Startup investments declining, but founders should not lose faith

Time for some bad news: the number of financing rounds attracted by tech startups in Romania has dropped considerably. Only seven substantial investments were announced in the first quarter of 2023, compared to 16 in the same period of last year.

By Claudiu Vrinceanu

The trend indicates the tech industry is still reeling from 2022’s high interest rates and broad economic uncertainty. But if we take a look at the total value of investments, we’ll see that it’s not the end of the world: they reached EUR 14.3 million, down just 10 percent compared to the first quarter of 2021 (EUR 16 million) and up 27 percent versus the same period of 2022 (EUR 11.2 million), according to Business Review calculations.

Startups in Romania have come to understand that 2023 will be a challenging year for teams looking for funding as venture capital funds are being more cautious and trying to keep the capital they have for follow-on rounds that will mainly go to startups in which they have already invested and which are part of their portfolios. Ultimately, we should analyse this trend in the context of the decline: what’s going to happen to startups that were funded in 2021 and 2022? Companies with an actual business model and a route to profitability, which may need help raising money, may experience a decrease in valuation. Meanwhile, tech-driven companies in areas that are still “hot,” such as AI, are rising, even amid harsher market conditions.

The largest funding rounds of Q1 2022 were attracted by Ogre AI (EUR 2 million) and Archbee (USD 2 million), two startups that have moved to other countries. This year’s champions so far have been Veridion, with a late seed financing of USD 6 million, and Videowise, an eCommerce video platform that recently received USD 3 million in seed funding.

Kubeark, an open and infrastructureagnostic platform, has raised USD 2.8 million in a pre-seed funding round. The investment round was led by Credo Ventures, and also attracted the participation of Seedcamp, LAUNCHub Ventures, 500 Emerging Europe, and others. Profluo, a startup that builds machine learning technology for the automatic processing of accounting documents, has reached a total investment value of EUR 625,000 less than a year after completing its first seed round. Along with Early Game Ventures, which was the main VC investor, a series of angel investors have also recently joined.

Vatis Tech, the local startup that creates voice recognition technology based on artificial intelligence, reached a valuation of more than EUR 4 million after attracting a second round of funding worth EUR 650,000. FieldOS, a startup for real-time asset operations management, has drawn funding of EUR 620,000, of which EUR 200,000 were raised on SeedBlink. The money will be used to develop the company at the international level, including in the US restaurant industry and in the UK business and residential buildings sectors. The new round saw the participation of existing investors Early Game Venture and Sparking Capital and business angels.

Another relevant round, particularly for the fintech segment, was attracted by Instant Factoring, the micro-financing platform for small companies, which got an investment of EUR 600,000 that it intends to use for expansion. Instant Factoring’s backers include social investment company MicroEurope.

In conclusion, some investors seem to be slightly worried by the steep decline in funding, but when compared to the pre-covid period, things are looking rather normal.