Until recently, those landing at Sofia Airport and willing to continue their journey to the capital’s center by public transportation were required to do something they hadn’t been doing back home for a very long time. Locate a kiosk, buy a paper ticket (cash only), and then, once on the bus, perforate it and hold on to it till the end of the journey in case of a ticket inspection. Those going through this arduous task might find it hard to believe, but they’ve just arrived at one of the fastest-growing start-up destinations in Southeast Europe.
Bulgarian start-ups accelerate
Now, things have changed. Visitors can pay for tickets on the go by card, but what remains unchanged is Bulgaria’s appetite for growth in its start-up environment. The 2022 “Startups & Venture Capital in South-Eastern Europe” report by the Bulgarian Private Equity and Venture Capital Association, together with Dealroom and the EIB Group, places the SEE region among one of the fastest-growing ecosystems in Europe. Since 2012, SEE start-ups have grown 49.9 times in combined enterprise value, significantly faster than its neighbors in CEE (9.1x) and the European average (12.1x).
Further on, combined Venture Capital funding of SEE-based start-ups has already reached over USD 1.3 bln in 2022, an all-time record. Since 2017, VC funding has grown 5.9x and shows signs of continued growth, the report says.
Among the other good news: Bulgaria ranks at the top three of developed venture ecosystems in SEE with more than 230 funded startups per 1M inhabitants, after Slovenia (450 start-ups per capita) and Montenegro (320). Further on, Bulgaria is the region’s leader in the number of locally-based Private Equity and Venture Capital funds. Currently standing at 18, this number is projected to grow further. Bulgaria has not only received the highest volume of VC funding in the region, but Bulgaria is among the leading investors in start-ups in neighboring countries, the study notes.
But things can always get better. 3Seas Europe asked three industry insiders what is hindering growth and how can Bulgaria’s start-up environment can further improve.
Jane Dimitrova, co-founder, Foodobox, the first mobile app in Bulgaria that fights food waste
The start-up environment in Bulgaria is a vibrant ecosystem of entrepreneurs, innovation, and technology. In recent years, this system has been growing at breakneck speed, thanks to several accelerator programs, events for entrepreneurs, private equity funds at different stages of a start-up’s life, and the return of many young people from abroad.
I see the desire to develop and the drive to ‘outperform’ the competition in the market. What this environment lacks is support from the government and the administrative sector.
The administration hinders development and creative thinking and turns innovative minds into bureaucrats. It relies mainly on private investors and grants to find funding, while start-ups create new business models to revitalize the economy. For a startup environment to succeed, there must be good conditions for one to develop. To a large extent, slow legislation also hinders growing companies that are heavily dependent on laws and rules created decades ago. If legislation is made more flexible, administrative burdens eased, and some of the best ideas that create jobs and value of strategic importance to the economy should also receive investment.
Leona Aslanova, CEO, Innovation Starter
The innovation startup ecosystem in Bulgaria is developing positively in terms of the total number of engaged participants – entrepreneurs, investors, business angels, consultants, trainers, policymakers with ideas in this area, NGOs, funding programs, etc., i.e., we are growing in terms of quantitative results. The issue of quality is more complicated. From our work at Innovation Starter, the first Bulgarian specialized innovation agency, we see some weaknesses in the environment.
Firstly, there’s a lack of an overall binding innovation strategy for Bulgaria that directly targets investment in products and services that permanently improve the quality of life in the country rather than simply creating personal wealth for entrepreneurs. This includes both an emphasis on the real competitive advantages of the Bulgarian economy, rather than wishful or imaginary ones, and a direct link between education and entrepreneurial activity as a driver of economic modernization.
That brings us to the next point. The objectives of investment funds and other funding programs are not synergistic, and they do not “pass the ball” smoothly, growing a company through all funding levels as one family. It is common for startups to experience serious difficulties for subsequent investment rounds and to be artificially delayed due to the difficult access to development capital in the Bulgarian market and the non-overlapping requirements of individual investors; they go around to a series of formats, funds, programs and get distracted in their search for opportunities.
Finally, there is a lack of facilitation and support from the state for rapid testing and implementation of Bulgarian development products and services for the benefit of society. The cumbersome regulatory framework, including the processes under the Public Procurement Act, corruption, and slow processes, are significant obstacles to the progress of Bulgarian companies in the field of innovation. Instead, they often perform well on the international stage. Still, in doing so, we channel their high added value outwards, which is not necessarily a bad thing, instead of inwards, where we have a huge need for qualitative progress in the environment and quality of life.
Assia Marinova, Chief Sales Marketing Officer, IT Management Consultancy BRIGHT
The start-up environment in Bulgaria is one of the most dynamic and fast-growing among the countries of Central and Eastern Europe, and this is no coincidence. A big contribution to this are experienced entrepreneurs and investors who pass on their experience and knowledge and support interesting projects with both financial start and personal commitment to their success. There is momentum in the ecosystem, and it’s great to see young entrepreneurs becoming bolder in making their dreams come true. More and more mentorship programs are supporting start-up entrepreneurs. I believe that access to business training can make a big difference in developing a successful and sustainable company. It should start from primary and secondary education and motivate children to dream of starting something of their own.