Monday, October 31, 2011

NYT: In Romania, Start-Ups Gain Strength

By PALKO KARASZ

PARIS — With a sparkling start-up scene and a wealth of young talent, Romanian entrepreneurs, especially in the information technologies sector, are aiming for the global market.

“I am very optimistic about what start-ups can do in Romania,” Jan Muehlfeit, chairman of Microsoft Europe, said in a telephone interview. The local pool of technology talent, he said, is one of the main reasons Microsoft has invested in the country.

“In the cloud, you can become a global company in a very fast way,” Mr. Muehlfeit said, referring to the services and applications that are now being provided to businesses through the Internet, by companies like Microsoft, as well as by start-ups. Shared software, data storage and other forms of cloud computing present an opportunity to outsource information technology.

Microsoft has been present in Romania since 1996. Five years ago, it opened a technical center there that it says is the largest of its kind in Europe. It now acts as a partner for small businesses like software developers, sitting at the center of an array of more than 4,000 information technology companies, Mr. Muehlfeit said.

As part of its Romanian operations, Microsoft provides free technology, helps companies connect with investors and supports marketing efforts through its BizSpark program for start-ups. In exchange, the partner companies have developed new applications for the Microsoft platform.

Private enterprise, despised and banned by the former communist regime, emerged only two decades ago in Romania with the onset of democratic change. The country, like its neighbors, has relied heavily on foreign investment to rebuild itself from the ruins of the formerly centralized state economy.

In efforts to catch up with Western competitors, a new generation of entrepreneurs still has to cope with a business culture that lags behind.

Still, Romania has a number of advantages over its Western neighbors. Information technology professionals cite its large talent pool and advanced broadband infrastructure, together with low wages and an appetite for enterprise. Companies including Intel and Oracle as well as Microsoft have set up shop there, investing in call centers, software development and support services.

Romanian start-ups have recently figured among the most promising in Europe. The Telegraph, a British newspaper, worked with the technology start-up blog TechCrunch to compile a 2011 ranking of the top 100 emerging technology businesses in Europe. The list included three companies from Romania.

UberVU, a social media monitoring and aggregation platform, was one of the start-ups selected by the Telegraph panel. Founded in 2008, it now has offices in both Britain and Romania, with international clients and investors.

Dragos Ilinca, co-founder of uberVU, said the initial financing had come from Britain.

“What was difficult to do in Romania was to find the capital necessary to develop a product and take it to the market. This was in early 2008, when everyone was investing in real estate, which was generating crazy returns,” he said.

When the property bubble burst, seed funds and angel investors turned their attention elsewhere and investment became more easily accessible, he said. That was too late for uberVU, which had already raised its first round of venture capital in Britain, but it presented opportunities for entrepreneurs back home.

Mr. Ilinca said that for digital service start-ups seeking a larger market and more financing options, Western Europe still offered an easier environment. Still, he sees a role for companies like uberVU in Romania. “If we want to help Romania be better off economically and socially, entrepreneurship and creating high-value Romanian products and services is the way to do it,” he said.

Marius Ghenea, a pioneering serial entrepreneur, has been running businesses in Romania since the early 1990s. A speaker at School for Startups, a privately run training program, he said that one of Romania’s problems was a lack of business role models.

“When prompted, a lot of young people today indicate international entrepreneurial models such as Steve Jobs or Bill Gates, rather than a local model,” he said. “Entrepreneurial success is still not celebrated in Romania as it should be, for cultural reasons that will only be completely surpassed by the younger generation, born and raised after 1989.”

Based on a British curriculum, School for Startups had 200 students this year in the capital, Bucharest, and the western city of Cluj. For next year, it has started to accept students from neighboring countries. Its founders hope Romania can emerge as a regional hub for entrepreneurial development.

Karen E. Wilson, a senior fellow at the Kauffman Foundation, visited Romania in the fall. Kauffman, a U.S. organization, sponsors global initiatives like Startup Weekend and Global Entrepreneurship Week, which is host to events locally.

“I was amazed at how much is happening right now in this area,” Ms. Wilson said in a telephone interview. “People realize that there are a lot of opportunities through entrepreneurship and innovation.”

Startup Weekend, a 54-hour event, is scheduled to take place Nov. 11 to Nov. 13 in Bucharest. Participants will come together for a weekend of brainstorming and networking to help get their start-up ideas off the ground. Similar events are planned in at least 65 cities worldwide through November.

Two days earlier, on Nov. 9 and Nov. 10, How to Web, another conference in Bucharest, will bring together leading entrepreneurs and specialists for talks on innovation, Web trends, business analysis and advanced technologies.

At both conferences, a core focus will be how to bridge the cultural gap between innovation and entrepreneurship.

Entrepreneurship classes are compulsory in Romanian high schools and a growing trend at universities, said Lucian Gramescu, operations manager at Junior Achievement Romania, a nonprofit organization that teaches entrepreneurial skills to young people. But classes concentrate on theory, rather than providing a hands-on approach to starting a business, he said.

“Entrepreneurship classes are not fun, not attractive to students,” Mr. Gramescu said. “For many of them it is just another topic in school and not an invitation to start an enterprise.”

Technical universities have been surprisingly ready to include entrepreneurship programs in coursework, but technology students have tended to be less receptive, he said.

Another issue is teaching people to communicate with investors, he added. “There is money out there, you just need to educate people on how to ask for it.”

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