ROMANIA AMONG THE MOST ATTRACTIVE MARKETS FOR US AND UK TECH FIRMS

Romania among the most attractive

markets for US and UK tech companies

Romania is among the 30 most favourable markets for US and UK tech firms, based on a wide range of factors, including the availability of skills, complexity of the regulatory landscape, quality of connectivity and infrastructure, GDP growth, and inward investment.

By Claudiu Vrinceanu

investors with only a few local Romanian funds able to participate in Series A+ rounds.

Bucharest is the main hub in Romania, driven by its strong digital workforce and diversity

Romania has been included on a list of the world’s best markets for tech companies in both the United States of America and the United Kingdom. International business growth and development company Velocity Global ranked Romania 29th in its Global Expansion Tech Index, which is part of a report on global expansion opportunities for the tech industry.

The study examines the top markets for tech companies and considers metrics like regulation, knowledge, and growth, while the index lists the 50 best locations for international expansion. Countries were scored according to a range of factors, including their regulatory landscape, availability of skills, and quality of infrastructure and connectivity. Countries like Italy, India and Greece followed Romania, and Europe was named the most desirable global destination. The top performing countries in the index were the Netherlands, the US, Hong Kong, Denmark, and Singapore, having scored highly on each of these metrics. The research is based on the expansion ambitions of 1,000 US and UK tech companies. The survey revealed that 90 percent of tech businesses across both countries were planning to expand to a new market within the coming years, and that access to new customers and talent were the key drivers behind this.

EVOLUTION OF THE ROMANIAN TECH ECOSYSTEM After years of constant growth, 2019 set a new milestone in the development of the Romanian tech startup ecosystem. It was growing up and attracting investors’ interest. Funding of Romanian startups became more sustainable and diversified. The pipeline of local and international ventures is no longer driven by a few small-sized companies in e-commerce and marketplaces, but rather shows a balanced mix of innovative ideas in FinTech, Biometrics, Blockchain, Robotic Process Automation and HR solutions, according to an EY report.

Bucharest is the main hub in Romania, driven by its strong digital workforce and diversity. Top funding is driven by international TOP PRIORITY FOR TECH FIRMS: ESTABLISHING PRESENCE IN A NEW COUNTRY A broader international footprint is less common for tech companies—only 20 percent of businesses have an international presence in four or fewer countries. Further, the share of firms with a widespread global presence is currently small—just 8 percent were active in over 14 different countries. This is set to change rapidly in the years ahead.

For any growing business, establishing a presence in a new country is an exciting time, but it can also be daunting and stressful. Given these challenges, Phil Dunne, head of international development for EMEA at Velocity Global, argues that firms should be looking beyond the most obvious targets, as there are plenty of countries that are currently more attractive to tech businesses looking to expand. He said: “Saudi Arabia, South Africa, Israel, Portugal, and Greece are all current examples of places where government incentives are having a dramatic effect in terms of retaining tech talent, and we’re beginning to see more US and UK companies employing people in those places as a result.”

For Romanian tech companies, the external barriers are the bureaucracy in Romania and the lack of support from the government, according to a Romanian Business Leaders study. It seems that Romanian tech firms need a very smooth transition within the target market, minimising risks and having more external support. One out of three Romanian firms believe that they don’t have personal barriers within this process. However, those who did state their personal barriers mentioned the lack of connections and experience/knowledge about the market.

Private equity in 2020: declining confidence versus the new year’s optimism

Private equity activity will expand in 2020 and will maintain a robust level. Romania remains interesting for private equity funds, with some players opening offices in Bucharest, even though the confidence of private equity funds in Central Europe is at its lowest level of the last seven years and Romania has missed out on big international transactions over the last year.

By Claudiu Vrinceanu

markets in the region where deal volume declined, mainly the Czech Republic and Poland, overall deal value was up compared to 2018, indicating a growth in average deal size,” the study states.

Despite this trend of optimism, Romania last year missed the biggest regional transactions closed in the CEE. Of the top 10 transactions made by private equity funds in the region in 2019, none involved Romania directly, but the local market was part of three regional deals. According to the Emerging Europe M&A Report, Romania was included in the sale of CME media group’s operations to Czech investment fund PPF Group, in Advent International’s acquisition of the regional operations of drug manufacturer Alvogen, and part of Vivendi’s takeover of M7 Group business in four countries, including Romania.

In Romania, private equity buyout activity reached a total of 22 deals in 2019

Central and Eastern Europe (CEE) is a target market for international and private equity investment, and Romania specifically could be interesting for investors, considering that the deal volume increased by 10 percent last year, according to the latest Emerging Europe M&A report by CMS, published together with EMIS, a research platform focused on emerging markets.

“On a country-by-country basis there are numerous positive signs. The region’s largest markets, Russia and Turkey, produced an almost similar number of deals as in 2018, while both Ukraine and Romania saw a substantial uptick in activity. In some of the more mature PRIVATE EQUITY CONFIDENCE AT SEVEN

YEAR LOW AS ECONOMY FACES UNCERTAINTY Central Europe’s private equity markets may be slowing down, according to the latest Deloitte Central Europe Private Equity Confidence Survey, as nearly half of respondents (46 percent) expect the economy to worsen over the coming months. Despite this concerning outlook, most CE economies are growing 2-3 times faster than those in Western Europe, with Poland expected to grow at 3.5 percent and Romania at 3.1 percent in 2020, against 1 percent for the eurozone. Confidence among professionals in CE private equity houses has been declining

gradually for two years and has reached a seven-year low. Market activity, already slow in 2019, may reduce further, with over a quarter (27 percent) of respondents expecting it to decrease.

The proportion of deal-doers expecting to focus their efforts on new investments in the coming months has been decreasing over the last four years, from 73 percent in 2016, to 52 percent. As for deal sizes, the vast majority of respondents (69 percent) expect them to remain the same.

The cautious economic outlook combined with high pricing stimulates the appetite for selling, with a quarter of respondents (25 percent) planning to focus on this in the coming months. “As we speak, Romania seems to be a seller’s market; however, vendor price expectations may be at an inflection point as these might fall further, with an unprecedented 48 percent of our respondents expecting pricing to further decline this year. However, we still notice a significant appetite for transactions in Romania from private equity funds, with most local players actively involved in certain deals, especially on the buying side,” said Radu Dumitrescu, Transaction Support Partner at Deloitte Romania. Most of the 2019 transactions involving PE firms in Romania were acquisitions, and business consultants noticed that besides the deals concluded by players who had been focusing on Romania for some time (Mezzanine Management’s investment in PetStar, Abris Capital’s acquisitions of Global Technical Group and Dentotal Protect, Innova’s acquisition of Optiplaza and Optical Network and MEP’s top-up acquisitions in Regina Maria), there were also new funds that made their first acquisitions locally: Highlander Partners’ investment in Ares, Greenbridge Partners’ investment in Rus Savitar, CEE PE’s investments in Flash Lighting Services, Brise Group and FarmavetPasteur. In this last category, it is worth mentioning the first acquisition made by a local Private Equity firm: Morphosis Capital’s investment in DocProcess and Blackstone Group’s minority investment of EUR 175 million in Superbet.

In Romania, private equity buyout activity continued to expand reaching a total of 22 deals in 2019, versus 11 in 2018, and an estimated value of almost EUR 2 billion. Investment bankers expect private equity firms to

remain active this year, however a decrease in value might occur, following a specific set of circumstances in 2019, namely two large transactions.

HOW 2020 STARTED OUT FOR PRIVATE EQUITY FUNDS The first month of 2020 brought some public communications from two investment funds, Enterprise Investors and Abris Capital, from which we can expect new transactions. The same is expected from Morphosis Capital, a private equity fund of 50 million euros, and Equiliant Capital, the investment fund financed entirely by Paval Holding, focused on investments in small and medium-sized companies. As for the first transactions in January 2020, Horizon Capital, one of the leading private equity fund managers in the region, invested USD 7 million for a 6.8 percent stake in Purcari Wineries.

Meanwhile, investment platform ROCA, launched by CITR Group and several Romanian investors, has been negotiating the sale of S-Karp, which does both retail and production, to Clujana, a Romanian brand with a history of over 100 years.

Small but risky revolution

in Romania’s healthcare system

The new Liberal government has introduced some limited reforms in Romania’s tatty healthcare system, favouring private medical services providers, but critics say that the new measures are not necessarily going to help patients.

By Sorin Melenciuc

Private healthcare providers will be included in the programmes based on the same conditions as public hospitals

Romania’s healthcare system is currently dominated by old public hospitals, which are in need of urgent modernisation and are largely characterised by lack of funding, bad management, corruption, and low-quality services. Another major problem is the migration of thousands of physicians and nurses to western Europe, generating severe staff shortages in many hospitals.

LOW PUBLIC FUNDING This dire situation is primarily linked to the low public funding of healthcare services. In Romania, health spending is the lowest in the EU, both on a per capita basis (EUR 1,029 compared with an EU average of EUR 2,884) and as a share of GDP (5 percent vs. 9.8 percent in the EU), according to a recent country report released by the European Commission.

“The share of publicly financed health spending (79.5 percent) is in line with the EU average (79.3 percent), and while out-ofpocket payments are generally low, except for outpatient medicines, informal payments are both substantial and widespread. In absolute terms, spending in all sectors is low and the health system is significantly underfunded,” the report indicates.

This reality forces many Romanians from the upper-middle classes or those with high incomes to turn to private medical services, which are more expensive, or even to seek treatment abroad. But most Romanians cannot afford to cover the high cost of private services and depend on public hospitals and medical services when they get sick. THE “LIBERALISATION” OF PUBLIC HEALTHCARE PROGRAMMES While the former Socialist government seemed to favour a gradual modernisation of the public healthcare system, by slightly increasing budgets, the new Liberal government has decided that some bolder changes were needed. An emergency ordinance approved by the government on February 4 put private hospitals in Romania on par with public hospitals when it comes to curative national healthcare programmes, with a total annual budget of around EUR 1.5 billion – including key programmes such as oncological and diabetes treatments and dialysis.

Until now, private hospitals were only allowed to treat patients and be reimbursed within these programmes when the capacity of public hospitals was exceeded - and this was the case in some areas, meaning that private healthcare providers were sometimes included. But from now on, private healthcare providers will be included in the programmes based on the same conditions as public hospitals. At the same time, emergency healthcare services provided to patients by private hospitals will now be reimbursed from the public budget at a capped cost that is aligned with public hospitals. These measures have been fiercely criticised by public healthcare unions and some observers, who said that they essentially represented “privatisation in disguise” for public healthcare programmes.

ARGUMENTS FOR THE NEW MEASURES Health Ministry officials have dismissed the accusations. “It is not a privatisation, but a liberalisation,” says Horatiu Moldovan, a state secretary in the Health Ministry, considered to be among the masterminds behind the new decisions. “We expect it to result in a

redistribution of the number of patients and surgical procedures across the two systems. There will probably be more surgical procedures done in private hospitals,” he indicates. But the official wants to ensure the public that the new measures will not affect the financing of public hospitals, offering three arguments. First, the budget of the public health insurance scheme (CNAS) grew this year by RON 3 billion compared to 2019. “Secondly, by offering more timely surgical procedures to patients, the outcomes will improve,

and as a consequence, total healthcare costs will decrease,” Horatiu Moldovan points out. The third argument is related to projected savings from decreasing costs for treatments offered to Romanian patients abroad.

“CNAS reimburses the cost of surgical procedures performed for Romanian patients in other countries, with the total amount reaching EUR 180 million per year. It is a very large amount,” Moldovan notes. According to the official, reimbursing the same surgical procedures performed in local private hospitals will save taxpayer money as the costs are much lower than those in hospitals in western Europe. At the same time, officials argue that the new measures will create more competition between public and private hospitals, resulting in better services offered to patients.

WHAT ARE THE RISKS? However, many experts have not been convinced by these arguments. In fact, many suggest that the impact of the new measures on public hospitals may be significantly underestimated by the government. “One of the major risks is the migration of the medical workforce from public hospitals to private healthcare facilities. As private hospitals will have a higher number of patients, they will prefer to hire staff that is already qualified, and the public hospitals are their natural workforce suppliers,” Dr. Nicolae Fotin, a former president of the Romanian Medicine Agency (ANMDM) and an expert in healthcare services, told Business Review.

“Other risks include the shutdown of

some public hospitals, lower earnings for public hospitals’ employees, and reduced access to healthcare services for low-income patients after April 1, 2020, when co-payments for private services will be allowed,” he added. Dr. Fotin estimates that a high number of patients will be incentivised to move from public hospitals to private hospitals, and the result could be a transfer of waiting lists between the two systems. But one of the major effects will be seen in public hospitals’ budgets. “The budgets of public hospitals will be less predictable, because they won’t be able to estimate their share in the public healthcare programmes. The effects of this lack of predictability could include cuts to staff and/or beds,” Dr. Fotin said.

PRIVATE INSURANCE Another important policy change announced by the new government was the introduction of complementary healthcare insurance schemes based on the French model (mutuelles). This measure would bring additional funding to the Romanian healthcare system without a major impact on the public budget – which is already lacking resources due to very high fiscal deficits. “We are meeting with representatives of insurance companies on a weekly basis. We’re working with several models, and one of them is the French model of mutuelles,” Health minister Victor Costache recently said.

This measure could have larger effects on the healthcare system, beyond additional funding, experts estimate. Private insurers could better control the cost of services and drugs provided to patients and this could result in improved spending efficiency.

Without well-organised complementary insurance schemes, the local health insurance market remains weak, as it is held back by regulations and low purchasing power. According to official data, the number of Romanians with private health insurance policies was around 365,000 at the end of 2018. At the same time, the sums paid for private health insurance policies, which generally cover services offered in the private medical system, increased in 2018 by 60 percent to RON 335 million (EUR 72 million), a negligible sum compared to total healthcare costs in Romania.

BOOSTING PRIVATE HEALTHCARE BUSI

NESSES But the new measures have been welcomed by the private health service providers, as they could boost their revenues and profits starting this year. The Romanian private healthcare market has been on the rise in recent years, with networks such as Regina Maria, MedLife, Medicover, Gral Medical, and Sanador gaining from the tendency of middle- and high-income patients to avoid public hospitals.

Major local healthcare chains have been posting double-digit growth rates even without this new regulatory push, but more favourable regulations could speed up their expansion both at the territorial level as well as in terms of medical procedures.

However, representatives of private healthcare providers have warned that the amounts reimbursed by the state for many medical procedures do not cover the real costs, and have called for a budget increase.

Romania highly exposed to global

downturn as coronavirus spreads

Romania entered 2020 in a bad shape from an economic perspective, with huge twin deficits, high financing needs, crippled infrastructure, a workforce crisis, and political turmoil. A possible global downturn - whether triggered by the new coronavirus outbreak or by something else - could add a lot of pain to this already tough state of affairs.

By Sorin Melenciuc

Romania’s public debt is projected to be on an explosive trajectory

LARGE TWIN DEFICITS First of all, Romania’s fiscal position has considerably weakened, with its budget deficit peaking at 4.6 percent of the gross domestic product (GDP) in 2019, the highest level since 2010 and by far the largest in the European Union. At the same time, Romania closed 2019 with a current account deficit of EUR 10.5 billion, or 4.7 percent of GDP – again, the highest in the EU -, compared to 4.4 percent in 2018 and 2.8 percent in 2017. Foreign direct investment (FDI), traditionally seen as a “sound” way to finance the current account deficit, flattened at around EUR 5.3 billion last year, covering only half of the gap.

This fiscal runaway train was triggered mainly by the populist wage increase-oriented policies of the past few years, which allocated almost all the budgetary resources of the eastern European nation towards wage and pension spending and cut investments in almost all areas. Having run out of resources, the government now has limited choices. Experts warn that currency depreciation may prove to be a prime option in this context. “As the Romanian leu is strengthening in real terms, it becomes an additional pain point for exporters. We believe that currency depreciation should be considered though, at least in line with the inflation differential between Romania and its main trading partners,” ING Bank analyst Valentin Tataru wrote in a recent report.

POLITICAL TURMOIL AND PENSION DISASTER In addition to the lack of options, the government faces some major political dangers that could lead the nation towards bankruptcy. A currently applicable law has scheduled a 40 percent pension increase starting from September 1, 2020, a burden already seen by most analysts as catastrophic for public finances. However, no Romania politician dares to propose a postponement of the measure in a year with two rounds of elections – local and parliamentary. But experts abroad have already calculated the impact of the pension hikes. “If implemented as is without offsetting policy measures, the new law could double Romania’s already sizable fiscal deficit, substantially increase current account deficits and raise external financing needs to excessive levels,” IMF says in its 2019 Article IV Consultation staff report.

However, it is not yet clear whether the budgetary disaster triggered by the pension hike can be avoided. The current liberal government and president Klaus Iohannis have tried to force early parliamentary elections this summer – ahead of the scheduled pensions increase. But their plan now seems to have failed because the other parties, which still control a majority of the seats in the Parliament, have blocked the procedures, with the help of the Constitutional Court (also controlled by the former ruling parties).

Fiscal Council projections show that, if implemented, the pension law coupled with other current policies (no-policy change scenario) would increase Romania’s public debt to 51 percent of GDP in 2023 and to 91 percent of GDP in 2030. “Romania’s public debt is projected to be on an explosive trajectory, but the markets will force corrections,” the council warned in a recent study.

A global slowdown was already in sight for 2020 even before the coronavirus outbreak in China, but the new international health emergency may end up having a much larger impact on the economy than initially estimated. Romania has been bracing for the almost inevitable arrival of the virus as several European countries have reported cases. Experts are prudent and say it is too early to estimate the economic impact of the coronavirus, but business sentiment already seems to be affected.

Waste management issues debated in Arad during Business Review’s “Sustainable Romania” event

In February, the city of Arad in western Romania was the host of an environment-themed event organised by Business Review. Titled “Sustainable Romania”, the event was attended by leading figures from both the private and public sectors in the counties of Arad, Bihor, and Timis, which together with Cluj county form the “Western Alliance.”

By BR Team

One of the hottest topics at the event was domestic waste, a sector in which Romania has already taken several commitments before the European Union, but most are still far from implementation. The event moderator was Ionut Georgescu, the CEO of FEPRA International, one of the leading organisations that deal with extended producer liability. The talking points proposed by Ionut Georgescu were addressed by Iustin Cionca, President of the Arad County Council, Arad Mayor Calin Bibart, Arad MP Glad Varga, Simona Stan, director of ADI Waste Arad, and Bujor Chirila, director of ADI Ecolect Oradea.

Discussions revolved around sustainable waste recycling and whether authorities saw it as an asset or a burden, as well as around the problematic bureaucratic procedures which slow down the resolution of some issues by city halls and ADI Waste, and the possible solutions to these problems. MP Glad

Varga talked about several projects to amend the waste management law 211/2011 adding that it took him over two years to pass an amendment which led to an increase in the fines imposed on those who abandon waste. “The ideal principle that must be applied is the circular economy concept. The main problem is that we were very late in starting to educate and inform the population. We’ve changed legislation to comply with European standards and we’ve set tasks for both local authorities and private operators. But how can you enforce these standards when the Environment Fund, with its huge budget, doesn’t grant funding for selective collection projects?” said MP Glad Varga, a member of the Environment and Ecological Balance Commission in the Chamber of Deputies. Mayor Calin Bibart brought up the problems faced by the city of Arad following the adoption of the new waste management system. “The project was implemented and City Halls ended up having to solve the issues. When things don’t work out well, citizens look to the authorities, namely the City Hall.” He also made a proposal for better selective packaging waste collection by incentivising consumers to return glass bottles or PET packaging. The mayor also stated that he was in favor of a firm response from the authorities regarding waste collection.

Iustin Cionca and Simona Stan talked about the waste management programme implemented in Arad, but also about the problems that came with it. “We didn’t set the price, nor the conditions; the European Funds Ministry did. We’re having problems with the Polaris sorting facility, and we know how hard it will be to persuade the population to adopt selective waste collection. But some important steps have been made. I remember when waste collection was being done with tractors and horse-drawn carriages,” says the Arad County Council president. One of the main reasons why wastecollecting companies abandoned the project was the very small price, according to Arad officials. “After ten years, the minister’s advisor proposed an update to the fees. We sent a plan but the Ministry hasn’t issued a decision yet,” added Simona Stan.

In response to this issue, the ADI Ecolect director noted that in the neighboring Oradea county, mayors can choose between a special tax or a tariff, while operators who want to take part in public auctions must come up with two proposals. “The winner of the public auction chooses based on the average between the tariff and the proposed special tax,” concluded Bujor Chirila, director of ADI Ecolect Oradea.

Brexit shakes up EU startups’ competition over funding and talent

Some of the major startup associations in the European Union are calling for the creation of the United Tech of Europe following the United Kingdom’s finalised Brexit process. In response, Romania can take a long-term approach and attract more British and European startups through a mix of fiscal incentives and investments in its tech infrastructure. Still, the UK is set to remain an important startup hub, with venture capital funding having reached a record USD 13.2 billion in 2019.

By Ovidiu Posirca

Brexit is a massive wake-up call for the European tech investment scene

The UK, which was the second largest economy in the EU, entered a transition period after its January 31 exit from the bloc. It will have to negotiate its new relationship with the Europeans, a process which will impact the entrepreneurial sector as well.

WHAT’S GOING TO HAPPEN DOWN THE ROAD? “The UK’s departure from the EU poses a number of challenges to the continued cooperation and trade with EU-based businesses, including possible interruptions to the free flow of personal data between the UK and the EU, an end to worker mobility - meaning UK workers may need visas to travel to the EU to perform temporary work -, and an end to the free movement of people, making it harder for UK and nationals from EU countries to live, work and study for longer periods,” Miruna Suciu, managing partner at law firm Suciu Popa, told BR.

Since the Brexit referendum in 2016, companies have been working on contingency plans to decide what will happen once the UK actually leaves the EU. A survey from e-Residency with British companies has shown that 33 percent of respondents were considering moving out of the UK, most likely due to dissatisfaction with the government’s approach to protecting them from the fallout of Brexit.

“Once Brexit is in effect, the EU needs new financial capital. All the EU financial institutions currently located in the UK will relocate somewhere else inside the bloc. It is possible that some other financial players, such as investment funds in private equity (PE) and venture capital (VC), will also move their headquarters to the continent in an attempt to stay closer to the European startups. Nevertheless, many things depend on the final agreement between the UK and the EU and the conditions imposed on business conducted across the new border,” Cristian Munteanu, managing partner at EGV (EarlyGame Ventures), told BR.

The finalisation of Brexit means that PE funds based in the UK will no longer be part of the Alternative Investment Fund Managers Directive (AIFMD). Thus, the country will be considered offshore and lose its AIFMD marketing passport.

“No matter which of these marketing options is chosen, the fundraising and the ongoing investment, risk and compliance management of existing PE funds for UK managers that do not have an EU presence following Brexit will become more expensive, complex and time consuming,” wrote PitchBook analysts in a report.

The UK is one of the largest tech hubs in the world and the country is particularly attractive for fintech entrepreneurs. In 2019, VC funding for British startups soared 44 percent to USD 13.2 billion, according to a report by industry group Tech Nation and research firm Dealroom. By comparison, funding for startups in Central and Eastern Europe (CEE), which includes Romania, amounted to around EUR 1 billion last year. ALTERNATIVES TO THE UK While Paris, Amsterdam and Berlin are some of the cities that could compete with London for fast-growing companies, a group of startup associations are calling for a different approach.

In an open letter, the associations call for governments across

Europe, including the UK, to let data flow freely, to open their doors to talent and break down barriers to investments.

“Brexit is a massive wake-up call for the European tech investment scene, which is still fragmented and suffering from a lack of integration: a major reason behind the lack of transnational investment in startups. French and German ecosystems’ heavy reliance on domestic investors proves that Europe is still far from being a ‘Digital Single Market’,” according to the letter. The representatives suggest that Germany is set to dominate the startup industry in the EU after Brexit, but urged all member states to support the “United Tech of Europe” vision. They are calling for the creation of a European Startup Visa to ease the recruitment process for employees across the EU.

While the entrepreneurial sector in Romania is growing rapidly, it’s still too small to attract large startups that could decide to relocate from the UK. But the country can play the long game and become more attractive for international players through a combination of providing fiscal incentives, cutting red tape and promoting its high availability of skilled tech workers.

“Romania still has a competitive advantage thanks to the good level of education and language skills of potential employees. However, the winners of the race for funding are probably going to be the countries that provide a minimum set of requirements for startups to be able to access the EU market in terms of clients and qualified workforce,” says Suciu of Suciu Popa.

Vladimir Aninoiu, technology director with Deloitte Romania’s Management Consulting Practice, adds that Romania could facilitate and support the creation of intellectual property, in order to increase its attractiveness in the competition for funding. He suggested that IT startups in Romania would not experience any “significant impact” due to Brexit.

In fact, Romania hasn’t built its profile as a “go-to” destination for international startups, and there are no short-term fixes.

“The national legal framework is too rudimentary when it comes to startups, the paperwork in any matters related to the state is too complicated and time-consuming, and there are no other clear advantages in locating a startup in Romania other than access to relatively affordable and qualified labour,” says Munteanu of EGV.

Meanwhile, some EU states have moved to capitalize on the uncertainty of Brexit for startups. For instance, the Bank of Lithuania launched a special e-licensing tool last year to make the submission of information for an operating banking license easier and more efficient. Eight fintechs, including Revolut, have hubs in this country now.

Estonia has an e-Residency program, allowing the establishment and management of EU-based, location-independent companies completely online. So far, more than 60,000 people have signed up for the program, and over 10,000 businesses have been created, around 440 of which originate from the UK, according to the managing partner of Suciu Popa.

“UK and Polish tech trade associations are pushing for legislation allowing a continued free flow of data after the UK leaves the EU,” adds Suciu.

Meanwhile, the potential for development for European startups remains significant. The letter signed by several entrepreneurial associations in the EU points out that the top 100 US companies invest six times more in their local startup ecosystem than their European counterparts.