A few clarifications on startups

16.01.2019   |  Press  |  Startup

In entrepreneurs’ and investors’ lingo, the meaning of the term startup is pretty clear. However, after several years of business in this field, I’ve noticed the necessity of some clarifications, both for experienced businessmen and young people who tackle business for the first time.

What is – and especially what is not – a startup

Let’s start with a definition. The common feature of the numberless business textbooks and encyclopedias is that a startup is an incipient business, which aims at increasing and reaching a replicable profit in a number of years. We all know that, but the interesting thing is what a startup is not. From this point of view, if we exclude big listed companies, the definition above does not include incipient businesses that do not aim at growth by capitalization. In other words, a convenience store or a small family farming business, dealing in bio products, does not fall under this category.

According to certain sources, the term ‘startup’ started to be used in the ’70s by various publications such as Forbes. It is no wonder that its birth coincides with the computer revolution and the birth of Silicon Valley, which have led to the incorporation of the most innovative companies – but also to numberless failures associated to the idea of startup. According to the Bureau of Economic Analysis, in the USA, the fixed capital investments in the IT industry amounted to 0.6% of the US overall economy in the ’60s, whereas in the timeframe 2010-2012, it reached 12.2%, which is a good indication of the sector growth: times 20 according to this indicator.

However, the money invested in a startup is supposed to make a profit far higher than in a conservative industry. In IT, only from 2004 to 2017, according to Statista, that the turnover of Apple increased from $ 8.2 billion to $ 229.23 billion, that is 27 times, and Apple was no longer a startup in 2004.

Financing Cycles

In other words, there is no startup without an IT component. According to World Finance, of the five industries with the highest growth in 2018, three (cybersecurity, virtual reality and artificial intelligence) are intrinsically related to this field and the other two (renewable energy and biotechnology) are include technology.

Speaking of money, the successive capital infusions in a startup are called financing cycles. It is not my intention to tackle these in this article, but I would like to only point out a simple difference: the business will be supplied by founders and angel investors for the incipient period, during which it does not make any profit and it cannot access venture capital or bank loans and neither can it be subject to a merger or acquisition without exceeding a break even. This is the so called validation phase of the startup. From this point of view, all advice on attracting capital is very well put by Tim O’Reilly, the creator of O’Reilly Media and the main promoter of the term Web 2.0: “Money is like the fuel on a car ride. You don’t want to run out of it, but you aren’t making a tour of the gas stations.”

This means that, as far as startups are concerned too, money does not make you happy, but you cannot do without them. In order to get them, you need to refine your idea with research means and detailed business plans.

A Romanian version of this article was published by Capital business magazine, on 19 December 2018.

Octavian Pătrașcu  |   16.01.2019   |  Press  |  Startup
ADGM

Attracting investors: Romania versus The World

01.11.2019   |  Capital Market  |  Fintech  |  News

Over the last decade, I've built my professional life as an investor, focusing on 3 key areas: financial services, real estate and tech startups. I’ve participated in the setup and development of two major fintechs, and after those two successful exits I’m now directing my resources into building a new enterprise in this area – the Key Way group. 

I've started, participated in and developed companies in Romania, as well as Bulgaria, Hungary, Czech Republic, Germany, the UK, Mexico, Dubai and South East Asia. I'm constantly looking for new segments, new markets and new opportunities, and therefore I interact regularly with the regulator institutions and official agencies in various countries and  markets. 

The most recent example is the GCC area (Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, and Saudi Arabia).  I  started to research opportunities in that area at the end of 2018 -  more specifically, the United Arab Emirates, which are establishing themselves as one of the most dynamic markets in the world.

The whole experience of working with the official institutions there was a great example of how to attract and encourage investors! ADGM, the Abu Dhabi Global Markets regulator, was established quite recently and I was absolutely impressed with their professionalism.

To start off, I researched the local market regulators online. The information was clear and easily available: I contacted them online, via their website and LinkedIn accounts. They responded promptly, and in only a few days, we set up a series of meetings with the financial markets regulators in both Abu Dhabi and Dubai!

The ADGM gave me full support and very clear, detailed information on what and how I need to do to obtain a trading licence in financial services in the UAE. I met with representatives from both the ADGM registration department (where all new businesses have to register before they acquire a licence for online trading) and from the FSRA (Financial Services Regulatory Authority).

They were very clear on the procedure, steps to follow and criteria we need to meet, which is a fantastic help for an investor on a new, highly regulated financial market.

In a few days I started the onboarding procedure - everything happens online, everything is digital, everything is set up for maximum ease and transparency.

They set investors up for success, but they make sure they vet them thoroughly as well! A "user friendly" approach does not mean lower standards, quite the opposite - they made sure I meet all commercial and business criteria, they assessed my financial, capital and business status and previous experience, and checked references from markets in which I operated previously. 

We went through a process of  very rigorous assessment and due diligence, and several meetings where I detailed our business plan and long term vision. Professional but friendly - you feel welcome, encouraged and supported as an investor. 

Furthermore, their “enthusiasm”, or appetite for new business, equaled mine! They’re happy to welcome new businesses, they work hard to attract them and to set them up for success. I was very impressed that they genuinely appreciate the fact that investors, however big or small, choose their market to set up a company. 

I’d love to see this same level of energy, hard work and appetite for business in my home country, Romania.

While other jurisdictions welcome investors and work hard to create the framework for development and success, I often feel that the Romanian regulators, for financial markets and not only, start from a default position of suspicion or, at best, indifference. Investors are regarded with thinly veiled (if at all veiled!) suspicion and distrust and sometimes downright hostility, you almost feel guilty or embarrassed to be successful financially. 

I hope to see this mentality change in Romania, because I, as well as most Romanian entrepreneurs I know, really want to make our country a top choice for investments,  not just in outsourcing and services. We want to make Romania known for its know how and creativity.

I think Romanian regulators  should remember that their whole purpose of existence is to enable business, not hinder it. And as investors, especially once we see best practices from other jurisdictions, we need to remind them of this reality.

Read full article

10 interesting Startups in Romania this year

23.10.2019   |  Fintech
According to a report by McKinsey, globally, over 12,000 Fintech startups are competing with banks for up to $1 trillion in profits of which up to 60% are at risk, in the following five retail businesses: consumer finance, mortgages, small-business lending, retail payments, and wealth management. As an investor, I’m focused on tech, fintech and real estate startups. These areas have seen a huge wave of disruption, transformation, and evolution, and the tide is still high. My own home country, Romania, is a hotspot for tech and fintech innovation, and I keep a close eye on what’s going on in this market. Though it’s still in an early stage compared to nearby countries such as Poland, the Czech Republic or Hungary, the Romanian fintech industry is poised to take off as demand for fintech solutions and digital banking increases. Here are a few exciting startups that caught my eye recently. Some of them are in startup accelerators, some of them have already gone through various rounds of investment, but all of them have one thing in common: they provide innovative, agile solutions for needs and issues that traditional companies have ignored for too long.
  1. Fintech OS - B2B services and TaaS enabling automation for financial services. The fact that this is a Romanian company that has achieved such rapid growth proves that (to paraphrase) geography is not destiny. Their experience is inspiring.
  2. Fagura - P2P Lending. Although Fagura is actually coming from Moldova, they are present in Romania. This is a friendly peer-to-peer platform, modelled on UK similar companies. I think it has good potential for success.
  3. Smart dreamers – a platform for recruitment marketing automation, they’re already in the UK, the US, and Singapore, with enterprise-ready software that helps companies reach and engage with potential candidates online.
  4. Medjobs – this is a platform for recruitment and jobs in the healthcare sector. I like their focus and the fact that they’ve honed in on this very specific opportunity, as it is a very dynamic niche and was generally very fragmented.
  5. Typing DNA – such an original idea! They’ve developed an app for typing biometrics authentication – recognizing people from the way they type, this is an AI-based solution for risk-based authentication and fraud prevention.
  6. Competitors.app – a very useful and comprehensive app for monitoring competitors’ marketing activity across online channels.
  7. Finqware – this was badly needed in Romania, since most companies and people have several bank accounts and they need a centralized dashboard for their finances.
  8. Keez – A user-friendly alternative to accounting, payroll, and ERP software.
  9. Teleport HQ - An AI powered platform and suite of open source tools which simplifies UI building and adds realtime optimisations by analysing user's intentions.
  10. Cyscale - a Multi-Cloud Platform, for all major providers like Amazon, Google and Microsoft, which handles Cloud Native Security, Threat management and Secure Cloud Design.
Do you know of any other Romanian Startups that are worth mentioning here? Leave a comment - or, if you are an entrepreneur launching your startup, you can always contact me and let's see if there's an opportunity of working together!  
Read full article

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Attracting investors: Romania versus The World

Over the last decade, I've built my professional life as an investor, focusing on 3 key areas: financial services, real estate and tech startups. I’ve participated in the setup and development of two major fintechs, and after those two successful exits I’m now directing my resources into building a new enterprise in this area – the Key Way group. 

I've started, participated in and developed companies in Romania, as well as Bulgaria, Hungary, Czech Republic, Germany, the UK, Mexico, Dubai and South East Asia. I'm constantly looking for new segments, new markets and new opportunities, and therefore I interact regularly with the regulator institutions and official agencies in various countries and  markets. 

The most recent example is the GCC area (Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, and Saudi Arabia).  I  started to research opportunities in that area at the end of 2018 -  more specifically, the United Arab Emirates, which are establishing themselves as one of the most dynamic markets in the world.

The whole experience of working with the official institutions there was a great example of how to attract and encourage investors! ADGM, the Abu Dhabi Global Markets regulator, was established quite recently and I was absolutely impressed with their professionalism.

To start off, I researched the local market regulators online. The information was clear and easily available: I contacted them online, via their website and LinkedIn accounts. They responded promptly, and in only a few days, we set up a series of meetings with the financial markets regulators in both Abu Dhabi and Dubai!

The ADGM gave me full support and very clear, detailed information on what and how I need to do to obtain a trading licence in financial services in the UAE. I met with representatives from both the ADGM registration department (where all new businesses have to register before they acquire a licence for online trading) and from the FSRA (Financial Services Regulatory Authority).

They were very clear on the procedure, steps to follow and criteria we need to meet, which is a fantastic help for an investor on a new, highly regulated financial market.

In a few days I started the onboarding procedure - everything happens online, everything is digital, everything is set up for maximum ease and transparency.

They set investors up for success, but they make sure they vet them thoroughly as well! A "user friendly" approach does not mean lower standards, quite the opposite - they made sure I meet all commercial and business criteria, they assessed my financial, capital and business status and previous experience, and checked references from markets in which I operated previously. 

We went through a process of  very rigorous assessment and due diligence, and several meetings where I detailed our business plan and long term vision. Professional but friendly - you feel welcome, encouraged and supported as an investor. 

Furthermore, their “enthusiasm”, or appetite for new business, equaled mine! They’re happy to welcome new businesses, they work hard to attract them and to set them up for success. I was very impressed that they genuinely appreciate the fact that investors, however big or small, choose their market to set up a company. 

I’d love to see this same level of energy, hard work and appetite for business in my home country, Romania.

While other jurisdictions welcome investors and work hard to create the framework for development and success, I often feel that the Romanian regulators, for financial markets and not only, start from a default position of suspicion or, at best, indifference. Investors are regarded with thinly veiled (if at all veiled!) suspicion and distrust and sometimes downright hostility, you almost feel guilty or embarrassed to be successful financially. 

I hope to see this mentality change in Romania, because I, as well as most Romanian entrepreneurs I know, really want to make our country a top choice for investments,  not just in outsourcing and services. We want to make Romania known for its know how and creativity.

I think Romanian regulators  should remember that their whole purpose of existence is to enable business, not hinder it. And as investors, especially once we see best practices from other jurisdictions, we need to remind them of this reality.

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