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Romania’s Silicon Valley Has An Innovation Problem

If you run a search on Romania’s IT sector you could easily be left with the impression that the country is about to deliver the next Facebook. But while the country’s IT sector is indeed booming, it also has an innovation problem.

Romania has more IT engineers per capita than the US, India, China or Russia, and over the past few years the sector has grown impressively. Invest Romania, a government website, claims that it currently has year-on-year growth of 9% and forecasts the sector will be worth $4.5 billion by 2020.

But while engineers in the country are plentiful and sector growth is strong, what’s lacking are innovators and good product people. There are several popular-held opinions in the industry as to why Romania has a lot of good technical developers but struggles to produce disruptive startups.

Marius Gaina, who works for gambling website GoWild, says: ‘In my view, the reason why Romania lacks good ‘product people’ or innovators has to do with a national risk-averse sentiment. Unlike Silicon Valley or London’s Silicon Roundabout, Romanian product specialists are encouraged to stick to what the product or solution does, rather than explore lateral thinking [of what a product could do.’

The cultural aspect – or risk-averse sentiment – that Marius Gaina pointed out is something that crops up often when speaking to Romanians who work in the industry. Several decades of oppressive communism has eliminated the competitive or capitalist spirit that would naturally allow startups or businesses more generally — to prosper enough to disrupt a market.

The country’s education system is also cited as a big contributing factor. Memorizing a series of facts is the favored style of learning in Romania; while creative, critical or lateral thinking is not held in such high regard. Other popular factors that have been noted are a national fear of failure; lack of access to funding; lack of good marketers; and a lack of business analysts with appropriate knowledge to guide a startups’ push into a market.

Then there’s the more obvious economic issue. The average salary in Romania is around $400 per month — some of the lowest wages in the EU; while senior developers in the country’s IT sector can earn between $2,200 and $4,000.

These higher salaries, though, are still low compared to their counterparts in Western Europe, and so it’s created a ripe patch of turf for large foreign corporations such as Microsoft, IBM, Oracle, and Amazon — who want, and get IT solutions at relatively low cost.

Ionut Alexandru, founder of hardware startup company visionbot.net says: ‘I believe that most of the good developers work in corporations and big companies for outsourcing IT solutions for others. They make a compromise everyday between a decent salary with no fear of tomorrow, or bootstrapping a disruptive startup.’

Around 90% of Romania’s IT sector is outsourcing for foreign companies. While this is beneficial to the country’s economy, it too may be contributing to the innovation problem by keeping its talented developers financially comfortable; where they may otherwise be keen to attempt to develop something on their own terms.

In short, Romania is struggling to transition from outsourcing to innovating.

Romanian Startups, an online group of over 13,000 IT workers, entrepreneurs, and technology journalists ran a poll asking its members whether they agreed with the idea that Romania has an innovation problem. Out of 255 poll respondents, 202 agreed that the issue is real.

Insight can perhaps be found in a report carried out by market intelligence firm Brainspotting this year, which revealed that 53% of Romania’s IT workers choose their employers based on the salary and benefits package; while 12% favor a creative and dynamic working environment.

Mircea Goia, owner of Romanian Startups website, says: ‘I think Romanians have to be more optimistic in starting something innovative, they should be more open to discuss ideas, not keep them secret.

“I can understand why, in the case of Romania, people are reluctant to share ideas: peoples fear of theft is the main thing, fear of ridicule is the second. But they have to smash this wall.’’ he adds.

Romania has been slow in its transition from communism to capitalism, and its tech sector — for myriad reasons — appears to be suffering a similar fate.

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So while much has been said in recent years about Romania’s tech startup scene – the city of Cluj has even been referred to as the ‘Silicon Valley of Eastern Europe’ — it’s a perception that is still far removed from reality.

(this story originally was published by FORBES May 2016)

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