly for innovation and technology transfer activities (ibid) In 2016 the Ministry of Regional Development started a process requesting Regional Development Agencies to submit concept notes to include regional priorities of the regional development plans and RIS3 in some funding lines of the 2014-20 Regional Operational Programme in order to better target the support
for RampD and the private sector according to regional needs This process is ongoing at the time of this report (October 2016)
42 Policy framework for start-ups and SMEs
421 Overview
In this chapter we present the main pieces of legislation and policiesstrategies that refer to SMEs in general and start-ups in particular Those of particular interest include
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The SMEs Law (Law Nor 3462014)
Business Incubatoracutes Law (Law Nor 1022016) and
Business Angels Law (Law Nor 1202015)
422 The Government Strategy for SMEs and the Business Environment ndash Horizon 2020
The Government Strategy for SMEs and the Business Environment ndash Horizon 2020 is a very
ambitious strategy for SME development (see Gheorghiu et al 2016) One of the main targets is that the number of SMEs per 1000population should increase by more than 50 (from currently 22 to 36) an increase of the number of SME employees by some 25 and an increase of the
contribution of the SMEs to value added by 60
Foreseen action lines are
Support for and promotion of entrepreneurship
Improving SME access to adequate funding
Support for innovative SMEs
SME internationalisation and access to markets
Public administration response to SME needs
Gheorghiu et al (2016) note that a very broad spectrum is envisaged and that there are overlaps with the National RDI Strategy 2014ndash2020 (eg support for partnerships between SMEs and RampD institutes or support for technological transfer) but that it is not clear whether there are additional
resources for the respective activities or whether there will be inter-institutional coordination when implementing the two schemes
423 SMEs law (law nr 3462014 on stimulating the establishment and development of
small and medium enterprises)
This law regulates the measures intended to create a favourable framework for the establishment
and development of small and medium-sized enterprises The main characteristics of SMEs
stipulated in Chapter 1 of the law are
Annual average number of employees less than 250
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
34
Annual net turnover of up to euro50m (RON equivalent)
Total assets do not exceed the equivalent in RON of euro43m (total assets mean fixed assets plus current assets plus expenses in advance)
The law classifies SMEs as follows
Micro-enterprises - up to 9 employees and an annual net turnover or total assets held up to euro2m equivalent in RON
Small enterprises - between 10 and 49 employees and an annual net turnover or total assets held of up to euro10m equivalent in RON
Medium enterprises between 50 and 249 employees and an annual net turnover of up to euro50m equivalent in RON or total assets held not exceeding the equivalent in RON of euro43m
In addition the enterprises can be of the following typologies depending on their relationship with
other enterprises with respect to capital held voting rights or the right to exercise a controlling
influence
Autonomous enterprise owns less than 25 of the share capital or voting rights in one or more enterprises or if one or more enterprises do not own more than 25 of the share capital or
voting rights of the enterprise concerned A derogation from this rule is made for a) public investment companies venture capital companies natural persons or groups of natural persons achieving revenues from investments venture capital (business angels) provided total
investment in the same enterprise is less than euro125m b) universities or non-profit research centres institutional investors local public administration authorities or town halls
Partner enterprises the (upstream) enterprise owns either solely or jointly with one or more linked enterprises 25 or more of the share capital or of the voting rights of another enterprise
(downstream)
Linked enterprises an enterprise owns a majority of voting rights of the shareholders or associates of the other enterprise or an enterprise has the right to appoint or call off the members of the Board of Directors an enterprise is a shareholder or associate of the other enterprise and owns a majority of the voting rights an enterprise has the right to exercise a controlling influence over the other enterprise
Except for the provisions noted above an enterprise cannot be considered small or medium if at
least 25 of its share capital or voting rights thereof are controlled directly or indirectly jointly or
individually by one or more bodies or public bodies
Chapter 2 of the law broadly defines the responsibilities of the government to set up the framework
conditions for the establishment and development of SMEs in terms of administrative procedures
access to public services and publicly owned or managed assets of priority access to public
procurement of information and assistance services and of access to subsidies and services to
stimulate RDI activities
Chapter 3 defines development programmes for SMEs and allocates 04 of GDP to finance them
Chapter 4 of the SMEs law stipulates that the National Credit Guarantee Fund for SMEs created as
ldquoan institution with venture capitalrdquo to improve access to financing for SMEs24 should have its initial
share capital annually increased by 04 of the budget revenues for a period of 5 years from its
creation25
424 Business Incubators Law (nr 1022016)
The Business Incubators law defines the framework for establishing and operating a business
incubator in Romania
A business incubator is defined as a ldquobusiness support structure organised in the business
incubator infrastructure in a proper area in which the incubator residents are located managed by
a manager who aims to create a favourable and sustainable environment for small and medium-
sized start-ups stimulating their development potential and viability helping them to develop in
the early stage by providing shared facilities and the necessary managerial supportrdquo
24 The National Credit Guarantee Fund for SMEs was established in 2002 based on Law 1331999 regarding the
promotion of private entrepreneurs and developing SMEs The Fund supports SMEsrsquo access to loans and
European funds with guarantees (see wwwfngcimmro) 25
The current budget of the National Credit Guarantee Fund for SMEs is RON 220m (cca euro494m) see
httpwwwaippimmroarticolimmfinantare_garantiifondul_national_garantare_credite_imm
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
35
A business accelerator is defined as ldquoa business incubator providing access to funds in stages
to residents in order to launch on the market a product or service in a short timerdquo
Founders can be a ldquopublic authority of the local administration institution or consortium of
accredited higher education institutions institutes research and development centres and resorts
chambers of commerce or legal entity of private law establishing a business incubatorrdquo
Establishing and operating the incubator
The types of business incubators that can be established under the law are a) business
incubator with mixed portfolio - targeting the SMEs with growth potential from a wide range of
sectors b) technological business incubator academic business incubator (implementing or using
the RampD activity in an university or public research institute) agricultural business incubator
social business incubator business incubator specific to a certain sector incubator for non-
agricultural activities in rural areas
The founder needs to obtain the ldquotitle of a business incubatorrdquo from the central public authority
with responsibilities in the field of SMEs and business environment in order to benefit from the
facilities of the law For obtaining the title of a business incubator applicants (founder or
manager) need to provide a feasibility study a business plan agreements with public utility
suppliers evidence of the existence of the business incubator infrastructure in the founderrsquos
patrimony or of the right of use for 10 years The title is granted for 10 years with the possibility of
being extended
The operation of the business incubator should be delivered by a manager who needs to be
approved by order of the head of the central public administration authority with responsibilities for
SMEs if a public authority is among the founders (Article 9)
The manager signs a service agreement with the founders for three years (the length of an
incubation period) two years can be added to the contract for monitoring the incubatorrsquos residents
post-incubation phase The service agreement can be renewed upon positive evaluation of meeting
performance criteria The managerrsquos responsibilities include the provision of services for the
operation of the business incubator attracting economic operators as residents preparing a
development plan and monitoring the residentsrsquo post-incubation phase The manager also
develops the criteria for selecting residents of the business incubators (also see Article 15)
The types of services that can be provided to the business incubator residents are categorised
as a) services provided to the potential beneficiaries in the pre-incubation period for a period of
no more than six months (eg information sessions seminars professional training legal
consultancy) b) incubation services for an incubation cycle of no more than three years (see
below) c) business accelerator services for a period of no more than two years (eg grants
and reimbursable financial allowances to reduce the time to market) (see Article 12)
The incubation services provided by the business incubator manager depending on the residentsrsquo
requirements are as appropriate
a) managerial counselling and constant cooperation between resident companies
b) access to professional training services for current and future needs of the market
c) professional financial accounting and legal services
d) collective purchase of services and products
e) access to non-governmental funding for economic development
f) access to financing sources investments and working capital
g) contacts with individual investors venture capital funds
h) transfer and marketing of technology and contacts with universities and research and
development institutes
i) services on the internationalisation of SMEs
j) services on the overall management of the business incubator infrastructure
k) other necessary services
Incubator residents can be any SMEs Romanian or foreign They should have no more than 3
years of activity and not be in a process of dissolution legal reorganisation liquidation
bankruptcy or in difficulty (Article 14)
The business incubator residents have the right to benefit from the business incubation services
and use the infrastructure based on the incubation agreement no more than three years This
period is reduced to up to 2 years in case the resident benefits from financing for the quick launch
of a product or service in an accelerator (see Article 16) Residents are responsible to pay the
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
36
manager the amounts stipulated in the agreement and to create at least one new job within six
months from entry into the incubator (among other formal responsibilities) (Article 15)
Facilities for the founder of the business incubator include a) exemption from land tax b)
exemption from tax on buildings c) exemption from any taxes owed to local budgets of
administrative-territorial units for issuing any urban planning certificates building permits andor
demolition permits for the lands and buildings of the business incubator infrastructure d) other
facilities that may be granted in accordance with the law by the local or central administration
authorities (Article 20)
425 Business angels law (Nr 1202015)
This law regulates the conditions under which the natural persons called individual investors -
business angels can benefit from tax incentives as a result of the acquisition of shares and of
lending to SMEs
The SMEs benefiting from business angelsrsquo investment need to fulfil the following conditions (see
Article 1)
a) they are organised as limited liability companies
b) they have no more than three years of existence
c) they have no debts to the general consolidated budget at the date of the loan
d) they are autonomous enterprises in the sense of Law no 3462004 as subsequently
amended and supplemented
e) their object of activity is not the provision of consulting services of any kind
The conditions according to which any natural person can become an angel investor are the
following (among other formal obligations such as a clean tax offence record and clean criminal
offence record) (Article 2)
a) they are a person outside the company and become an associate by assignment of
social shares
b) they grant a loan without interest according to the provisions of the law the
equivalent in RON of at least euro5000 for at least three years to the company to which
they became an associate
c) they grant the loan only to meet the core object of activity of the company and in
accordance with the business plan
d) they cannot hold as a result of the assignment in their own name or through
intermediaries more than 49 of the share capital of the company concerned
The tax incentives to business investors can be granted for no more than 49 of the share capital
of the company concerned in proportion to the percentage of shares held (Article 2)
Tax incentives for business angels provided by the law (Article 3) are the following
a) Exemption from income tax in respect of dividends for a period of 3 years from the
moment of assignment of shares for the dividends related to the shares acquired
b) Exemption from tax for earnings established under article 66 par (3) of the same law
if the transfer of shares occurs after a period of at least 3 years after the acquisition
The total cumulative value of the incentives may not exceed the value of the loan given by the
business angel
The investor may be granted the tax incentives provided if the following conditions are met
cumulatively
The business angel does not alienate the shares before the expiry of the 3-year period from their acquisition) otherwise it owes income tax with respect to dividends for the period for which it was granted the tax incentive plus accessories in accordance with the law
The articles of incorporation of the company submitted to support the application to register the assignment in the Trade Register contain the following clauses
shy the profit and loss sharing of the associates will become proportional to the percentage of
shares held by each of them
shy the decisions on the business plan and on giving up the profit sharing related to the loan
granted will be taken with the agreement of all associates
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
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Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
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World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
37
The state aid or de minimis measures established by this law are granted under a state aid or de
minimis scheme developed by the Department for Small and Medium Enterprises Business
Environment and Tourism in compliance with the national and the European Union provisions in
the field of state aid
5 PUBLIC SUPPORT MECHANISMS FOR SMES START-UPS AND SPIN-OFFS
51 Public direct funding and ldquosoftrdquo support
The main SME support programmes funded from the national budget are coordinated by the Ministry of Economy Trade and Relations with the Business Environment ndash Directorate General Entrepreneurial Policies (AIPPIMM) but do not specifically target research and innovation activities For 2016 they included the following funding schemes (apart from the programmes targeting
specifically rural enterprises artisanal entrepreneurs and enterprises founded by female entrepreneurs)26
The National multi-annual programme for micro-industrialisation a de minimis scheme for SMEs with a budget of approx euro136m (RON 608m) in 2016 Funding is provided for acquisition of equipment investments in intangible assets (ie Intellectual property) IT equipment among others
The ldquoSRLD programmerdquo a de minimis scheme for entrepreneurs starting their first business
with a budget of approximately euro5m (RON 227m) for 2016 Financing can be used for very diverse activities from acquiring technological and IT equipment to furniture or construction works among others
ldquoSTART programmerdquo for developing the entrepreneurial abilities among young people and facilitating their access to financing with a budget of euro38m (RON 17m) Eligible costs included the acquisition of technological and or IT equipment energy efficient equipment or energy
systems based on renewable energy sources development of a web page
A programme for developing the commercialisation of products and services in SMEs with a total budget of euro47m (RON 21m) for 2017
Apart from the funding made available through the NP3 programme and its calls for SMEs and researchers the following schemes are also notable
On 8 September2016 the government signed a new support programme into effect by which SMEs obtain financial support for investments made27 The total budget of the multi-annual
programme is RON 900m (euro202m) between 2017ndash2020 It is expected that there will be some 200 beneficiaries The programme is administered by the Ministry for Economy Trade Industry and the Business Environment However it is not apparent whether this programme addresses particularly innovative SMEs andor start-ups
The ldquoStart-Up Plusrdquo scheme is an implementation of the ESF Operational Programme Human Capital 2014ndash2020 (see section 53) Start-Up Plus provides company founders with up to euro24000 as grant and first instalment and a further euro16000 as second instalment if certain
turnover targets are met The aim is to fund 1500 SMEs with this scheme and to have more than 10000 persons trained in the entrepreneurial education area The programme guide is currently subject to a public consultation28
The ldquoRomania HUBrdquo programme is designed as a platform for entrepreneurs and to bring together respective stakeholders (governmental organisations NGOs educational institutions) The programme covers information activities training technical assistance debates and
mentoring The aims are i) to develop entrepreneurial skills via workshops ii) to create partnerships between science and business and iii) to promote funding programmes for SMEs29 The programme relies with its funding entirely on EU structural funds
Another platform initiative is ldquoGovITHubrdquo which is aimed at fostering eGovernment and related IT-entrepreneurship The initiative which launched in August 2016 also offers a euro2000
26 See httpwwwaippimmrocategorieprogrameprograme-nationale-2016 27 httpeconomiehotnewsrostiri-companii-21277802-guvernul-aprobat-schema-multianuala-sprijin-900-milioane-pentru-imm-urihtm 28 httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs 29 httpwwwaippimmrocategorieprogrameprogramul-romania-hub-2016 and also the 2015 SBA Fact Sheet Romania
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
38
scholarship per month (for up to six months) for people interested in working on innovative eGovernment solutions30
There have also been further funding channels arising from bilateral national collaboration with
Switzerland and Norway which played a role in supporting entrepreneurship and innovation in
2009-2014 The Swiss-Romanian bilateral programme was targeting broad private sector
development the funding commitments had to be completed by 2014 One of the focus areas of
the Norwegian grants programme was on increasing competitiveness of green enterprises
including greening of existing industries green innovation and green entrepreneurship in 2009-
2014 The Norway programme continues through EEA and Norway Grants in the 2014-2021 period
also targeting innovation research education and competitiveness among others31
52 Fiscal measures
With regard to Romanian taxes the tax system relies on an almost entirely flat tax of 16 leading to the fact that Romanian tax rates are among the lowest in Europe concerning corporate income
tax personal income tax as well as tax on stock options Capital gains for non-resident investors are taxed accordingly As of February 2013 the Romanian administration introduced a special company tax rate for micro-enterprises (ie companies with a turnover of less than euro65000 not in public property and not active in banking consulting management insurance or gambling) of 3 of annual turnover (EVCA 2013)
According to a PWC fact sheet from June 2016 the following applies to RampD tax credits32
Companies can benefit from an additional deduction of 50 of the eligible expenses
for their RampD activities Moreover accelerated depreciation may be applied for devices and equipment used in the RampD activity In order to benefit from this supplementary deduction the eligible RampD activities must be applicative research andor technological development relevant to the taxpayerrsquos activity and must be performed in Romania or in the EUEEA member states As of 1 January 2016 a new provision has been introduced according to which the additional deduction for RampD activities is not available if the RampD projectrsquos objectives are not met
On Sep 9 2016 news emerged that the Romanian government planned for tax exemptions on income taxes of researchers in applied research fields This tax exemption is applicable to researchers working in a research department with at least a ldquocycle 1rdquo licence or diploma from university studies who perform (a) budgeted applied research project(s)33
According to the RIO 2015 Romania report ldquofiscal incentives for RampD are used only marginally
in Romania The main obstacle appears to be the uncertainty about the tax authorityrsquos approach
to the treatment of RampD costs Furthermore according to the Deloitte Romania Corporate RampD Report 2014 46 of Romanian companies are not familiar with RampD tax incentives In addition almost half of respondents (46) consider RampD tax regulations to be unclear and burdened with risk for the companyrdquo (see Gheorghiu et al 2016)
53 Structural Funds and support for participation in H2020
531 Cohesion funding for SMEs and innovation in 2007-2013
Romania started implementing EU structural funds (ERDF and Cohesion Fund) programmes since its accession to the EU in 2007 Due to the lack of experience with EU funding and poor administrative capacity at national and regional level the absorption of the structural funding has
been difficult (Gheorghiu et al 2016) albeit accelerated towards the end of the programming period Of the total funding of over euro18b or about 75 had been spent by March 2016 according to the ex-post evaluation of Cohesion Policy (see European Commission 2016c)
In Romania structural funds were distributed mainly to the fields of Transport (over a third) Environment (29) and Enterprise support (17) (European Commission 2016c) Total allocations to the field of enterprise support and innovation amounted to euro23b the majority of
30 httpwwwbusiness-revieweunewspm-ciolos-through-govithub-we-want-to-bring-the-capacity-for-innovation-from-the-it-sector-to-the-administration-114641 31 See httpeeagrantsorgWhat-we-doEEA-and-Norway-Grants-2014-2021 32 httptaxsummariespwccomuktaxsummarieswwtsnsfIDRomania-Corporate-Tax-credits-and-incentives 33 httpeconomiehotnewsrostiri-finante-21279047-document-cercetatorii-scutiti-impozit-veniturile-din-salarii-incepand-din-luna-august-conditii-trebuie-indeplinitehtm
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
39
which went to support to enterprises other than RTDI while 37 of the euro23b was used for RTDI (ibid) However in terms of absorption the ex-post evaluation notes that
A relatively small share of funding went to enterprise support and innovation Specifically 9
of the total budget went to general business support and less than 4 went to SME support
Investment in RTDI amounted to just 3 of overall funding
euro129 million or around 6 of the funding for enterprise support went into Financial
Instruments (FIs) By the end of 2014 all funding was paid into FIs and 78 had reached final
recipients Four FIs were set up a holding fund and three specific funds
The main achievements of the structural funds programmes supporting enterprises and innovation in the framework of the 2007-2013 programming period (see European Commission 2016c) include
By the end of 2014 ERDF co-financed 569 RTDI projects and 41 projects for cooperation
between enterprises and research centres
The support provided helped to start up 101 new businesses and co-financed 2898 investment
projects in SMEs
Some 13228 jobs were reported to have been directly created in SMEs as a result of the
funding and further 1160 jobs in research
532 European Structural and Investment Funds 2014-20 and links to Horizon 2020
The following structural funds schemes are particularly notable for supporting RDI activities and SMEs in Romania for the 2014-2020 programming period
The Competitiveness Operational Programme (COP) addresses in the current 2014ndash2020 planning period RampD and innovation as well as ICT services and infrastructure Axis 1 is therefore earmarked for research development and innovation supporting economic competitiveness and the development of businesses (total budget euro95257m) while axis 2
concerns ldquoinformation and communication technologies for a competitive digital economyrdquo (total budget euro6302m)34 The key issues addressed in the ICT area are eGovernment interoperability cyber-security cloud computing and social networks use of ICT in education health social inclusion and culture e-commerce clusters and developing innovation through ICT further deployment of the broadband infrastructure for the whole country
euro2065m are earmarked in the RDI axis of the OP Regional Development 2014ndash2020 for
ldquotechnology transferrdquo ie for the creation upgrade and extension of the innovation and tech transfer infrastructure This OP is administered by the by the Ministry of Regional Development and Public Administration
The Operational Programme (OP) Human Capital for the implementation of the ESF in the period 2014-2020 has in Priority Axis 3 (ldquoJobs for Everyone ndash Independent activities entrepreneurship and founding enterprisesrdquo) some euro105m earmarked for the ldquoRomania Start-Up Plusrdquo programme (see section 52)35
The Operational Programme COP (Axis 1) in Romania is presented as an explicit example on how structural funds can complement H2020 funding (European Commission 2016b)
First there is a series of actions planned under a dedicated section called lsquoCreating synergies with the EU Horizon 2020 Framework Programme RDI actions and other RDI international programmesrsquo These include
shy Linking emerging centres of excellence with their counterparts in other EU Member States
in order to increase excellence ndash lsquoTeaming projectsrsquo
shy Establishing lsquoERA Chairsrsquo to attract outstanding academics
shy Optimising existing structures and where necessary establishing new ones to facilitate
identification of priorities for different coordination instruments and structures at national
level (institutional development)
shy Supporting research organisations and enterprises in particular SMEs in the preparation
and implementation of projects under Horizon 2020 and other international RDI
programmes
34 See httpeceuropaeuregional_policyenatlasprogrammes2014-2020romania2014ro16rfop001 35 See httpwwwnineoclockroromania-start-up-plus-eur-105-million-for-creating-jobs
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
40
Furthermore Axis 1 of the OP COP will fund SME projects that have not received funding from H2020 but have the lsquoSeal of Excellencersquo certificate from the European Commission Funds are earmarked also for the establishment of support structures that assist researchers preparing
H2020 proposals A link is also planned to Joint Technology Initiatives (JTIs) More specifically the programme is to support successful projects under the JTI on Electronic Components and
Systems for European Leadership (ECSEL) Eventually funding is provided for RDI infrastructure ldquofor entities which win projects under Horizon 2020 Calls for the lsquoERA Chairsrsquo and lsquoTwinningrsquordquo (Ibid) as complementary measure to soft financing received in H2020
6 PRIVATE SUPPORT TO START-UPS AND SPIN-OFFS
61 Loans
Romaniarsquos financial sector is dominated by credit institutions which hold the largest shares of the assets in the system (78) Investment funds only hold 8 of the assets while pension funds are 37 and insurance undertakings 35 (European Commission 2016) Overall the banking sectorrsquos resilience improved in 2015
Recent legislative developments could pose challenges to financial sector stability The Parliament
passed a law on the discharge of debt obligations stemming from loan contracts through the
transfer to the creditor of immovable property in 2016 The law is expected to have a negative
impact on payment discipline and credit activity and further on consumer and investor confidence
and domestic demand (European Commission 2016)
According to the 2015 RIO report on Romania ldquoFour Romanian banks ndash joined by a fifth the
following year ndash signed on in 2014 to the JEREMIE initiative of the European Investment Fund
(EIF) The amount available for 2014 was euro120mn in addition to two other JEREMIE instruments
already on the market under which 2000 loans exceeding euro180mn had been awarded The budget
available for 2015 was increased to euro250mnrdquo (see Gheorghiu et al 2016)
JEREMIE is also a significant link to VC funding (see section 62) as it has been instrumental in
establishing the VC fund Catalyst Romania which to date ldquoremains the most important growth
and venture capital fund specifically dedicated to this countryrdquo
The RIO 2015 report for Romania indicates that within the National RDI Strategy 2014ndash2020 a
ldquocredit system for innovative SMEs (microcredit credits for current capital and credit for
development investments) with subsidised interest creating an individual guarantee system
available to innovative SMEs to cover the technological riskrdquo is planned (Gheorghiu et al 2016)
At the time the RIO report was published (early 2016) there were no implementation details
available
62 Venture capital schemes Business angels
621 Venture Capital
There are different reports when it comes to count the number of venture capital funds The RIO-
2015 report counts seven venture capital firms36 UEFISCDI has three VC investors on file ndash 3TS
CapitalPartner TechAngels Earlybird Venture Capital (see UEFISCDI 2015) ndash and crunchbase lists
three VC and three micro-VC firms
Invest Europe data37 shows that PE investments into Romanian start-ups declined sharply as fall-
out of the financial crisis hitting a low in 2012 with an investment volume of euro28m in 10 start-ups
(see also Invest Europe 2016) There has been a steady increase in investment volume but the
number of firms into which funds are invested fluctuates still in a bandwidth of around 10 to 20
pa The new data for 2015 shows an overall investment volume of euro144m into 11 firms (see
Figure 15) Private equity investments as percentage of GDP amounted to 009 in Romania
36 According to the RIO report these are ldquoAdvent International Romania (loans around $5m) AIG New Europe Fund (loans around $10m with refund rate of 35 ) Global Finance International Ltd (loans $2-3m to companies with a turnover of minimum $6m) Danube Fund (provides loans between $05-2 refund rate of 30) Environmental Investment Partners (loans $1-3m to the companies with minimum sales of $08m and 3 years of activity refund rate 35) ORESA Venture Romania (loans $1m) and Romanian Investment Fund (Cyprus) LTDrdquo 37 httpwwwinvesteuropeeu
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
41
which puts it in front of Slovakia (002) and the Czech Republic (001) but well behind
Hungary (015) or Poland (019)
Figure 15 Private equity statistics Romania by investment volume and by
number of companies invested in
Source Invest Europe
As can be seen in Figure 15 the major type of investment capital in 2014 and 2015 was buy-out
capital In terms of total venture the respective investment was only euro18m in 2015 and also lower
than the corresponding value of 2014 (euro53m) However one has to account that with small
numbers of investments pa (ie a low n) fluctuations over time can be expected to be high
Invest Europe data finally indicates that between 2012 and 2015 there were in between three to
five exits pa in Romania with divestments at costs of in between euro42m to euro120m pa A further
breakdown of exits according to type of exit does not seem to exist in the Invest Europe data for
Romania
Table 5 Type of private investments in Romania 2014 and 2015 (meuro)
Source Invest Europe
The RIO report ndash drawing on different sources of data papers but also anecdotal evidence ndash states
in relation to the supply and demand of the VC market (see Gheorghiu et al 2016)
Local culture is said to not favour serial entrepreneurship There is a tendency for founders of firms to never consider selling it while highly educated people who could potentially found a start-up prefer jobs in multi-national corporations for better security
Start-up founders frequently overrate their business and there is lack of awareness regarding milestones that a company has to fulfil once it becomes part of a VC portfolio
However there is an increasing tendency to view Romania as an emerging and promising start-up location
Type of investment 2014 2015
Seed 0 455
Start-up 1825 0
Later-stage venture 3478 1374
Total venture 5303 1829
Growth 24144 2265
Rescueturnaround 1060 0
Replacement capital 0 0
Buyout 49182 140200
Total 79689 144294
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
42
But it is also observed that ldquomore and more Romanian entrepreneurs raising early stage financing directly abroadrdquo were only able to do so after relocating to Western Europe or North America Therefore such success stories may be more about firms of ldquoRomanian originrdquo than of
Romanian firms
The RIO 2015 report on Romania (Gheorghiu et al 2016) notes that ldquofor the period 2014-2020 both the NS 2020 and the Strategy for SMEs provide for the creation within the de minimis aid programme of an investment fund with starting capital and seed capital for innovative entrepreneurs as well as an investment fund with venture capital and growth capital for innovative start-upsrdquo More specifically the National RDI strategy 2014ndash2020 is supposed to develop ldquowithin the de minimis aid programme an investment fund with starting capital and
seed capital accessible to innovative entrepreneurs establishing an investment fund with venture capital and growth capital for innovative start-upsrdquo (Ibid) These schemes are still in preparation at the time of writing (October 2016)
622 Business Angels
According to Business Angels Europe the business angels community in Romania is young and less
developed than the EU average38 However the business angels investment market has been
growing in Romania Moreover the European Commission DG Connect is financing a launchpad
pilot project to develop further the early stage investor community in Romania (together with the
those in Poland and Slovakia)
Business angel networks such as Venture Connect39 AngelConnect40 and TechAngels have
developed based on the experience of already successful Romanian entrepreneurs who want to
support the Romanian entrepreneurial ecosystem further For instance ldquoTechAngelsrdquo is a platform
dedicated to ldquofacilitating the development of tech businesses from South-Eastern Europe through
investment expertise and connectionsrdquo41 The platform shows the profile of 24 angel investors by
name If a start-up intends to be supported through TechAngels there are four criteria to be
fulfilled
Investments will vary between euro10000 and euro200000 for a maximum of euro1m evaluation
The projects should reach at least prototype stage or productmarket fit stage
The domain should be in tech projects focusing especially on web mobile embedded software hardware and medtech
As with all good start-up evaluations a focus is on teams with professional expertise and good track records
In November 2015 another Business Angel organisation was set up by the name of ldquoBusiness
Angels Romaniardquo42 Business Angels Romania is member of EBAN (The European Trade Association
for Business Angels Seed Funds and Early Stage Market Players) Business Angels Romania also
facilitates the matchmaking between start-ups and investors and provides respective services for
both angels and start-up companies The platform also organises yearly conferences for business
angels in Romania While the homepage of the organisation does not disclose the names or profiles
of the potential investors their presentation on EBAN mentions that the network already includes
50 angel investors and over 100 business ideas were pitched to them in 201543
63 Crowdfunding
UEFISCDIacutes special page on the Romanian Entrepreneurial Ecosystem lists eight genuinely
Romanian crowdfunding platforms44 With respect to general crowdfunding activity in Romania the
2015 RIO report states Several Romanian technology projects have received funding using US
crowdfunding platforms In 2014 five such projects managed to raise thousands of dollars on
kickstratercom or indiegogocom The highest amount (US$ 95000) was obtained from the
platform kickstartercom for a board game developed by NSKN Games While there are a number
38 See Business Angels Europe 2016 httpbusinessangelseuropecomNewsPagineBuilding-capacity-of-Business-Angels-in-Romaniaaspx 39 See httpwwwventureconnectro 40 See httpwwwangelconnectro 41 See wwwtechangelsro 42 See httpbusinessangelsromaniaro 43 See httpwwwebanorgbusiness-angels-romania-building-a-strong-community-for-startups-in-romania 44 See httpreeuefiscdirofunding-resources
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
43
of domestic crowdfunding platforms most projects do not raise money and even those that do
raise minor amounts for small arts projects or campaigns (Gheorghiu et al 2016)
64 Microfinance
The UEFISCDI site on the Romanian Entrepreneurial System lists 13 institutions under ldquofunding
resourcesrdquo specifically for microfinance (see reeuefiscdiro)
An assessment made by Pop amp Buys (2015) after surveying the microfinance sector in Romania
noted that ldquocurrently due to the existing regulations microfinance activity can be practiced only at
authorised banksrsquo level while the non-banking financial institutions involved in microfinance can
only provide micro-credits Moreover the territorial concentration shows a high concentration
within the more developed country regions than with regions in need of microfinance support
While the demand for microfinance products given the important number of microenterprises at
Romaniarsquos level exists the Romanian microfinance sector remains marginal and blurry included in
commercial bank large offers and hidden among various types of credits offered by a high number
of non-bank financial institutions credit unions and mutual aid housesrdquo
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
44
BIBLIOGRAPHY
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation Scoreboard 2016 Available from
httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7 httpwwwimtroRO_FP7_1pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document
SWD(2016) 91 final Available from httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Available from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and
the European Structural and Investment Funds (ESIF)
httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania September 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs
Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profile for Romania Available from httpwwwgemconsortiumorgcountry-profile103
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
45
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
httpslibraryiatedorgviewLEOVARIDIS2016ENT
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015) Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR
27846 EN doi 102791782805
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
Brainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Brainspotting (2015) ITampC talent Map Romania 2015 httpwwwbrainspottingrowp-contentuploads201510Brainspotting_ITC_Talentmap_2015-2016pdf
CNIPMMR (2016) Carta Alba a IMM-urilor in Romania 2016 httpcnipmmrro20160711cel-de-al-14-lea-raport-de-cercetare-al-cnipmmr-carta-alba-a-imm-urilor-din-romania
D Osimo amp the Startup Manifesto Policy Tracker Crowdsourcing Community (2016) Startup Nation
Scoreboard 2016 Available from httpwwweuropeandigitalforumeuindexphpcomponentattachmentsattachmentsid=311amptask=view
Deloitte (2016) Central European Corporate RampD Report 2016 Available from httpswww2deloittecomcontentdamDeloitteglobalDocumentsAbout-Deloittecentral-europeCE_corporate_rnd_2016_reportpdf
Digital Agenda Scoreboard 2013 (2013) Romania ICT RampD and participation to FP7
httpwwwimtroRO_FP7_1pdf
Edqvist C amp Zabala-Iturriagagoitia JM (2015) The Innovation Union Scoreboard is flawed The
Case of Sweden ndash not the innovation leader in the EU ndash updated version Papers in Innovation Studies Paper no 201527 Lund UniversiryBrainspotting (2014) ITampC talent Map Romania 2014 httpwwwbrainspottingrofilesBrainspotting_IT_Talent_Map_Romania_2014pdf
Elsevier Analytical Services (2016) World of Research 2015 Revealing patterns and archetypes in
scientific research httpswwwelseviercomresearch-intelligencecampaignsworld-of-research-2015
European Commission (2015) 2015 SBA Fact Sheet Romania Available from httpeceuropaeugrowthsmesbusiness-friendly-environmentperformance-review_de
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
46
European Commission (2016) Country Report Romania 2016 Including an in-depth review on the prevention and correction of macroeconomic imbalances Commission Staff Working Document SWD(2016) 91 final Available from
httpeceuropaeueurope2020pdfcsr2016cr2016_romania_enpdf
European Commission (2016) Digital Economy and Society Index Romania Availabel from httpseceuropaeudigital-single-marketenscoreboardromania
European Commission (2016b) EU Funds working together for jobs and growth ndash Examples of synergies between the Framework Programmes for Research and Innovation (Horizon 2020) and the European Structural and Investment Funds (ESIF) httpseceuropaeuresearchpdfpublicationski-01-16-339-en-npdf
European Commission (2016c) Ex post evaluation of Cohesion Policy programmes 2007-2013 focusing on the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) Task 3 Country Report Romania Septembr 2016 httpmediahotnewsromedia_server1document-2016-10-7-21338512-0-2coeziunepdf
European Commission DG Enterprise and Industry (2010) Internationalisation of European SMEs Available from httpeceuropaeuDocsRoomdocuments10008attachments1translations
European Commission DG Enterprise and Industry (2011) Opportunities for the
internationalisation of European SMEs Available from httpbookshopeuropaeuenopportunities-for-the-internationalisation-of-european-smes-pbNB0414189
EVCA (2013) Tax benchmark study 2012 Available from httpwwwevcaeuuploadedFilesBenchmark2012pdfdm_i=1GLS1K23D827W8K5C4G81
EY and Impact Hub (2016) Start-ups barometer Romania Available from
httpwwweyromaniarositesdefaultfilesattachmentsEY_Barometrul20startup-urilor20din20Romaniapdf (only in Romanian)
G Bullhound (2016) European Unicorns ndash Survival of the Fittest Available from httpwwwgpbullhoundcomwp-contentuploads201606GP-Bullhound-Research-European-Unicorns-2016-Survival-of-the-fittestpdf
Global Entrepreneurship Research Association (2014) Global Entrepreneurship Monitor (GEM) Country profie for Romania Available from httpwwwgemconsortiumorgcountry-profile103
Invest Europe (2015) Central and Eastern European Private Equity Statistics 2015
Leovaridis V Frunzaru DM Cismaru (2016) ENTREPRENEURIAL EDUCATION IN ROMANIAN UNIVERSITIES INTED2016 Proceedings pp 92-102
Leucuta E (2016) Clusters as Innovative Partnerships for Economic Growth and New Jobs in Romania httpwwwpiaromrowp-contentuploads2016036-CHIRISTINA-LEUCUTApdf
Ministry of National Education (2013) Romania in the European Research Area ndash Report 2013
National Bank of Romania (2015) Investiţiile străine directe icircn Romacircnia icircn anul 2014 Available
from httpwwwbnrroDocumentInformationaspxidDocument=20932ampidInfoClass=9403 (only in Romanian)
Pop C amp Buys P (2015) Microfinance in Romania in Barkovic-Bojanic amp Lulic (2015)
Contemporary Legal and Economic Issues V
Radu Gheorghiu Liviu Andreescu Jana Zifiakova (2015) RIO Country Report 2015 Romania EUR 27846 EN doi 102791782805
Roman L (2014) Regional Innovation Monitor Plus ndash Regional Innovation Report North-West Romania httpseceuropaeugrowthtools-databasesregional-innovation-monitorreportinnovationregional-innovation-report-north-west-romania
Schade S (2015) The Horizon2020 SME instrument httpsmegaslidescomdoc2080446sven-schade--sme-instrument-training-romania
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
47
Sophie Doove Ton Kwaak and Tommy Span (2015) Survey on the access to finance of enterprises ndash Analytical Report 2015 Available from httpeceuropaeugrowthaccess-to-financedata-surveys_de
Technopolis Group GEA Consulting amp FMMC (2012) Mid-Term Evaluation of the National Strategy
and of the National RDampI Plan 2007-13 Bucharest
World Bank (2011) Romania Functional Review Research Development and Innovation Sector httpsopenknowledgeworldbankorgbitstreamhandle1098612210NonAsciiFileName0pdfsequence=1ampisAllowed=y
World Bank (2016) Doing Business Report Country Page for Romania Available from httpwwwdoingbusinessorgdataexploreeconomiesromania
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
How to obtain EU publications
Free publications
bull one copy via EU Bookshop (httpbookshopeuropaeu)
bull more than one copy or postersmaps from the European Unionrsquos representations (httpeceuropaeurepresent_enhtm) from the delegations in non-EU countries (httpeeaseuropaeudelegationsindex_enhtm) by contacting the Europe Direct service (httpeuropaeueuropedirectindex_enhtm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) () () The information given is free as are most calls (though some operators phone boxes or hotels may charge you)
Priced publications
bull via EU Bookshop (httpbookshopeuropaeu)
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]
The Horizon 2020 Policy Support Facility (PSF) has been set up by the Directorate-
General for Research amp Innovation (DG RTD) of the European Commission under the EU
Framework Programme for Research amp Innovation lsquoHorizon 2020rsquo
It supports Member States and countries associated to Horizon 2020 in reforming their
national science technology and innovation systems
This report summarises evidence on the situation of the entrepreneurship ecosystem in
Romania and provides a background for the PSF Specific Support to Romaniarsquos panel of
experts
Studies and reports
[Ca
talo
gu
e n
um
be
r]