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News from Members EY Barometer - Entrepreneurs Speak Out: 88% of Romanian Entrepreneurs Consider It Difficult to Access Funding

EY Barometer - Entrepreneurs Speak Out: 88% of Romanian Entrepreneurs Consider It Difficult to Access Funding

by EY February 13, 2014

Website www.ey.com

  • 88% of entrepreneurs consider it difficult or very difficult to access funding
  • 72% believe that the regulatory and tax environment deteriorated in 2013
  • 59% say that Romanian society does not support entrepreneurship
  • 40% believe that coordinated support of specialized organizations has improved in the last year
  • 58% of entrepreneurs argue that entrepreneurship education has improved in 2013

88% of Romanian entrepreneurs believe that access to funding is difficult or very difficult. Meanwhile, nearly half of entrepreneurs (48%) say that access to funding has deteriorated in 2013 compared to the previous year, while 27% see no progress, according to the EY study - Entrepreneurs Speak Out: The Romanian Entrepreneurship Barometer 2013.

Entrepreneurs Speak Out is an annual barometer conducted by EY and reaching its second edition, which analyzes Romanian entrepreneurs’ perceptions on five fundamental factors for the development of entrepreneurship: access to funding, regulation and taxation, entrepreneurship culture, education and coordinated support.

   "Entrepreneurs play a vital role in any economy’s health. Therefore, it is important to measure   their perceptions on the most important factors that support or not entrepreneurship, while all  stakeholders interested in its development (authorities, entrepreneurs themselves, financiers, corporations) to sustain entrepreneurs’ priorities. Our study shows that these priorities are primarily in the field of taxation, access to funding and on society's perception on personal initiative." says Bogdan Ion, Country Managing Partner, EY Romania.

Compared to last year's edition, when funding sources such as venture capital, angel investors and private equity were unfamiliar, these financial instruments are viewed this year as having the most important potential impact on entrepreneurs’ businesses, after bank loans.

Regulation and taxation - the first two priorities are stability and regulatory simplification
Despite the difficulty of finding funding, entrepreneurs do not consider financing as the most important obstacle in the set up and development of companies in Romania. The uncertainty of the fiscal environment, bureaucracy and tax rates are considered the biggest obstacles (43% of responses), while 87% of respondents said there is no visible progress in the last year: 72% believe that the regulatory and taxation environment deteriorated in 2013 compared to the previous year, while 15% see no change.
Most Romanian entrepreneurs (94%) believe that ensuring the stability of the regulatory and fiscal environment and simplifying laws (91%) are the two major priorities for the development of entrepreneurship in Romania, even more important than reducing tax rates.

At the same time, entrepreneurs have expressed the need for a direct stream of communication with authorities in order to express their problems and concerns about the regulatory environment, indicating the need of entrepreneurs to be consulted when laws impacting businesses are issued.
Entrepreneurial culture: Romanian society does not support entrepreneurship
Entrepreneurs' perceptions regarding Romanian mentality on entrepreneurship are also negative: 59% consider that Romanian society does not support entrepreneurship, compared to 43% of entrepreneurs in the EU and 29% of respondents in G20 countries.
In terms of positive sentiment towards entrepreneurs, Romania is ranked 18 of 21 countries surveyed in the Entrepreneurship Barometer (Romanian and G20 edition), with only 35% of answers.

Asked if they see progress in how Romanians value entrepreneurship, the answers are quite balanced: 26% say that perception has deteriorated in 2013 and 35% think it has improved, while the rest see no change.
It is worth noting, however, the perceptual asymmetry between entrepreneurs under 40 and those over 40 years: for almost half of young entrepreneurs (46%), the perception towards entrepreneurs has improved in the last year, while mature entrepreneurs consider in the highest percentage that this perception has deteriorated (34%), which may translate into a greater willingness of young people to become entrepreneurs, as perception towards this career option is improving among younger generations.
Romania surpassed only by Brazil regarding risk tolerance
Fear of failure remains, however, one of the most important barriers in approaching entrepreneurship. Only 14% of respondents believe that Romanian society tolerates failure in business, while 81% believe it is a barrier to future business projects, a failure in career or indicate lack of necessary skills. Only 5% of respondents think that business failure is seen as a learning opportunity. Of a total of 21 countries analyzed, Romania is positioned second-to-last regarding positive attitude towards risk and failure, followed only by Brazil.

Similar to last year's edition of the barometer and in line with the responses of entrepreneurs in the European Union, Romanian entrepreneurs believe that improving the dissemination of entrepreneur’s success stories would have the greatest impact on the perception of entrepreneurship in society (52% of respondents).
Entrepreneurial education: 58% of entrepreneurs believe it has improved in 2013

The only majorly positive perception of Romanian entrepreneurs who answered EY’s survey is on education: 58% of entrepreneurs argue that entrepreneurship education has improved in 2013. Although the effects of education are not seen immediately, it should be noted that, in 2010, entrepreneurial education has become a compulsory subject to be studied by high school Romanian students.
In addition to formal education, in developing their business, entrepreneurs also need counseling based on personal experience from mature entrepreneurs who have met and overcome the typical financial, operational and mental obstacles. 80% of experienced entrepreneurs that answered the survey said they offer organized or informal mentoring to new entrepreneurs.

Coordinated support: government measures and entrepreneur clubs are seen as having the greatest potential impact
Beside mentoring, entrepreneurs also need coordinated support provided by specialized organizations such as clubs and associations of entrepreneurs, informal networks of entrepreneurs, government agencies, business incubators and accelerators. Most entrepreneurs, 40% consider that the help offered by such associations has improved in the last year. Young entrepreneurs (under 40 years) have a more positive perception: almost half (48%) believe that coordinated support experienced a positive development in 2013, compared to only 35% of mature entrepreneurs.
Asked what action/organization would have the greatest impact on the development of entrepreneurship, business leaders indicated the government, through programs specially dedicated to start-ups and entrepreneurs, demonstrating the high demand of Romanian entrepreneurs that their ecosystem to be strongly supported by the state government.
In addition to government programs, entrepreneurs indicate business clubs and associations as equally important for entrepreneurship development in the long-term. Thus, 45% of respondents say they are members of clubs and associations of entrepreneurs, a percentage lower than in Europe. In the EU, 63% of entrepreneurs belong or have belonged to such organizations in the past three years.
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About Entrepreneurs Speak Out: The Romanian Entrepreneurship Barometer 2013
EY Romania’s study assessing the perception of Romanian entrepreneurs on the local business environment is based on an online survey examining the perceptions of 106 Romanian entrepreneurs, face-to-face interviews with 10 Romanian entrepreneurs and analysis of more than 200 best practices and government initiatives in G20 countries. Of the respondents included in the survey, 25% own businesses with sales below EUR 1 million, 38% businesses with sales between 1-10 million EUR, 9% between 10 to 15 million EUR and 28% revenues exceeding EUR 15 million.

About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. 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, EY has been a leader on the professional services market since its set up in 1992. Our over 450 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. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.

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