Venture capital is a relatively new concept in Romania, a country that has seen some spectacular tech exits in the last decade, including its first unicorn, UiPath. In this interview, Bogdan Iordache, General Partner at Underline Ventures explains why Bucharest is an attractive investment opportunity for funds both local and international.

Bogdan Iordache
General Partner, Underline Ventures

Bogdan has been working in venture capital since 2013, with Springboard, 3TS Capital Partners, MVP Academy, and Gecad Ventures. He is the founder of How to Web, one of Europe’s top 10 startup conferences, and the founder of Conectoo (exited). Bogdan advises early-stage startups on raising capital, building useful products, or crafting great pitch decks.

You are well known in Romania as a co-founder of How to Web, one of the biggest conferences on tech entrepreneurship and innovation in Central and Eastern Europe.

Before I ever founded How to Web, I was actually a tech entrepreneur. I started a business right out of college which failed in one year. Then I started a second one, Conectoo, which became one of the biggest players on the local market for email marketing services. I sold it to a subsidiary of eMAG, the largest e-commerce portal in Romania. So everybody knows me for How to Web, but that’s not where my professional life started.

What led you to venture capital?

Because of How to Web I was invited to support different accelerators and funds as a scout. HackFwd, for example, had a quarterly meeting in Berlin, where we would discuss potential deals. That was my first contact with the world of venture. Later I joined Springboard in the UK as their Program Manager for a while. Then, in 2017, I wanted to raise a fund with a bigger team and that effort failed. It took us two years and a half, so it was quite painful. Then, at the end of 2020, my first ever investment that I did, Green Horse Games, a community-focused gaming company, successfully exited and the founder got back to me and asked me if I wanted to start a fund. And I thought that’s a terrible idea. I was just recovering from the previous failed attempt to raise a fund with Gecad Ventures, and it took me almost half a year to start working on Underline because of that.

And now Underline Ventures has just successfully closed its first €20 million fund. Congratulations!

Thank you, it was a team effort, and I got a lot of help from my venture partners, Vlad Ionescu and Iulian Circiumaru, and some other people who were very supportive and backed me from the idea stage that we finally made it here.

Venture capital is fairly new to Romania. When did it take off?

The first venture fund active in Romania was 3TS Capital Partners. They had a regional fund that invested in a couple of tech deals in Romania between 2007 and 2012. They then raised a dedicated fund for technology in Romania, which operated from 2012 to 2016. I was part of this dedicated venture fund called Catalyst Romania. Our most successful investment was Green Horse Games which had a significant exit in 6 years.

There are six venture funds currently operating in Romania, two of them with capital from the European Investment Fund (EIF) and a handful of private-only venture funds such as Underline Ventures.

Why aren’t there more?

You have to take into consideration that Bucharest has become a popular destination for investments in Europe and that means there are several international venture funds that are directly connected to the local startup scene and doing investments here. In the last two years, Romanian tech companies have attracted investors from Atomico, Dawn Capital to Point Nine and Verve Ventures, of course. The capital that is available right now to Romanian founders is not limited by far to Romanian venture funds. Apart from funds, we also have a couple of really good business angel networks like TechAngels or Seedblink that are popular and do a lot of deals.

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What is the average Romanian business angel like?

The average business angel in Romania is a tech professional who has made money from technology or other areas. They want to invest in tech startups for two reasons: to make more money and to give back to the local industry and the startup scene.

What are the most active and successful fields for entrepreneurship in Romania?

I would say enterprise software primarily. The most successful companies to come out of Romania like UiPath, Bit Defender, FintechOS or Druid, have had large sales forces and have sold their technology to the enterprise sector internationally rather than on the internal market. Romania is very much driven by B2B rather than B2C business models and focused on the international market from the get-go.

Where do entrepreneurs come from in Romania?

Most of the time, they come from other companies. The most successful founders in Romania worked for other software or product companies in the past and that informs their decision making and management and leadership capabilities. I don’t think we have almost any university spin-off that has raised significant money. I think it’s very hard to make a successful company right out of college in Romania as the research environment is very academic-oriented rather than commercially driven. You don’t go into research with the assumption that one day you will spin out a startup.

Compared to 20 years ago, we have a stronger workforce in technology, and today’s entrepreneurs predominantly come from that area. In the 90s, most of the engineering graduates were leaving Romania. That started changing with the 2000s, once we joined the European Union and NATO. We saw a fast development of outsourcing companies, then big companies setting up R&D services in Romania. Now we are at the stage where we are seeing the growth of our own startups and product-focused companies.

How do people build up their startups in Romania?

I think incubators and accelerators have become less fashionable in the last few years. I have seen more interest in communities and, in particular, being part of larger startup communities that, over time, can put you in touch with the relevant people. I think that’s more valuable.

What are the challenges facing venture capital in Romania?

I can’t speak for others, but I think the biggest challenge that I tried to address when I started Underline Ventures is how to be relevant in the next 5 to 10 years. The Eastern European venture landscape is undergoing a deep transformation. It is becoming part of the European tech scene. That means that your competition is not only the next fund located in Bucharest, or in Sofia. Your competition is every seed fund in Berlin or London, and you have to be relevant in comparison to them. And if all you have is leveraging your personal relationships on the ground, soon that may no longer be enough. However, we’ve been building infrastructure and tools internally and I think we’re on the right track.