October 2006, Palo Alto. Imagine yourself at a startup event with the most prominent celebrities of the silicon valley. You start talking to some of the guests and then comes the moment when you have to tell everyone where you’re from: “Sofia, Bulgaria - a small, but beautiful country, at the heart of the Balkans.”
Blank stares. You try again: “It’s in the middle of the road between Vienna and Istanbul. One of the oldest countries in the world, with rich historical heritage.”
Maybe you get a few polite nods: “Aha.”
Ten years ago this was the reality for the Bulgarian entrepreneurs, but now things look significantly different. Last year our capital was proclaimed by Forbes as one of the top 10 destinations for business startups. Only three years after the emergence of the first venture capital funds, Launchub and Eleven have almost 200 startups in their portfolio. Recently we became witnesses of one of the biggest exits in the region, with 262,5 million dollars value, after the acquisition of Telerik by Progress Software.
It is logical to conclude that Sofia has created its so-called startup ecosystem – a network of entrepreneur organisations and events, funds and business angels, successful companies and entrepreneurs. Our country certainly stands out as an entrepreneurial hub in the region, although it’s still below the level of London and Berlin’s ecosystems, which bear successful companies world almost every year.
Bulgaria has made impressive progress in the last five years.
Despite the rapid improvements in our entrepreneurial environment, we still have much to do before we close the distance between the global start-up leaders and us. As an active participant in this emerging ecosystem, I think that a few things are missing here:
-
A few world-famous success stories
“The 10-second barrier” is a term used in sports, and it’s related to the psychological barriers, that a person puts ahead of himself when faced with an obstacle. For many years it was thought that running 100 meters for less than 10 seconds is impossible, but in 1969 Jim Hines managed to break this barrier.
The interesting phenomenon here is that Jim Hines does not remain the only one who has made it, and the number of sprinters falling into this category is increasing exponentially every year.
Currently, the Bulgarian entrepreneurial scene is looking for its Jim Hines. Yes, we have our Telerik, a company based right next to the golden heart of entrepreneurship at Stanford University, but unfortunately, their products aren’t used by the average person, preventing the company from reaching global popularity. The Bulgarian entrepreneurial environment will achieve more if we give a platform to other successful companies like Telerik who can manage to become a "household name".
Estonia has Skype, Finland has Nokia, Hungary has Prezi, Sweden - Spotify. It is time for us to join this list.This will give faith to new and not so new entrepreneurs, it will raise investors’ confidence in the country, it will allow us to hire more foreign talents and will provide us with various other benefits that are impossible to predict.
Estonia’s President likes to say: "Not everyone knows where Estonia is, but everyone knows Skype."
After the success of Skype, the startup environment in the country has become highly dynamic, thanks to the emergence of impressive companies such Transferwise, Pipedrive, Cloutex and many others. There is an undeniable correlation between the success of a company and the success of the community to which it belongs.
-
Still not entirely developed system of business angels
One of the most relevant formulas for business success is "advice from the right people and hard work by everyone in the company". Quite often the right people to give us this savvy are current or future participants in the company that we build, the so-called "business angels". They have experience in certain fields of the business, which we are developing and they are willing to invest their funds, often at an earlier stage.
Unfortunately, their number here is still insignificant. One possible reason for this is the lack of liquid capital – something that is not entirely true. In Bulgaria there is a considerable group of investors for whom investment of 50-100 thousand euros is not a problem.
A more serious problem stems from the mentality of the majority of old-school businesspeople.
It consists in the belief that for a deal to be profitable the investor must take a majority stake in the company. The consequences of such moves are harmful to both sides. In most developed economies worldwide business angels and startup funds avoid the purchase of a majority stake in the companies in which they invest. Behind this decision stands awareness of a problem: the motivation of the founders of startups falls dramatically when their sense of ownership and control is revoked. Businesses and investors suffer from such lack of motivation.
It is very likely to hear the following phrase from potential investors: "For 100 thousand euros I can buy a whole restaurant, and you offer me a small percentage of something that possibly would not happen at all."
Yes, of course, a large percentage of global startups fail, but the statement above shows an enormous misunderstanding of the investment processes, and in particular - the idea of risk in investment. If a startup succeeds, it will bring an exponential return on the initial investment. Besides, the investment in a new company is a noble act, especially in our local context. Here in the last 25 years, young people had gangsters as a role model. Now entrepreneurial culture attracts more and more young Bulgarians. This undoubtedly happens thanks to the work of the new generation startups and the foresight of business angels.
Today our country has unique, goldie-locks business opportunities. Unlike in Europe and America, the Bulgarian state has not seeped into every corner of society. I do not doubt that Bulgaria will evolve into a business centre of Europe in the next decade. If there is an ideal time to invest in Bulgaria, it is now.
-
Lack of environment and resources for each different stage of the "life" of a startup
6-7 years ago, when our ecosystem was still in its infancy what we missed was more publicity about what is entrepreneurship and startup. Since the advent of organizations like Startup Foundation, Start It Smart and ABLE, things started to move. Soon after that, dozens of other clubs and organizations with entrepreneurial orientation were founded, and they all began to organize various events on business topics.What was missing then was a physical place to gather all startup enthusiasts and the emergence of betahaus | sofia, the first co-working space in the city was part of the logical evolution of our ecosystem.
In spite of the large rapid steps taken towards our development, without capital, the start of any project is pushed down significantly.
One of the main reasons is that its founders fail to focus on it after the 8-hour working day, which provides a basic standard of living. The problem was solved with the emergence of the first venture capital funds, Eleven and Launchub, focused exclusively on investing only in recently started technology companies. Another problem surfaced a year later. We had funds that invest in startups (early stage and pre-seed: amounts to 200 thousand euros); funds which invest in already proven businesses (series A: amounts over 1 mln. euro), but there weren’t any funds that take the intermediate round, which is often the most critical for a startup (seed-sums between 300 and 800 thousand euros).
Ultimately, it seems that Launchub and Eleven will be able to fill this gap with their next fund. However, it will be primarily focused precisely on these "seed" investments, as well as the so-called "follow-up" investments in companies already existing in their portfolio. Which naturally raises the following question on the agenda: "What will happen with early-stage financing? Will a new gap emerge in our ecosystem?"
-
We build successfully but sell hard
The IT industry in Bulgaria is often mentioned as one of the main causes for the development of the entrepreneurial environment here. It consists of international companies with offices here - VMWare, SAP, Microsoft, HP; Bulgarian product companies which are positioned globally - Telerik, Chaos Group; a large number of outsourcing companies; as well as software Academies (HackBulgaria, IT Talents, Telerik Academy); recently even software University (SoftUni).
To mention all the players in this industry, I would need a separate blog post. However, among businesses still prevails the illusion of deep lack of software professionals for this huge and rapidly growing industry. Yes, undoubtedly for each start-up it is difficult to hire programmers, but it is often at least three times as hard to find experienced people to deal with business, sales or marketing.
There is a significant number of talented technology professionals in our country. The problem is that the products, being produced by our talents are hard to sell or feed with users. Therefore, no matter how good the idea is if it doesn’t reach enough people, the whole business built around it fails.
The truth is that currently there is a huge field for marketers, growth hackers, sales machines, etc. I'm sure all startups in Bulgaria need qualified personnel in these areas. To fight the competition on a global level, you need top people to attract the attention on you.
-
Foreign talent
Whether it is for foreigners who want to work here or Bulgarians who return to their homeland, the truth is that the number of talents with experience from abroad should be increased in order to be able to elevate our entrepreneurial environment on a global level.
In the world leading ecosystem, The Silicon Valley, over 52% of the founders of companies are immigrants. The cluster there acts like a magnet for some of the smartest people on the planet. So to have a world-famous startup, Bulgaria should attract more foreign talents in its companies. In the 14-member team of Enhancv there are people from 5 nationalities. This brings us extreme diversity, dynamism, creativity, exchange of ideas and international culture. I am convinced that each startup can increase the effectiveness of its internal processes if it attracts more talent from different cultures and countries.
I would like to say a few words for the Bulgarians abroad
Without categorising them as a separate group. Unfortunately, right now some of the most talented Bulgarians live outside of the country. The more of them return to Bulgaria, the faster our ecosystem will start to bear successful companies. This is evident from the example of Dronamics - still young Bulgarian startup, which a year ago won the largest entrepreneurial competition in Europe - Pioneers Festival. The company develops unmanned cargo aircrafts, which can carry up to 350 kg payload to a distance of over 2500 km. The founders of the project, the brothers Petar and Konstantin Rangelovi are exactly from this group of Bulgarians who decided to return here after completing their studies abroad. Svilen graduated in the US, and his brother left his job in Netherlands, when the Fund Eleven decided to invest in Dronamics.
The achievement of the company that inspires me most is the people who Petar and Konstantin Rangelovi have managed to "return to Bulgaria" and to make them join the startup team. Their Avionics Team and Lead Aerodynamics Engineer worked respectively in the US and England, but returned to Bulgaria to become part of the new company.
The two brothers did not cease to progress and are now trying to attract several Bulgarian engineers working in the Silicon Valley. "If Bulgaria was hopeless, we would not be wasting our time at all," Svilen told me recently. "We believe that Bulgaria is now as it was after the liberation - with the potential to become a regional industrial miracle with business, competitive free market, taking advantage of the capacity and experience of those who wish to return to their country and to rebuild a modern, healthy state together." I'm sure that if we see more people like Rangelovi brothers, the future would materialize in the manner described by Svilen.
-
Education in entrepreneurship
Undoubtedly, entrepreneurial flair is not something that can be taught at the university. This does not mean that the entrepreneurs do not need formal education. The basis of each successful company are the people with know-how and theoretical knowledge to complement the passion for the product offered. The founders of a startup must be well prepared. But what is quality preparation? Is the reading of "The Lean Startup" by Eric Ries sufficient? Is a founder prepared after visiting the Startup Weekend? Will it be enough, if as the owner of a startup I attended over 20-30 business events? And if I have accordingly filled up Business Model Canvas of several sample projects?
The truth is that over the last decade most young entrepreneurs in the country have plunged into the startup environment in precisely this way. This do-it-yourself approach is far from optimal. Imagine a curriculum that includes regular lectures from successful Bulgarian entrepreneurs, combined with the know-how events like Startup Weekend, hackathons, networking in hubs such as Cosmos, Puzl, Betahaus, SOHO, not just a visit to the Natural Museum. I am convinced that such holistic program for acquiring practical skills and synthesis of theory would be much more useful for today's entrepreneurs.
If we look again at the Silicon Valley, where universities like Stanford and Berkeley are the core of the startup ecosystem, we see that these universities have launched large companies such as Cisco, Google, Yahoo and many others. If in Bulgaria we bet on entrepreneurship in early and higher education too, the results will come shortly, and our ecosystem will grow quickly.
-
Courage and industriousness
In my last point, I want to analyse two qualities critical for an entrepreneur - courage and industriousness. These basic characteristics of any successful founder are often ignored. No, these are not the talents of those who are born lucky. Courage and industriousness are the product of constant self-improvement and conscious labour. The two qualities above are necessary for each of us, who has the ambition to establish a successful product company whose customers are mainly foreigners. Such success, especially for a Bulgarian company is achieved through a lot of hardships, perseverance and work. Building work processes and culture and developing them is essential. Let me refer to a saying by a close friend of mine to illustrate what has been said so far: "It is still considered as normal to be five minutes late for a business meeting." This is far from being right.
Remember, hard work is just one side of the coin. Courage is equally important and should not be overlooked. Courage comes in many forms - the courage to declare your crazy vision to the world; determination with which to talk to the next investor; courage to face the hegemon in the industry which is receiving funding amounting to half the GDP of our country; determination with which we believe that even a small Bulgaria can give birth to the new Instagram, Slack or LinkedIn.
Firmness and boldness with which to pursue our authentic dreams, not the generally accepted ones.
In conclusion, I want to emphasise on how crucial it is to work with your team as one. And not only, we need to create wider circles and increasingly dense clusters; we need to realise that entrepreneurs should support each other and exchange ideas constantly in order to maintain the dynamism of our ecosystem. There is no place for ego and narcissism in startup environments. A fact that undoubtedly you know for yourself, and consciously or not it has attracted you to our robust, strong, quickly growing environment. Envy is unnecessary for the entrepreneur - kill it. Get to know more about people, work together more, enriching each other.
Here is how you can join in the process immediately: share a picture of your team through Lucid, post an infographic about dogs through Doglar, order Domestina for your home, record a football game through Join the Players, buy a subscription for Ucha.se and give it to your little sister, reserve a cinema ticket through Cinexio, use Kanbanize to manage your team. Thus you will not only make the processes in your company more efficient, but you will also support a young Bulgarian company, that will most certainly support you back in its turn.
More and more companies, organisations and individuals realise that together we can achieve a lot more.
EDIT.BG, a newly created initiative also aims to connect all the pillars of the digital entrepreneurial environment in Bulgaria. Its first project is a national research that will reveal the potential of the digital sector in the Bulgarian economy. I'm sure it will be huge if not, it’s only up to us to create it. The responsibility lies within us, not to lose the inertia, built over the past few years because the results from the efforts of everyone in our ecosystem are yet to come.
