Romania: Incubating businesses, supporting entrepreneurship


Ioana Ghila of the Mures Business Incubator crafts hand-made jewelry. (Photo: UNDP Romania)

In 2006, Csaba Kiss was thinking of launching a box manufacturing company in a new business incubator in Sfantu Gheorghe, Romania.

Business incubators, which host start-ups and early-stage firms, provide office space, start-up grants and consultancy services. The government was promoting them as a vehicle to stimulate new investment and encourage entrepreneurship – but in 2006, such incubators were new, and many people viewed joining one as a high-risk endeavour.

Highlights

  • The business incubators have created 450 new jobs, 47 percent of which have been filled by women.
  • By the first quarter of 2012, the business incubator network consisted of 10 incubators, most in disadvantaged counties in central and northeast Romania.
  • The Business Incubator Programme began in 2006 with a budget of US $800,000, funded by the governments of Romania and Japan, UNDP and local municipalities. In 2010 the government increased annual funding to $2 million.

Despite his reservations, Csaba took the risk. He launched his box-manufacturing company, TriBox, in the incubator with two employees and $10,000 in capital. He spent three years in the facility, where he received a $7,000 grant, subsidized rent, free access to business development advice, and the opportunity to collaborate with 19 other start-ups.

In 2009, TriBox became a self-sufficient business and left the incubator. It employed 11 workers and had robust annual revenues of $732,000, despite the global financial crisis of 2008, which had sent many businesses into bankruptcy.

“I wouldn’t turn any order down no matter how large or atypical,” he said, adding that he even has a contract with BMW, the German automaker, to supply a nearby factory with boxes for auto parts.

A coordinated enterprise

TriBox is one of 200 businesses that have received assistance from a network of incubators established between 2006 and 2012 with support from UNDP, the Romanian National Agency for Small and Medium-sized Enterprises (SMEs) and local municipalities. The latter provided the land and often the space for the business incubators.

UNDP coordinated the programme, including hiring administrators for each incubator, overseeing the recruitment of companies, providing training, reporting on results, and assisting administrators with financial and operational management. Each incubator hosts between 16 and 24 businesses for a period of three years, and businesses are expected to leave the incubator after the three-year cycle.

By 2009, the survival rate among small and medium-sized enterprises in incubators in Brasov, Sfantu Gheorghe and Alba lulia was 82 percent.
Out of 56 start-ups that were in the incubators at the time, all but one completed the three-year cycle despite the severe economic slump. The three business incubators grew in size during the first three years, seeing a six-fold increase in revenues of hosted firms.