Caution supplanted buoyancy in the tech ecosystem in 2022 and will continue to do so in 2023

Bucharest, 9 January 2023 – Judging by the first opinions summarized, 2022 was a challenging year for the tech start-ups. In an internal survey, the members of TechAngels, the largest network of angel investors in Romania, described 2022 as a reset year and even a “brrr” year. Last year was a good year for less than 15% of the investors.

Investment rounds worth more than EUR 300 million were initiated (from public sources, announcements by start-ups, platforms or investment funds), but there were occurrences of rounds not materializing or closing at lower-than-expected values.

The war in Ukraine is yet to come to an end, the energy crisis persists, the need for digitization continues to be high, AI was in the spotlight since the very start of the year, tech security and service customization are trends that sometimes clash. As usual, predictions are risky and even more so in this environment.

Mălin-Iulian Ștefănescu, President of the TechAngels Association, believes that “things are for the time being as uncertain as they were in the last quarters of 2022, which will favor already funded start-ups (if they are capitalized enough) over new investments, so I expect to see follow-up rounds rather than new investments.” The president of the individual investor association also said that (cautious) growth rounds may occur for companies that manage to perform well.

However, if stock markets rebound and indicate that economies are heading the right direction, then the appetite for investing in start-ups will also improve in all categories.

An analysis of the individual opinions voiced by the TechAngels members showed that about one third of the investors are seeking to expand their portfolio, while the rest manifest increased caution to the effect that they will either decrease their investment volumes or stand by to see how the situation evolves in the short term.

As to the developments in the tech ecosystem, there is a perception that the relationship between the local angel investor groups is very good and will likely continue to improve. “I believe that the various groups of business angels in Romania will continue to collaborate and invest together, because they share the same values and because there aren’t enough business angels anyway,” says Ștefănescu.

Another 2022 trend noted by the investors was a decrease in the number and quality of start-ups compared to previous years, probably because of the pandemic and the economic uncertainty it generated.

“The appetite for new investments has diminished both in Romania and in Europe, but, on the other hand, we did notice growing interest in specialized events, expanding communities and dialogue,” believes Mălin Ștefănescu. According to him, Romania still lags behind other European countries as far as digitization is concerned (both governmental and private entities), which has a negative impact on the size of the local market (which could be significantly larger), but also creates more opportunities. Because of the insufficiently large local market, Romanian start-ups are rather driven to scale up and expand regionally. “Unfortunately, I continue to believe that most of the start-ups that do not wish to grow beyond our country’s borders are rather not worth investing in from an angel investment/venture capital standpoint,” says the TechAngels President.

TechAngels is a network of more than 120 investors, who make decisions individually, but may collaborate and share experiences or decided to syndicate certain investments. “Personally, I will keep on looking for good start-ups, but I will carefully choose where I decide to invest in the near future. I will try to help the start-ups in which I have already invested to successfully navigate this period and be prepared for successful investment rounds once things improve,” concludes Mălin Ștefănescu.

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The beginnings of angel investment in Romania.

Find out how TechAngels was born and raised.

Read the brief history of the first and largest network of angel investors in Romania as seen by investors and startups.

As Malin Stefanescu, TechAngels President put it: “Learning from your mistakes is great, learning from other’s mistakes is definitely cheaper.”