Skilled devs, low costs: No surprise this second city has a booming startup scene

With a good startup infrastructure and a strong supply of software skills, Cluj-Napoca in Romania is building itself a reputation as an emerging Eastern European tech hub.
Written by Andrada Fiscutean, Contributor
Romania's second largest city, Cluj-Napoca, is attracting established tech businesses and startups.
Image: Razvan Photography
An old rundown factory revamped into a smart tech park, home to hundreds of software developers eager to make a name for themselves. Welcome to Cluj-Napoca, Romania, the city that transformed its derelict furniture, clothing and candy factories into technology hubs.

Over the past three years, the IT sector has mushroomed in Cluj-Napoca (pronounced kloo-zh nah-po-kah). Many software companies located there have doubled their staff in that period and are experiencing 20 to 30 percent growth in turnover, year on year.

Skilled developers, on fairly low salaries compared with Western Europe, and an airport that connects the city to Germany, Italy, Spain, Switzerland and the UK are part of its appeal.

Some software companies prefer to set up shop in Cluj over Bucharest, according to IT recruitment agency Brainspotting. "New technologies such as Xamarin or F# have been used here for the first time in Romania," a spokesman said.

Of the large pool of developers covering the full stack of software technology, 98 percent speak English and many are also fluent in German and Hungarian.

"We've seen some interesting JavaScript professionals with knowledge of CoffeeScript or AngularJS. There's also a lot of mobile development and SAP Basis," according to Brainspotting.

Overall, salaries are 10 percent lower compared with Bucharest. A junior iOS or Android developer has a take-home pay starting at €450 ($480) a month, while a senior engineer can make up to €3,000 ($3,200) a month, the agency's Talent Map shows.

Cluj-Napoca is the location of the Romanian headquarters of UK IT services company Endava. "Cluj is a vibrant city, welcoming and innovative, with a strong entrepreneurial spirit. Many new companies are setting up offices there," Valentin Metzger, Endava's delivery director, said.

"There's strong demand and an opportunity for the IT community in Cluj to continue to develop. Local authorities and other business sectors are continuing to keep up with the infrastructure needed for business development," he said.

Endava had revenues of over €37m ($39m) last year in Romania, up 40 percent compared with 2013. It employs 1,400 people in the country, half of whom are located in Cluj.

Cluj's talent pool has also been appreciated by local software company Fortech. It is planning to increase its numbers in the coming years. "With a strong tradition in engineering, sustained by the technical universities, Cluj promises to ensure a constant flow of skilled graduates," Fortech CEO Calin Vaduva said.

Among the city's benefits, he lists the geographic proximity to Western Europe and the European values Romania shares. Fortech's team has also doubled in the past three years, while its turnover has increased by an average of 30 percent year on year.

Vaduva believes that companies should be more engaged in educating young professionals, to ensure further growth. Universities produce 1,700 ICT graduates every year, and they are easily absorbed by the job market.

Cluj-Napoca's ambitions go beyond nearshoring. Early-stage startups are beginning to appear. "I'm happy to see tech companies understanding that there is value in supporting startups," Jennifer Austin, managing director at Spherik Accelerator in Cluj-Napoca, said.

An MBA graduate from UCLA's Anderson School of Management, Austin moved to Romania two years ago, embarking on what she calls "the most exciting and rewarding" journey of her life: building a startup ecosystem in this city.

"I sincerely believe in the capacity of Romanian entrepreneurs to succeed in a global market," she said.

Lower costs than in the Western world should really help startups. "We even had a USA team apply to the Spherik program, in part because it's become so expensive to do a startup in the US, combined with Cluj's reputation for high-quality, high-value development."

At Spherik Accelerator, there are currently 20 startups at different stages. They all want to match the success of iMedicare and Moqups, two of the city's most acclaimed young businesses.

Austin believes more investments from outsourcing companies could boost this ecosystem.

Cluj-Napoca's software companies aren't the only ones on the rise. The whole country's tech sphere is expanding. Last year, the Romanian ICT sector was worth €2.4bn ($2.55bn), a 12.5 percent rise year on year, according to a recent report released by Romanian software and services industry association ANIS. And the future looks bright: estimates say it will be a €4bn ($4.26bn) market by 2020.

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