How one outsourcing hotspot is remaking itself as startup nation

Coming from a region with few investors, startup founders in Romania have employed several hacks to approach the global market.

Bucharest

The skyline of Bucharest

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Romania is striving to shift from being an outsourcing destination to a country focused on developing its own tech businesses.

The number of startups has doubled in the past three years, according to RomanianStartups.com, and many of the country's 100,000 skilled tech professionals dream of building their own company, making this perhaps the most sought after career in cities such as Bucharest and Cluj-Napoca, where tech ecosystems are better developed.

Stories like those of LiveRail, acquired by Facebook, and uberVu, sold to Hootsuite last year, are seen as examples to follow by those aiming high.

"Nowadays there are more opportunities than ever here," said Irina Scarlat, CMO of How to Web, the largest conference in Romania dedicated to the startup environment, where US and Western European entrepreneurs are invited to share their expertise and guide local businesses.

"We see more and more people choosing to turn into angel investors and support the development of early-stage startups. And they do bring along not only money, but also their valuable expertise," she added.

Romanian-born entrepreneur Larry Gadea, founder and CEO of the San Francisco-based Envoy startup, said that competition and the need to get ahead might be stronger in Eastern Europe compared to more established markets.

At startup competitions, where people on stage are judging the people speaking, "the investors are really aggressive," he said. "That's like super unusual for Silicon Valley, where investors try to be super friendly with you and they really try to help you through the process"

Cost-effective startups

The Romanian startup ecosystem feeds on the local tech talent pool. A junior software developer in Bucharest has a take home pay of €750 to €1000 a month, while a senior developer makes between €1800 and €3000, according to the Brainspotting recruitment agency, while over 7,000 tech students graduate each year.

Many developers often create startups that require limited resources, using their spare time. "When building a SaaS product, all you've got to invest in is a small team that has the capacity to build a product with the potential of succeeding on a global scale," Scarlat told ZDNet.

The cost-effective IT salaries compared to Western Europe have persuaded startup founders to employ a hybrid model: they keep the developers in Romania to minimize costs, while the CEO, sales and marketing departments move to London or to Silicon Valley to have a better chance at receiving funding.

This kind of strategy makes sense, Jack Newton, co-founder and CEO of Canadian cloud-based project management platform for lawyers Clio, told ZDNet during the How to Web Conference in Bucharest.

"Go to where the investors are. Don't expect them to come to Romania. Once you're in investors' backyards, there's a comfort level there. It's so much easier to raise capital," he said.

Several Romanian startups have received funding in the neighbouring countries, such as Poland or Bulgaria.

Business people needed

A few years back, Romania was focused on outsourcing, and this helped tech workers hone their skills, many still lack the business, sales and marketing competences to build their own products and to develop them on a global scale.

Teaching developers how to become business people can be the root of Romania's startup ecosystem growth, How to Web's Scarlat said.

"We lack product knowledge in Eastern Europe and we still have difficulties in understanding failure as a learning experience," Scarlat said."Once we will solve the competencies and mindset problems, things will be much easier for tech entrepreneurs in Eastern Europe and differences [with Western ecosystems] will start to level down."

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