GUEST POST - Eastern Europe Entrepreneurs - Possible Parallels to Jamaica’s Entrepreneurs
I’m quite happy to say that Mike gave me a wonderful opportunity to talk about Entrepreneurship in Eastern Europe following his excellent report on Jamaican Entrepreneurship. I would say that writing this article puts a great deal of responsibility on my shoulders, first because I have to match Mike’s article with an equally interesting one, and second because Eastern Europe is actually called home by a lot of countries with very different perspective. Lot’s of things to say, so let me make some sort of list that we can follow later if it’s the readers’ wish.
The business environment in general is very dynamic.
In Eastern Europe entrepreneurship started some 20 years ago. Without any warnings, the economies, business environments and people were forced to compete with the Western countries that built their business models in the last 40 years since WWII. This meant that we had to skip some steps and put everything on fast forward. In a way that’s good, because it saved us from experimenting the harder, longer way. But it also adds a lot of stress, you have to be competitive in the shortest time available and usually with less resources.
Result: Entrepreneurship changes reality. New businesses, infrastructure investments are growing at a tremendous rate. Not having an Entrepreneurship legacy made place to business innovation.
Foreign investments
Eastern Europe has witnessed massive foreign investments in the last 20 years for a number of reasons, like cheaper labor near shore and also being an easy to access market for sales. But from the entrepreneurship point of view, foreign investments are both friends and foe. Friends because it helps develop local entrepreneurship, foe because it uses up a lot of workforce and if you happen to be in a competing business you need to be up to the challenge.
Result: Quality workforce is hard to find. A lot of local businesses went belly up.
Plenty of space to invest. But most businesses start on a bootstrapped model
I still don’t have a decent restaurant in my home area, nor a good spa. And if you go anywhere outside big cities you will get that many things are missing. While I could think about 3 viable businesses that could be developed in Bucharest (where I live) based on clear and loud needs, financing, VC, or Angel Investors are not so common around here. Taking out major investments that are done with Foreign investments or European funds, I believe that most of the businesses start on a boot strapped model (better yet, a TPing model), without an outside source of investments.
Result: While there are a lot of businesses that can be started, Eastern Europe is not as Entrepreneurial as you would expect. Most people are afraid to take the risk and prefer a job.
Social differences are huge
Note: that might be more or less specific to Romania than other Eastern European countries. For a country like Romania that has wages way below Western countries, you would be amazed how many luxury cars you see on the street. That’s a sign that due to the fast forward motion of the economy, innovation and relatively low competition, chances to make a million $ in Eastern Europe in a short time are much higher than anywhere else. Let me put it this way. If you open a recycling factory somewhere in the Western Europe, well, you will probably be one of the many. Here will make you one of the few, and guess what, you just have to wait for orders.
Result: Luxury car industry it’s very successful. It’s easier to get rich here than anywhere else. Of course hard work is necessary.
Ever changing legislation makes planning harder
You will have to imagine at least 2 things: 20 years is not enough to put everything in good order and a variable level of corruption (which is actually a result of “Social differences are huge”. Most foreign companies that invested in Romania had complains about changing legislation. Furthermore, Eastern Europe is really an atypical market – it doesn’t always follow the rules. I mean would you expect to see Ferrari on sales here? Or Maserati? Well, their predicted sales volumes were done in a couple of months.
Result: Risk can be higher, there is no saying how things will work in 5 years from now.
This list is far from being complete - I could be talking for weeks about the business environment over here. It might not even be very accurate because of course it’s my personal view, but at least 3 things are to be remembered: fast forward, plenty of things to do, atypical market.
*****
Cristian Dorobantescu
Romania
http://www.energybyte.com/blog/entrepreneurship-changes-reality
Tags: bucharest, cristian dorobantescu, eastern europe entrepreneurs
September 20th, 2008 at 12:56 pm
This was a really interesting read. I find it interesting how foreign investment impacts the entrepreneurial environment.
September 20th, 2008 at 1:47 pm
I love to hear about business in other countries. Most of my visits are with my family on vacation and I have epiphanies that I bring back and do in the US. From your post and the one on Jamaica, I have a new perspective on creating businesses abroad. Good post Cristian and thanks Mike for keeping the flavor changing.
September 20th, 2008 at 3:27 pm
Scott,
Indeed the reality is that while foreign investment creates jobs on one side, it kills the local not so efficient businesses and make other people to lose jobs. For example, while Renault invested in the Dacia car factory here, and managed to create a low cost car, the Logan, that addresses a specific target and sells like gold, I certainly miss some local brand products which were replaced by cheaper (and not necessarily better)products. Also, if we are talking about IT, companies like Oracle, Adobe and others opened offices here, attracting the best workforce, but these investments are just huge scale outsourcing projects in my opinion.
Chase,
Usually we tend to think and evaluate things on the perspective we’ve got from the environment we know. But the perspective and environment is inexplicable different depending on the country and region and as a result, the reality is different.
September 20th, 2008 at 5:11 pm
I think the irony is how government in all countries inserts itself to “help” entrepreneurs. The more they “try to help” the worse things get. Government should provide law enforcement, education and perhaps health services… but jeez, they need to get the freak out of the way of the entrepreneur.
- Mike
September 21st, 2008 at 2:18 am
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