The Startup Ecosystem in Iasi and in Romania in General

Palatul Culturii Iasi
Palatul Culturii Iasi

This will be an easy and short blogpost for today because I’m writing about the startup ecosystem in my hometown, Iasi. It’s easy and short because frankly speaking there are not many things to write about. Even the idea that an ecosystem exists is debatable, because in order to have an ecosystem you need to have various interacting parts that work together as a functional unit.

The most important element missing in this ecosystem is the financial one: the usual mentality in Romania is one of conservation, anti-risk, people are reticent in investing in risky endeavours (and also to take them). There is even a proverb: “Capul plecat sabia nu-l taie”, idiomatic expression that loosely be translated to: “The sword doesn’t cut the bowed head”. I guess that this traditional belief stems from an historical context and a long lasting feudal system that had long lasting consequences. The peasants which were usually poor depended on their master, the boyar, he was the one that actually owned the land, the boyars in exchange were granted land rights from their master, the Voievode, the leader of the “country”. The Voievode in exchange had to rule as a vassal to the strong neighboring empires like the Ottoman Empire, the Polish-Lithuanian Commonwealth, Hungary and later the Austro-Hungarian Empire and so on.

Guess what happened to the peasant, boyar or voievode that had the “entrepreneurial gene” of risk taking, defying the status quo and wanting to be a “disruptive innovator”? He would get very hard times from his peers all the way to the top of the hierarchy.

Let’s take the Voievode Stefan cel Mare (Stephen the Great) for example. He didn’t want to bow his head to the neighboring empires. The result is that he fought all his neighbors, most of the time being outnumbered and outgunned:

“When talking with Muriano in 1502, Stephen mentioned that he had fought 36 battles, only losing two of them. When the enemy forces mostly outnumbered his army, Stephen had to adopt the tactics of “asymmetric warfare”.”

I highly recommend reading more on Stephen the Great, he was one of the greatest military commanders of all times. Unfortunately, he wasn’t the only example, most of the rulers had to be on the defensive for most of Romania’s history, those who were disruptive didn’t last for long.

I’m looking into the past in order to try to understand the present and I think it’s a very good point to start. Looking into the past I can’t say that I see much innovation hubs, progress, Renaissance. We progressed, obviously, but a slower pace than the Western countries. Dimitri Cantemir (1673-1723) is considered to be a Renaissance man but he came a bit late, Renaissance was already happening for a few centuries. The starting point of Rennaisance is considered to be Florence circa 1300. We don’t associate Florence only with great art stored in the Ufizzi Gallery, Michalengelo’s David, Brunelleschi’s architecture, quaint bridges over the river Arno, we also associate Florence with the most powerful family that emerged from it: the Medici family.

The Medici House was well known for it’s wealth and power that were generated by banking. Capital. Capital is the source of innovation and great art. We enjoy a lot of great works of art today due to the patronage of people like Lorenzo de Medici. Even though the Italian cities and the powerful ruling families were engaged in countless wars between them during the period that coincided with the Renaissance,  there still was progress and innovation due to capital and patronage. Leonardo da Vinci.

Anyway, I’m getting carried away and digressing a bit, I’ve always been fascinated by history. The point I’m trying to make is that it takes capital to finance any worthwhile endeavor and to take it to the next level. There is a lack of capital, venture capital, investors, angel investors in Romania, smart money. What is also lacking is the entrepreneurial mentality.

Update: I’ve written a post about Capital-intensive economy vs. Labour-intensive economy as an addendum

Citing from The Start-Up of You by Reid Hoffman:

If the local culture, institutions, and population do not engender an entrepreneurial life, the Start-Up of You strategies yield only a small portion of their real potential. An entrepreneur who is trying to build a business in an unhealthy society is like a seed in a pot that never gets watered: no matter how talented that entrepreneur, his business cannot flourish. As Warren Buffett says, “If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil.”

Alright. I covered the lack of capital in the local ecosystem. What about the other elements? As far as I can tell, we are only at the beginning of a more organized form of entrepreneurship. There are projects such as Startup Weekend Iasi, TBNR Accelerator – the first startup accelerator in Iasi.

What about the informational element? Information is considered power – and rightly so. Information comes from various sources like empirical experience,  mentors, people who dealt with similar situations before: books, podcasts, videos, potential untested information: theories, reasoning, logic.

My hierarchy of the informational pyramid, ordered by importance would be the following. Note: one’s informational pyramid might differ from another’s. For some, social connections are important and learning directly from the source has a bigger weight than reading books for example. For others, reasoning and formulating theories – and testing them using the Scientific Method – has a bigger weight.

Top of the pyramid:

Mentors – they have decades old worth of experience. They went through a lot of situations, life experiences, accumulated knowledge from other mentors and informational pyramids.

Semi-mentors – they don’t have that much general experience or that much life experience but they have condensed experience and success in a particular domain/area of expertise.  They can help you with only a specific problem.

Battle Tested Information: usually generated by the two categories above. Books, podcasts, videos, forum posts, blog posts and so on. You don’t have direct access to the people that created them, you can only shoot a message/phone and hope for the best. You go over the information source and hope that it covers your problem and offers a real solution to it.

Empiric Experience:  The toughest and lengthiest method to acquire knowledge. Can be quite costly in terms of time, energy and money, that’s why this type of information has a lower status in the pyramid. However, the byproduct of this category can be very rewarding and consist more than knowledge: materialized knowledge. You gain knowledge by rolling up your sleeves and taking action, you build, you test hypothesis, you experiment. You learn through trial and error. The experience and knowledge you gain here takes you to the path of becoming a mentor or semi-mentor.

Theories/Hypothesis:  Untested information, potentially generated from other untested information. Can vary considerably and be very subjective. If it’s deceitfully presented as Battle Tested Information by unscrupulous sources and fake mentors and semi-mentors it can lead to a downwards spiral when fed as a source to Empiric Experience – El Dorado.

As far as I can tell, the entrepreneurial ecosystem is lacking the top of the informational hierarchy: mentors with decades long of capitalist experience and even semi-mentors. It’s easy to argument this: Romania adopted the capitalist economic system for less than three decades, most of the “successful entrepreneurs” have “dumb money” and got rich by fraudulent ways and by exploiting the chaos that ensued from the revolution that changed the ruling regime and the economic system.

Also from The Start-up of You:

In healthy societies, people are more likely to share information, join groups, and collaborate on projects together—all activities that eventually magnify career opportunities, both for you and for the people who come after you.

I participated at the fist edition of Startup Weekend Iasi and guess what? Since then a few editions passed, I didn’t participated, but all of the weekend startups albeit judged as winners or not by a jury had the same fate: they materialized to nothing and were disbanded after a while. People drop their enthusiasm, attention and focus as soon as the week-end…ends. Because it’s safer to go the next day to work, isn’t it? Because it’s comfier to have the security of a nice paying job (most of the participants are working in IT and earning better than the average Romanian).

We do outsourcing for other entrepreneurs, the real ones, but we deceive ourselves and say that we too, are entrepreneurs. It’s safer and less risky to sell shovels to the gold miners. It’s true, not a lot of gold miners succeed, but the few ones who take risks and succeed against all odds are rewarded handsomely for their trouble. Can you call yourself a gold miner if what you are really doing is to sell shovels to actual gold miners?

This turned out to be a lengthier post than I was initially intending, wanted to write about the importance of concepts such as the National IQ and others. I will most probably do this in another post or I will update this one.

Update: Why your Nation’s IQ matters more than yours.