NEST sits on $1.5m, waiting for viable projects

NEST, a Romanian IT business incubator, drew the line after six months of activity. The outcome? Almost a failure: $50,000 spent on promotion and 30 projects submitted for funding, but none of them viable. One million and a half dollars stuck in NEST’s treasury waiting for companies worth the incubator’s investments.

When it was launched in October last year, NEST officials announced their goal for the first year was to fund six IT projects worth $250,000 each. The failure of the business incubator, six months after its start can be explained by Romanian entrepreneurs’ incapability to put together attractive business plans, NEST officials say.

On the other hand, the managers of certain domestic IT firms, although badly in need of funds, are torn up with suspicion: “What guarantees do I have that once I take my idea up with them, they wouldn’t steal and capitalise on it and leave me out afterwards?”

“We’ve got 30 IT business projects so far, six of which were thoroughly discussed and only two are being considered now – one for a computer games producing company and one for a medical software developer.

Most of the projects failed in the first stage as they did not meet our criteria,” said Raluca Popescu, official in charge with investments within the Romanian Post-Privatisation Fund, part of the funding consortium of NEST.

“We’re expecting to succeed in opening a funding worth about $500,000 for two projects regarding a computer games producing company and a medical software company, some time in the next four months,” Raluca Popescu specified.

The low number of applications selected by NEST is mainly due to the companies that do not know how a business plan should be presented, although they have a lot of specialists to assist them in the process, Popescu comments.

As a result of the feeble interest the companies showed in financing from NEST, the funding consortium comprised of specialised companies in the field and investment funds decided to stop promoting the incubator, but it will keep waiting for IT business projects.

“NEST incubator stays open. We’re looking for projects that offer competitive advantages, have growth potential and require financial assistance,” Raluca Popescu explains.

NEST programme, officially launched by the Romanian Post-Privatisation Fund early last October stipulated a start-up cash inflow of up to $250,000 for every project admitted, logistics support (office space with all the facilities) and complex specialised assistance (management, IT, marketing, human resources).

For each new company set up based on this funding, NEST was supposed to have 51% in the incubated firm, while for those already set up NEST is negotiating its stake in the share capital.

The funding consortium is comprised of companies specialised in the field and investment funds, among which the Romanian Post-Privatisation Fund, a-anacom (Germany), Advantage Software Corporation (Romania), Roland Berger & Partners (Romania) and Hill International (Romania).