Last year Bulgaria ranked 44th out of 130 countries in the Global Entrepreneurship Index. The index positioned Bulgaria just ahead of Hungary but behind Slovakia, suggesting that Bulgarians have a good attitude towards startups and entrepreneurship, compared to other EU states.
Financially friendly environment
Low labour costs and rent prices, coupled with highly-skilled people have been just some of the incentives for big companies to invest in Bulgaria. This is spiced up by a 10% corporate income tax (the lowest in the EU), a stable currency and great competitive costs of labour. This environment has helped Bulgaria rank third in the number of investments in startups, according to Elitsa Panayotova, Sofia Tech Park CEO.
This trend is relatively new for a small country in CEE, but investments have been flowing through funds like LAUNCHub, Eleven and NEVEQ. As part of the JEREMIE EU funds programme, Eleven and LAUNCHub have 21 million euroс to distribute among hundreds of companies. Over 9 million euros have already been invested in the past two years.
Bulgaria has already been recognized as one of the most promising startup destinations in the world
Back in 2011, the Bulgarian startup scene was just waking up. Fast forward to 2015 and the place is abuzz with events, money, and initiatives around the country. In just a few years, the ecosystem grew, prompting some to speculate early on that this was another IT bubble waiting to burst. It scaled up fast with funding from LAUNCHub and Eleven, and venture funds like NEVEQ, with the help of some additional accelerator programs (Start it Smart, StartUP).
Since the beginning of the year, 12 startup teams have won a spot in the third round of the Start it Smart program. LAUNCHub and Eleven have already geared up for a fresh batch of startups in their last rounds, before both funds refocus.
Sofia is busy with events almost every week and the scene is expanding to other cities. Since the beginning of the year, Sofia has hosted four separate StartUp talks, organised by StartUp, and a Demo Day for the Start It Smart pre-accelerator program. Not to mention the casual meet-and-greets like Silicon DrinkAbout and Open Coffee. One of the biggest events of the year, DititalK, has just passed and co-organiser LAUNCHub is already bracing for next year.
“Funtopia” at Paradise Shopping Center in Sofia, Bulgaria. Photo Credit: Walltopia
Bulgaria’s startup scene has already had its success stories. Flipps and Emailio have already set up shop in Silicon Valley. Flipps reached $10 million in market value in just over two years.
Telerik made the biggest exit in 2014 through a $263 million acquisition from Progress Software. Walltopia, founded in 1998, now has offices around the world, a 10,000-square-meter factory and is currently building its own headquarters in Sofia Tech Park.
Chaos Group, which started as a two-man gig, now has offices in Europe, US, Japan and Korea. And PCloud, Auxionize, and Siteground are about to hit it big.
There is still hunger for investment capital. LAUNCHub and Eleven started simultaneously, but funding is insufficient. The segmentation of the EU market allows for many investments, but they are scattered across borders and are usually small-sized.
Another issue is government involvement. For Emiliyan Stanev, founder of Infozone, the Bulgarian government plays no active, positive role for developing an entrepreneurial ecosystem, especially when it comes to fast-growing companies. “The environment is underdeveloped, it does not provide stimulus for those crazy enough to make business with their own money, effort and resources,” he says.
Laszlo Gulyas of EIT ICT Labs sees market size as the biggest challenge for Bulgarian startups. “Companies target their local market first, it is their natural instinct, but they are soon limited and even good ideas get killed,” Gulyas says.
The lack of sales, marketing and business development skills is another challenge, according to Stephane Gantchev from LAUNCHub. Just like Stanev, he thinks the government could make more efforts to support initiatives.
[Bulgarians] are fresh. They try to prove their excellence, that’s a good thing.
The sheer volume of untapped tech potential means there is a solid ground for further growth. “We are a tech nation, we have lots of talent, but it is not inexhaustible. We are a nation of geeks, tech people. Nevertheless, we need serial entrepreneurs to up the ante,” Gantchev says. “[Bulgarians] are fresh. They try to prove their excellence, that’s a good thing,” Gulyas adds.
As far as MoveBG founder and former HP exec Sasha Bezuhanova is concerned, Bulgaria “has already been recognized as one of the most promising startup destinations in the world.”
Zoom in on DigitalK
EIT ICT Labs event at DigitalK; Photo credit: Heisenberg media
More than 60 startups joined a competition on the sidelines of the DigitalK event, held 21-22 May by Capital newspaper, LAUNCHub and NEVEQ. An investor jury from Point Nine Capital, Microsoft Ventures, Connect Ventures, Seedcamp, Day One Capital and Index Ventures selected four startups, who then pitched their ideas to the attending crowd. Snapwise won the competition with a live demo of their uCiC app and left Bee Smart second.
EIT ICT Labs also hosted a side-event for startups, where they announced their Idea Challenge contest with a prize fund of 40,000 euros. The event invited startups that are looking for media exposure but don’t know how to do it. Colette Ballou, Ballou PR and and Robin Wauters from Tech.eu, gave pointers on how to pitch to journalists. Wauters stressed that startups should “do their homework first,” before reaching out to a journalist and Colette Ballou reminded startup founders that not everything that happens to a startup is newsworthy.
This story is brought to you in partnership with EIT ICT Labs.