These are the conclusions of the first issue of Entrepreneurs Speak Out – the perception barometer of Romanian entrepreneurship, released today at the Romanian Business Leaders Summit.
„Entrepreneurship is the essence of initiative and of market economy. It is the source of leadership, of great family businesses and corporations which have marked people’s lives in recent history. We have designed this project to support and promote successful entrepreneurial businesses and the principles which have made their performance in Romania possible. Entrepreneurs Speak Out is a project that becomes reality through entrepreneurs and for entrepreneurs.” said Bogdan Ion, Country Managing Partner Ernst & Young Romania, in the opening of the Summit in Bucharest.
Entrepreneurs Speak Outbarometer analyzes the perceptions of 95 local entrepreneurs, who answered the Ernst & Young survey between 1 June – 15 August 2012, and those expressed in direct interviews with 12 renowned Romanian entrepreneurs.
Entrepreneurship culture: a negative view of business failure
Although 50% of respondent entrepreneurs think that the Romanian culture and society are supportive for them, their answers regarding how they think business failure is perceived by the business environment and society as a whole are not at all encouraging: only 12% of them answered that failure is perceived as a learning opportunity, while 32% of them see it as a barrier to future business projects and 24% as an indicator of lack of necessary skills. The magnitude of these answers shows that Romania is far from becoming a supportive society for entrepreneurs, indicating its tendency to discourage risk-taking in start-ups.
Improving the visibility of entrepreneur’s successes and promoting career and personal development opportunities offered by entrepreneurship are the actions perceived as having the greatest impact on improving entrepreneurship culture in the next three years.
Training and education: The more educated, the more entrepreneurial
In USA, 95.1% of small-business owners have at least bachelor’s degrees or higher. In Romania, only 53.3% of entrepreneurs are college and high-school graduates. However, starting with 2010-2011 school year, entrepreneurial education has been introduced at high schools (10th grade), expecting to raise awareness of entrepreneurship among teenagers as an alternative career path.
Moreover, the current economic context, that offers scarce and unstable jobs, led to a change in the traditional perception of the ideal career valuing stability, towards a more entrepreneurial mindset. Trying something on your own has begun to be considered acceptable. This trend should be further supported by educating pupils and students about entrepreneurship as a valid career option through internships, conferences and dissemination of success stories.
Access to financing: a huge task for all stakeholders
92% of respondents believe that funding is difficult for young entrepreneurs. The numbers speak volumes about the strenuous task of obtaining finance in a start-up or even in a later phase of venture development in Romania. Romanian entrepreneurs think that European Funds (63% of respondents) and Bank Loans (52%) would have the highest impact, while Private Equity, Business Angels and Venture Capital would have only a medium impact.
These answers do not necessarily show that development of financing instruments like PEs, VCs and Business Angels would not have a great impact on entrepreneurship, but show rather a troubling lack of information. It becomes clear that these types of investors and financing sources are still little known on the Romanian market. Furthermore, Business Angels and Venture Capitals are financing sources to which entrepreneurs have limited access, as these are not adequately represented or diversified locally. Among the alternative financing sources, Private Equities are the best known, and thus, the most used by Romanian entrepreneurs. For this reality to change, business angels should cluster in networks, while VCs and PEs should be promoted more as alternative funding sources.
Regulation and taxation: a pessimist perspective
Romanian entrepreneurs are not satisfied with the regulatory and taxation environment - only 36% believe that Romania offers an efficient legislation for starting a business versus 51% EU entrepreneurs. Regarding taxation and tax incentives for start-ups, they are indeed quite limited, as answers to our survey show. However, start-ups could benefit from tax incentives not specifically intended for them, such as the additional deductible allowance for research and development expenses - recently up from 20% to 50%.
Coordinated support: Improving but not yet integrated
Organizations like business incubators, mentors’ and entrepreneurs clubs, and state agencies offer coordinated help to entrepreneurs. When asked about the help they receive, 51% of Romanian entrepreneurs feel these organizations’ effort is not coordinated enough. If more integrated and rationalized, these resources could be more efficient.
”Romania cannot progress without strong entrepreneurship. We need this internal growth engine, in order to stimulate the sustainable development of our local economy. We need successive generations of entrepreneurs, who can contribute to harnessing our internal resources, generating more jobs and to increasing the added value of Romanian products and services.”concludes Bogdan Ion.
About Entrepreneurs Speak Out – Romania 2012
For this first edition of the Entrepreneurs Speak Out Barometer, our analysis of the entrepreneurial environment in Romania was articulated around five enablers (access to funding, regulation and taxation, education and training, entrepreneurship culture, coordinated support) defined by the G20 Young Entrepreneurs’ Alliance in Toronto, Canada (20-22 June 2010). Our analysis is based on four building blocks: macroeconomic indicators, a perception survey conducted with 95 Romanian entrepreneurs (between 1 June – 15 August), qualitative interviews of emblematic entrepreneurs and an analysis of Government’s leading practices. We offer our thanks to Romanian Business Leaders Foundation and also to Wall-Street.ro for their support in realizing this study.
About Ernst & Young
Ernst & Young is one of the world's leading professional services firms with approximately 167,000 employees in 700 offices across 140 countries, and revenues of approximately $24.4 billion in 2012. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, Ernst & Young has been a leader on the professional services market since its set up in 1992. Our 500 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. For more information, please visit www.ey.com
