www.business-review.eu Business Review | December 2021
32 ENTREPRENEURSHIP
Startup funds say rising inflation has limited impact on financing environment As Romania’s inflation rate is expected to reach 7.7 percent at the end of 2021 and begin to drop next year, the local startup financing environment will not experience significant changes, suggest representatives of funds operating in the country. By Ovidiu Posirca
Funding could become a challenge if growing inflation starts a recessionary trend
B
y October, the country’s inflation
necessary portfolio building and value cre-
rate had reached 6.5 percent, higher
ation, which take many years, but also to the
than the European Union’s average
need to account for inflationary and even cri-
a more significant impact on how startups
of 4.4 percent, according to Eurostat, the EU
sis economic cycles, so in a way, some infla-
spend the capital than on the funding itself.
statistics office. Going into 2022, the local rate
tionary peaks (normally followed by troughs)
Otherwise, inflation is only another argument
should fall to 4.7 percent, the National Prog-
are part of our investment model,” Marius
for the allocators to deploy capital faster, to
nosis Commission says in a report.
Ghenea, managing partner at technology-
put money to work sooner rather than later,”
focused VC firm Catalyst Romania, tells BR.
Munteanu tells BR.
For funds with a long-term perspective of financing startups, the spike in inflation is just
He adds that in the short term, funds
ing partner at Early Game Ventures. “I would argue that inflation will have
EGV has not been factoring inflation in
one of the risks they take into account when
should consider helping portfolio companies
when drafting term sheets for financing deals.
drawing up their investment strategies.
hedge the effects of high inflation more than
The fund’s managing partner says this will
they currently do.
remain unchanged for the foreseeable future,
“Venture capital investments usually have longer cycles than a typical loan, for instance.
We will probably see a slight increase in
mainly because EGV’s investments are all in
VC funds are usually structured for around 10
valuations due to inflation, but it will be neg-
euro, while inflation has been higher for the
years and this maturity is partly related to the
ligible, suggests Cristian Munteanu, manag-
local currency.
