{"id":964,"date":"2020-11-09T10:00:30","date_gmt":"2020-11-09T10:00:30","guid":{"rendered":"https:\/\/thenextweb.com\/?p=1327060"},"modified":"2020-11-09T10:00:30","modified_gmt":"2020-11-09T10:00:30","slug":"sofias-startup-ecosystem-is-one-to-watch-just-give-it-time","status":"publish","type":"post","link":"https:\/\/www.londonchiropracter.com\/?p=964","title":{"rendered":"Sofia\u2019s startup ecosystem is one to watch \u2014 just give it time"},"content":{"rendered":"\n
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Bulgaria is yet to produce a tech unicorn, but that doesn\u2019t mean its startup ecosystem should be overlooked.<\/p>\n

Over the past decade, Sofia\u2019s startup scene has flourished \u2014 even if it\u2019s noticeably absent from the top positions in most tech rankings.<\/p>\n

\u201cSofia is not London, Paris, or Berlin \u2014 but it has an excellent shot of coming right after them,\u201d says Svilen Rangelov, the co-founder and CEO of Dronamics, a Sofia-based startup seeking to democratize airfreight.<\/p>\n

\u201cJust thinking about how much has been achieved with so little in just one decade, I really believe that in another 10 years, Sofia will be competing for the top three in Europe \u2014 and will certainly be in the top five with Tel Aviv,\u201d Mr Rangelov adds.<\/p>\n

From communism to capitalism<\/b><\/h2>\n

According to Invest Sofia<\/a>, which helps foreign companies and entrepreneurs start up in the city, Bulgaria birthed around 2000 startups between 2013 and 2018.<\/p>\n

The rise of entrepreneurship in Sofia is particularly significant given Bulgaria\u2019s long-winded transition from communism to capitalism, Mr Rangelov explains: \u201cTen to 15 years ago, if you were young, talented and ambitious in Sofia, it was most probably the exception. Because the post-communist transition had taken too long, the economy was decimated and the brain drain was brutal.\u201d<\/p>\n

[Read: Micromanaging sucks \u2014 especially when it\u2019s about your \u2018Zoom shoes\u2019<\/a>]<\/em><\/p>\n

The demise of communism in Eastern Europe in 1989 paved the way for much needed economic and political change, but it took time for countries such as Bulgaria to catch up with their contemporaries.<\/p>\n

Luckily, additional progress was made in 2007 when Bulgaria joined the EU. As a result, multinational businesses opened offices in the country and created jobs that would help attract and retain the nation\u2019s talent. Bulgaria\u2019s famously low flat tax rate<\/a> may have also played a part in attracting businesses and individuals.<\/p>\n

\u201cTech companies, including home-grown businesses, started competing heavily \u2014 some even built their own training academies,\u201d says Mr Rangelov.<\/p>\n

\u201cSo now, if you\u2019re young, talented, and ambitious in Sofia, you\u2019re either founding or working for a startup.\u201d<\/p>\n

Brain drain now seems to be a thing of the past. \u201cThere are quite a few founders that have lived abroad and have come back, and quite a few foreign founders are moving here as well, confirming Sofia\u2019s advantages over some of the bigger hubs and contributing to the brain regain that has helped the whole ecosystem grow quicker than any other place in the region,\u201d Mr Rangelov adds.<\/p>\n

Struggling beyond Series A<\/b><\/h2>\n

Although the shift towards entrepreneurship is a sign of the times, it\u2019s worth noting that Bulgaria\u2019s startup fabric is far from homogeneous. The vast majority of businesses, according to Mr Rangelov, operate in the software space \u2014 and there\u2019s a clear dominance of business-to-business software-as-a-service products.<\/p>\n

Sofia is also making waves in financial technology. Cash Credit, which works with mobile network operators to offer microfinancial services to mobile subscribers; and Phyre, a mobile app which transforms a user\u2019s phone into a wallet, are both based in Sofia. In fact, such is the city\u2019s prowess in fintech that fDi ranked the country\u2019s capital as the most cost effective fintech city worldwide for 2019\/20<\/a> \u2014 beating the likes of Vilnius (Lithuania) and nearby Bucharest (Romania).<\/p>\n

Sofia\u2019s ecosystem is promising, but it still needs help. Stephane Gantchev, a partner at Launchub Ventures \u2014 one of the city\u2019s most prominent venture capital firms \u2014 says there are gaps that need to be filled if Sofia is to compete on an equal footing. The arrival of a reputable accelerator, for example, could do wonders for the ecosystem.<\/p>\n

As ever, fundraising activity is a great indicator of maturity. According to PitchBook, Sofia\u2019s startups have raised $10.6 million so far this year. Data going back to 2009, shows significant disparities in the deal value year-on-year. The highest figure, $20.4 million, was seen in 2019, and the lowest was raised in 2010.<\/p>\n

To put this into perspective \u2014 and unfair as it may be to compare Sofia to other more established hubs \u2014 UK startups raised a record $12.9 billion<\/a> in 2019, VCs in France poured a more modest $4.8 billion<\/a> into companies, and Berlin\u2019s startups received $6.9 billion<\/a> last year.<\/p>\n

If we look at fundraising across other Central and Eastern European countries, we can see Sofia is trailing behind. Poland\u2019s startups \u2014 with Warsaw being the main hub in the country \u2014 raised $343 million<\/a> in 2019. Over in Estonia, startups managed to raise $310 million from investors during the same year.<\/p>\n

Sofia\u2019s early-stage companies are well-served by local VC funds focused on pre-seed to Series A rounds and an active angel community. Later-stage companies, though, are forced to seek opportunities further afield.<\/p>\n

\u201cFor bigger funding rounds, it is logical for companies to look for funding outside of Sofia, as at this stage they need a more experienced investor with a larger network and deeper pockets,\u201d adds Mr Gantchev.<\/p>\n

This is not an uncommon problem, but much of Sofia\u2019s long-term success hinges on a solution \u2014 especially as it affects businesses in several ways. Talent, for example, is readily available, and even though it\u2019s convenient by western European standards, this is both a blessing and a curse.<\/p>\n

The capital city is home to 23 universities, more than 100,000 students \u2014 42,000 of whom are in science, technology, engineering, and mathematics \u2014 63 research centers and several independent software schools, including the well-known SoftUni and Telerik academies.<\/p>\n

The average software engineer salary<\/a> in Sofia stands at around $23,000 and senior engineers can expect to earn $38,000 or more, according to local website Obecto. By comparison, the same positions in the UK start at about $44,000, with senior software engineers taking home a minimum of $73,000.<\/p>\n

Essentially, this means early-stage startups in Sofia can make investor checks go further, but once a business starts to grow, so do the costs. Eventually, entrepreneurs will look to expand and build teams abroad \u2014 and when this happens they usually price themselves out of the local ecosystem, which is no longer able to offer adequate monetary support. In other words, the ticket sizes need to get bigger.<\/p>\n

\u201cThere are plenty of great funds for pre-seed and seed, but no one is capable of leading a $10 million Series A yet. The money exists, but the type of institutions and family offices that could afford it still prefer other asset classes, and are looking at the sidelines,\u201d Mr Rangelov notes.<\/p>\n

Building the future<\/b><\/h2>\n

The availability of early-stage capital has been facilitated further by Bulgaria\u2019s government, which has used EU funds to create a \u2018Fund of Funds<\/a>\u2019, which manages slightly more than $700 million.<\/p>\n

The ecosystem is also supported by Besco (Bulgarian Entrepreneur and Startup Community), a non-governmental organization bridging the gap between startups, private and institutional investors, and other key stakeholders in the industry. The hope is that the ecosystem will become more cohesive and that public and private partnerships will spring a new wave of products and services.<\/p>\n

Bulgaria will soon see the introduction of a startup visa to make it easier for foreign founders and employers to do business and grow their teams \u2014 it is likely to come into effect before the parliamentary election scheduled to take place in March 2021. There\u2019s also upcoming legislation for vesting, option pools and convertible notes, Mr Rangelov says.<\/p>\n

There\u2019s no denying that Sofia\u2019s ecosystem needs further support to fulfill its potential \u2014 it\u2019s missing much of the infrastructure found in other developed hubs \u2014 but perhaps what it really needs is time. For now, the quality of life, cheap rent and nearby ski slopes may be enough to convince founders to set up base there. However, going forward, stakeholders need to figure out how to support the ecosystem\u2019s ambitions of scale and success.<\/p>\n

This article first appeared in the series \u2018Rising ecosystems<\/a>\u2018 published by fDi Intelligence, a magazine by the Financial Times. View a digital edition of the latest issue here.<\/a><\/em><\/p>\n

Published November 9, 2020 \u2014 10:00 UTC <\/p>\n

Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Bulgaria is yet to produce a tech unicorn, but that doesn\u2019t mean its startup ecosystem should be overlooked. Over the past decade, Sofia\u2019s startup scene has flourished \u2014 even if it\u2019s noticeably…<\/p>\n","protected":false},"author":1,"featured_media":965,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts\/964"}],"collection":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=964"}],"version-history":[{"count":0,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts\/964\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/media\/965"}],"wp:attachment":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}