Eleven's office at The Roof. Photo credit Eleven

published 30 Mar 2015 by Petya Sabinova 11 minutes 39 seconds to read

Bulgaria’s JEREMIE experiment

As the pilot JEREMIE programme for funding startups in Bulgaria wraps up its first stage, inventures takes a look at what has been achieved and what is yet to come.

Back in 2011, “startup” was not even much of a concept in Bulgaria and to speak of an ecosystem would have been quite a stretch. Now, as the country is preparing to host some of the biggest industry events in the region - such as CEEDS by Webit or DigitalK - founders from as far as India and South Africa are applying to the local accelerator, while the neighboring countries are just warming up to the concept. So what was it that turned Bulgaria into the startup hotspot of the Balkans, and is there enough momentum to keep that title once the JEREMIE money is all utilised by the end of 2015?

The beginning

It all started with a risky decision – the local branch of the European Investment Fund (EIF) decided to “set aside a sizeable capital,” 21 million euros, and try a “very risky model”, as Stefan Tzalov from EIF explains. Accelerator Eleven and seed fund LAUNCHub, were created in the Fall of 2012 to put that idea into action.

JEREMIE Programme
JEREMIE (Joint European Resources for Micro to Medium Enterprises) is a joint initiative by the European Commission and the European Investment Bank (EIB) Group to improve access to finance for Micro, Small and Medium-sized Enterprises (SMEs) in the EU within the Structural Funds framework for the period 2007 – 2013. Its Acceleration & Seed Fund instrument supports SMEs at their seed and start-up stage through funding in the form of either equity or quasi-equity in order to enhance the access to financing to emerging entrepreneurs as well as to streamline the transition to a knowledge-based economy in Bulgaria.

The whole programme was a bold move, because Bulgaria was the first to implement an Entrepreneurship Acceleration and Seed financial instrument as part of the JEREMIE initiative of the EIF and EC. “Although 21 million may seem too little compared to the money spent by the state on useful and not so useful things,” Tzalov says, “this is also a lot of capital to put into an ecosystem which simply did not have enough companies to be supported by the so-called smart money.” The first goal of the twofold idea was to introduce a policymaking instrument consisting of an accelerator and a second financing stage – initially investing a lot of money in total, but in many companies with a little share in each and later supporting the more successful ones through seed fund investments. The second aim was to make sure that the money only went to the best companies and served to attract outside talent as well. They achieved both by opening the accelerators to foreign entrepreneurs to widen the pool, but making it a condition to have the company registered in Bulgaria.


Later on, in 2014, three more late-stage investment funds – NEVEQ, Empower Capital and Black Peak Capital were formed. Elvin Guri is head of Empower Capital, and explains the fund’s investment strategy as a VC/PE hybrid: “We are looking to invest up to 3 million euros per project, alongside sophisticated local and international investors, into growing Bulgarian industrial companies that wish to expand both locally and internationally, but we are also keeping an allocation to invest small amounts (250-500k euros per deal) in successful startups including those graduating from the portfolios of LAUNCHub and Eleven.” 

But in order for Elvin to have successful startups to invest in, the first two stages have to produce viable companies, and time wasn’t their best friend, as Dilyan Dimitrov, one of Eleven’s founders, points out. His team went through a whirlwind to set up a shop, prepare an acceleration programme, gather mentors and establish a selection process. Two years and nine cohorts later, the numbers sound mind-boggling: “For me, one of our biggest achievements is that we managed to create Eleven so quickly and make so many investments,” he says, “I recently calculated that we have invested in roughly one company per week, since we started”.

The stats

Both funds managed to do their job and more – Eleven and LAUNCHub have so far invested in almost 150 companies in total and they are on track for utilising the complete fund by the end of the year. As Dimitrov puts it: “Some 300 entrepreneurs started a business with our help, and for the most, this was their first business.” Add to that the 200 founders supported by LAUNCHub, plus the fact that the two funds have a different focus in terms of the maturity of the companies they support, and a pretty big crowd starts to shape up. Founders, on Eleven’s roster come from 13 countries and those on LAUNCHub’s from nine.

    Eleven   LAUNCHub
Amount invested to date           € 6.86 M             € 5.70 M
Startups supported to date     93   53
Average investment size   € 73,788   € 107,547
Additional investment secured   € 2.5 M   € 5.8 M
Number of founders   252   200
Nationalities of founders   13   9

Looking at it from a purely financial perspective, the figures are also quite impressive for a country on the lower end of the GDP table in the EU. Eleven have invested over 6.86 million euros since their first cohort in September of 2012, while LAUNCHub have put in another 5.7 million euros in the ecosystem. By the end of the year, the figures would be 12 million euros and 9 million euros, respectively. Not just that, but to date, LAUNCHub have also managed to attract another 5.8 million euros of co-investment funding, seeing through a couple of next rounds, including two Series A and a few joint rounds with participation from angels and other seed investors. Looking back, in lieu of an exit, LAUNCHub Managing Partner Lyuben Belov measures success through that funding. “The fact that a third of our companies found outside capital means that we are on the right track and the volume of the investments they attracted is a good measure of our success so far.”

The ripple effect

Put all the numbers together, and a different picture starts to form, one where each number has a face and those faces form a tight-knit community. “We did not realise at first how strong the community itself was going to grow to be and were very pleasantly surprised,” Dimitrov says. “We realised during our third cohort, that there was something there and that’s when we started trying to take more steps towards increasing the bond between the teams.” Teams that are now spread to various ends of the world, but proudly wear their “one of 11” t-shirts and have created an almost global network. 

With the community also came the ecosystem, and this is one change that everyone remarks on. “Compared to two years ago, when there was almost nothing on a massive scale, our efforts, and those of LAUNCHub and the community led to a number of changes – betahaus happened, several big conferences have been happening,” Dimitrov says. “All of this is a relatively big movement with ripple waves throughout the country, not just in Sofia.” Tzalov agrees: “The difference is huge – if back then we had just a few events and the Empower United award as a financing source, now we have the two funds and maybe an event a month, in every city. This is a huge development in terms of an ecosystem.” Belov and his LAUNCHub partner Stanislav Sirakov are quick to concur that the community is one very visible byproduct of all the hard work, and Sirakov is especially happy with the quality of external investors that the fund attracted to Sofia: “We worked closely with Seedcamp and with several venture capitalists, who came to Bulgaria, attended events and met with the startups.” Belov, ever the realist, quickly jumps up to a whiteboard to draw a Diffusion of Innovations curve and explain how two years ago the country’s knowledge of startups and tech entrepreneurship was in the innovators section of the population, but how it has now moved. “We are still barely moving a bit further than the early adopters, but this is a great achievement for such a short period of time.”

The fame

Events, of course, lead to buzz and the increasing number of foreign applicants is far from the only evidence that Bulgaria has earned a notable place on the CEE startup map. Some even call the country the Silicon Valley of the Balkans  – a description, which Belov feels is a bit much and Dimitrov says would be “a bit preposterous to claim it ourselves, but if people from other countries are saying it is definitely interesting.” While the exact tagline may still be up for discussion, there is no doubt that the two funds have brought about a major change. “[They] have put Bulgaria on the map as a regional leader in technology startup investment,” Guri says. “In addition, and partly thanks to the efforts of these funds and of the JEREMIE programme and its manager the European Investment Fund, the quantity and the quality of the discourse about entrepreneurship and its place in society has changed drastically for the better.” Sirakov concurs that the environment built in Bulgaria is a drawing force for entrepreneurs and with the “first movers” advantage, neighboring countries would have to work extra hard to catch up.

Money normally spent on grants [...] was used as smart money and investments in a new way that are not just subsidies but change the entrepreneur’s model of thinking...

Stefan Tzalov, EIF

The listed achievements are not just the talk of the tech community, however. Apparently, Sofia’s startup fame is becoming the envy of nearby politicians too. “This particular JEREMIE project is one of the more successful and well-working EC projects. It is very often that someone comes and mentions the programme as an example for what could be achieved with EU funding,” Dimitrov comments. During a high-level political meeting in Albania last year, every other sentence was ‘look at Bulgaria, look at what they did’, he adds. For Tzalov and the EIF, the biggest success to date has indeed been proving the concept of this risky endeavor. “Money normally spent on grants, given as subsidies to companies, was used as smart money and investments in a new way that are not just subsidies but change the entrepreneur’s model of thinking – they switch from receiving financing in exchange of a project to receiving financing in exchange of a share from a partner who will work with them to one common goal – an exit,” he explains. “The instrument is absolutely successful in Bulgaria, all of the countries around us have been saying they want to have an instrument like that and some even regret not using their European funding in such a way and are now talking to us about making similar instruments.” The EC is apparently also very happy with the experiment and, with the country’s absorption of EU funds often questioned, this is one of the few areas where commendations abound.

The future

We want to continue supporting some of the more successful companies in our portfolio and also to look for new opportunities, involving other investors too.

Lyuben Belov, LAUNCHub

With such a basis already built, everyone wants to keep the momentum going and both LAUNCHub and Eleven have plans for the next ten years. They aren’t just wishful thinking, either, because the EIF is on board. “We don’t want to stop the activity and we have seen great support from the government, despite its frequent changes of late, to continue because it has a very high added value,” Tzalov says. “We will surely start talking to the two funds later this year in more detail. But one thing we know we want to do is fit their working model more closely with that of a micro VC, so they can follow the companies with at least another round of financing.”

This is also along the lines of what the funds plan, as Sirakov comments that LAUNCHub intends to clarify its strategy more and focus its investments in a certain type of companies – both in terms of maturity  and in terms of area of expertise. Belov explains that their aim is to increase their tickets and enter later stage investment rounds and Series A, hoping to be able to invest upwards of a million in a company, rather than the current 200,000 euros limit. “We want to continue supporting some of the more successful companies in our portfolio and also to look for new opportunities, involving other investors too,” he said.

Eleven are adamant that they will keep the accelerator going, not just because they already have the expertise and want to keep building a community in the way a VC cannot, but also because: “entrepreneurs in this part of the world need a bit of a help in the beginning, a lot of them are first-timers, they haven’t had companies until now,” Dimitrov says. The changes they plan are for the subsequent stage: “What we want to address are some of the shortcomings of the current program, one of which is the investment ceiling of 200,000 euros.”

All in all, the future appears to be bright for the Bulgarian startup community and everyone involved is working hard to make sure that the end of this JEREMIE programme does not spell the end of the momentum too. But a word of caution is always in order, and this time, it comes courtesy of Empower’s Elvin Guri: “We all need to be mindful that entrepreneurship is a much wider subject than technology; that startups are not necessarily entrepreneurial; and that technology and invention are not the same as innovation and commercialisation,” he says. “The ecosystem, the whole venture capital and private equity industry that JEREMIE have kickstarted, needs to mature. It will necessarily have to go through some growing pains, setbacks, and failures. It is the main challenge for all of us involved in the industry: to move as quickly as we can along the learning curve."