Bulgaria has been well known as a "captured state", where highly profitable business is primarily linked to several oligarchy groups. But under that surface, a new wave of highly scalable and cost-effective innovative companies is coming, which might be an opportunity for the country to overcome its current situation and take over its economic freedom. The annual study Innovationship maps the high tech and digital businesses in Bulgaria, a sector which doesn’t differ much from the EU statistically.
Raycho is building microsatellites that might disrupt the space research. Spas is 3D printing skin tissue that is about to change the way clinical trials are conducted nowadays and accelerate the process by years. Dimitar is developing software that turns a smartphone into public transport ticket. Julian’s product allows a car to start only in case it scans the owner's fingerprints. Hristo can convert the children’s power on the playground into electricity. Svilen builds an unmanned aircraft that will redefine the cargo sector.
Companies like Endurosat, Printivo, Tickey, Biodit, Playground Energy or Dronamics have the potential to disrupt whole industries globally. Unfortunately, outside the ecosystem of startups and venture capitalists, too little is known about them, even in Bulgaria. The reason is partly the lack of visibility and data, and that is one issue the annual study Innovationship solves.
An ecosystem to watch
The ecosystem of innovative digital businesses, as well as the Bulgarian IT sector in general, exists laterally to the state, which means with minor support. However, between 2012 and 2016 the 20 Million Euro funds that actually catalysed its development were deployed to private fund managers by the Government.
In 2017 Bulgaria has a stabilizing and growing ecosystem, which consists of more than 35 co-working and hackerspaces across the country, up to 40 different organizations forking for promoting and supporting entrepreneurship, several pre-accelerator programs, a mix of funding vehicles - up to 10 funds and accelerators and a growing angel investment network. Today Bulgaria has an ecosystem of mainly micro (70%) and small (26%) digital companies.
It’s a highly positive trend that the Bulgarian digital business shows stable financial performance and exports to foreign markets, mainly EU (42%). Only 9% of those companies are still not generating incomes, 78% of them export and export accounts for more than two-thirds of their turnover.
Following the global trends, Bulgarian startups develop products and services based on technologies such as machine learning, blockchain, cloud computing, big data, biometry and others.
The most typical clients of Bulgarian startups are other businesses and corporations, which might partly explain the fact that local innovations are not widely known to a broader audience. Bulgaria still has no prominent consumer product such as Skype or Spotify, but there are fast growing and successful companies such as pClowd, which outperforms Dropbox by upload speed and security of storage or Chaos Group, the Academy Award Winner for special effects in Hollywood productions in 2017.
From outsourcing to products
Software Corporations have known Bulgaria as one of the great outsourcing destinations for years. Global companies such as IBM, VMware, SAP and HP employ thousands of Bulgarians as technical supporters, developers and engineers. Unlike ten years ago, when the outsourcing boom had just begun, now most of them have R&D teams and excellence centers in Bulgaria, developing core products. Even Viber has its core development team in Sofia.
An interesting finding of Innovationship is that the local Bulgarian startup ecosystem is following a similar trend. About 40% of the Bulgarian digital companies work in the outsourcing domain now, but there are substantial reasons to believe this is only a phase of the ecosystem’s development.
“There are a lot of examples of Bulgarian companies, Imagga for instance, that started as outsourcers, but after several projects turned into a product company”, Ivo Hristov, founder of the biggest IT portal in Bulgaria DEV.BG, says. An outsourcing business is easily started and requires less investment, which is the reason for the current state of the ecosystem. But, as Hristov says, this is an opportunity and no doubt soon Bulgaria’s startup ecosystem will let the world know about its products.
