For the last three years or so, the Bulgarian capital Sofia has been making quite the mark on the startup world. In 2012, the European Investment Fund earmarked €21m for two venture funds – LAUNCHub (seed investments) and Eleven (accelerator) – as part of the JEREMIE programme.
Coupled with their now-famous 10% flat rate of corporate tax, Bulgaria has become very appealing to corporations and startups alike, with Sofia becoming the focal point not only for Bulgaria but across Central and Eastern Europe.
What’s the status of Sofia now and how have things changed?
Alex: I think we’ve done quite some development for the past 3-4 years. Before that it was something very new, very fresh. There was no access to capital really for early-stage companies. There was no infrastructure. [Now], I think it’s a booming ecosystem already and, we have … all the ingredients: we have infrastructure in terms of co-working spaces; we have education, organisations; we have large conferences and most of all we have Stephane Gantchev and [access to] early stage capital.
Stephane: A few years ago there were not that many opportunities for funding and … starting something on your own was, you know… I mean you had to really have guts to do it because, everything was against you: public opinion, your parents [laughs], your friends… so this changed for sure.
What’s the most noticeable change in the people pitching startups?
Stephane: I describe them mainly as… good tech teams [with] 1 – 3 tech co-founders. They rarely have business people… or the person that is supposed to be the business person is maybe not the strongest.
There is definitely more maturity in the companies that talk to us and pitch us, compared to a year and a half or two years ago. People were a bit more naive. Now at least, there are some basic checkboxes before coming to pitch at a startup competition or requesting a meeting with us. I think Alex would agree that it’s kind of a trend that this startup culture, you don’t go and pitch without finding a co-founder, or you don’t go and pitch without having actually quit, or at least starting the procedure of quitting your current job. People are learning.
Alex: I would say it’s a small, cosy community, very tightly joined together and people know each other and you have really easy access to all contacts, all networks that you need. Every one of us can introduce you to every big player in the country and so that’s something really cool. That’s something not that typical for larger hubs and also as I said in the beginning, we have all the ingredients! We have infrastructure, we have access to capital, we have even institutional support in terms of taxes and this famous 10% flat tax is very appealing to international companies. And of course the talent. Everything is there! We just need more bridges, we just need more companies from the west to come here.
Stephane: If I have to add something I would say I think Sofia is the right size. It’s more or less 2 million [people], you’re not stuck in 2-hour traffic jams. And then Bulgarians, we’re not the most famous in terms of helping each other, in general this is our reputation. We’re more like ‘this guy is successful, we’re going to go and tell the tax authorities about him’ [laughs] but in the tech community, in the startup community… well, there are a few exceptions but in general things are very, very cool!
People know each other, people support each other, people can easily make intros. In this startup community, they’re a bunch of hustlers, they’re a bunch of people who are well-connected. So if somebody arrives in Sofia and says I need an intro to the three biggest telecoms, to the three biggest retailers and to this and that company and then basically out of Alex, myself and a couple of other friends, we have their phone numbers. It’s that simple.
How does Sofia compare to other startup hubs?
Stephane: There are a few more things that have to happen here so first, it would be difficult really to compare ourselves to London because historically, it’s a cradle of the European capitalist system so therefore entrepreneurship, they learn this in school.
Alex: Presentation skills and debating is something so traditional there.
Stephane: Exactly. So you cannot really compare London in terms of all the big corporations that are there and the financial, so… we’ll be a little bit more different. We’ll be a little bit closer to Berlin as compared to London, because Sofia, historically also Berlin, German corporations are sometimes in Munich or in other cities. Berlin is now some kind of a new ecosystem that is developing over the last few years, so maybe we’re like a year or two years behind Berlin but catching up. What we still don’t have is bigger companies. Companies that managed to grow and managed to raise Series A, Series B etc.
We still don’t have 10 successful exits, we just have 2 or 3. A company called Telerik, that was [recently] acquired by an American company for $260m so this is not only big for Bulgaria, but also for the CEE sector, so it’s a significant exit but actually what we need is 10 Telerik exits and for all of those exits… to start something new, this serialisation of entrepreneurship.
Alex: [Telerik] built up an academy where they taught software development to people. They were building software engineers in their company which is amazing, so this kind of corporate social responsibility has not yet developed yet in Bulgaria.
What we realised and what guys like Telerik realised quite quickly is that because we’re a relatively small country, even if you need 10 people it’s already a challenge to find good people. We’re in a relatively techie country and there are a lot of developers around compared to other places, [but] they’re still a limited resource.
What does Sofia need to develop?
Alex: I think we’re here of the same opinion that tech talent is here, in software companies or free-floating, but what’s definitely still missing a lot is business talent, and business education. That entrepreneurial spirit, where when you start your day, the first thing you think is what I’m going to close today, so we’re lacking closers. The guy that can sign the deal.
Stephane: Yeah, hustlers, sales we lack that a lot. Like I’ve experienced this in my team already for two and a half years. It’s so hard to find the hustler that’s thinking like you, that wants to grow the business and not just a yes-man who does what you tell him. So this is something we still lack and I think it’s normal because of our historical background. I mean, we have a private economy and a free market only [for the last] 25 years, so it’s different to UK, or Germany or the whole western world.
What advice would you give to someone who wants to work in a startup in Sofia?
Stephane: My advice would be… that people should join a team where they love the idea, they really believe in it. It has ups and downs, it’s a lot of intensive work, and a lot of your natural limits are put to the test.
Alex: Just do it if it changes something, if it’s going to change the world and not just build an application for an industry that’s full already.
It’s a lot of hard work and it’s not a lifestyle. In London, in Berlin they are already much more about the lifestyle and not about changing the world!
If you’re interested in finding out more about Betahaus Sofia or LAUNCHub, check out their websites! Betahaus’ flagship event, Betapitch Sofia takes place on May 20th, and don’t forget to check out the AMAZING line-up of speakers for DIGITAL|K conference (May 21st – 22nd).