Bullish on Bulgaria

By Maxim Gurvits on August 29th, 2012

It is a well-known fact that within Europe, the central and eastern regions are over-represented when it comes to promising technology start-ups. Some attribute it to a post-socialist hunger for success, or, equally, to the lack of comfortable job and social security opportunities.

Just look over to Seedcamp, one of Europe’s leading early-stage investment communities, where over a third of investments have been made in companies from central and eastern Europe.

One thing that has remained notoriously difficult however, is to get a company funded in this neck of the woods. There’s an impression that there is no VC in eastern Europe. During last month’s annual Southeast European Seedcamp in Zagreb, everyone nodded when one of the keynote speakers said of course there are not enough funding opportunities in our region.

Well, it isn’t the case any more. In Bulgaria, a country best known for cheap beaches and credit card skimmers at gas stations, we’ve just landed a whopping €21 million in seed stage funds, ready to be invested.

The money comes from a seed and acceleration instrument under the European Investment Fund’s JEREMIE program, and is divided between two accelerators, Launchub (€9 million) and Eleven (€12 million).

As I’m in a partisan position, being on the Eleven team, I’ll just tell you about how it works for us, and share some insights on our first investment selection.

Eleven invests in approximately 10 to 15 teams every three to four months, with a broad focus on technology. This year, we started with our selections in May, and the first acceleration period will run from September to December, by which time we’ll have selected the next 10 to 15 teams for the next three months.

Every team is expected to spend the three-month acceleration period in our coworking space in Sofia. They receive €25,000 euros against 8 per cent equity, and are eligible to compete for a follow-up investment of another €25,000 against 5 per cent with another 3-month stint under our roof, as well as a potential third round of €150,000 euros at a negotiable valuation.

We have an all-star team of mentors and partners, including Google’s London office, Springboard, and line-up of venerable serial founders and VCs.

We recently held our investment days, and selected 12 teams that we extended term sheets to from the almost 500 applications that we received in May and June. Exhausted and overwhelmed by the countless lessons we learned as a VC start-up, here’s a list of key locally flavoured insights I gained from the experience:


There’s a big difference in the attitude towards empowerment in eastern Europe, compared to the Western world. As all of our finalist teams ended up being from Bulgaria and Romania, I noticed a certain impression that the investor community is considered by some teams to be an entre nous clique, where good opportunities are passed from one to another, and where making it big depends overwhelmingly on whom you know.

It doesn’t need repeating that we are running a meritocratic process with Eleven, but we see many individual founders contemplating on their personal relationships with us, and how that influences our investment decision. Guys: don’t. Whether we know you or don’t, it’s all about your pitch, and the team, market, traction, and product that should shine in it.


It’s abundantly clear to for Westerners that the alternative cost of bootstrapping a start-up is a comfortable monthly income, and the consequential ability to afford a comfortable urban lifestyle. In Eastern Europe, the situation is different.

The economics of low consumer prices, low starter salaries and family-owned real estate versus renting creates situations where the problem of minimal start-up capital is not so dire. Simply put, the cost of life of x number of people multiplied by the time needed to reach MVP, the standard metric for start-up cost, plays out differently here.

When you don’t need to pay your rent, and your salary is only €300, it’s easier to abandon your job and stay at home coding, with either your family chipping in for your expenses, or by doing some freelancing or an odd job in the evenings. We noticed with a sizable number of teams that the investment amount and its drawdown throughout the acceleration phase are not the first thing on their mind.

Instead, many seemed interested to win for the sake of winning, or to get access to our mentor community.


This may sound somewhat critical of the competence of some founders, but I noticed a general lack of preparedness about market numbers and product development theory. Once again, these are meritocratic achievements, of the kind that count for success.

I consider this a cultural challenge, dealing with a mentality less exposed to the concept of competition. You can’t get around the fact that there’s much less of a rat race in Sofia than in, say, London or Paris, and that people here are not as desperate to prove their mastery

So, it will be an important challenge for us to inspire such qualities in our teams and applicants.


A great advantage leveraged both by us as an accelerator as well as by the founders, is the fact that most countries in the south-east Europe region are very isolated markets, with low online presence and low volumes of online transactions.

This means you can’t really create a monetisable product for the local market, but that’s not the idea usually anyway. What you can do is test and validate your concept, without interference from established players.

The main selling point of developing products in a place like Bulgaria is the combination of low cost and full access to the global market, and in that way an under-developed local online industry helps a lot.


One thing that stands out with founding teams in this region is high creativity. While many concepts can be characterized by the “X for Z” formula, or, in worse cases, as copycats for the local market, there is a clear presence of transformer concepts that aim to disrupt an existing industry, either by introducing online transactions where there are none currently, or by offering radically new ways to solving problems.

The reason behind this is again an underdeveloped local market, with less established players trying to cover for an adjacent, online area, from their existing offline marketplace. This encourages creative founders to come up with innovative solutions.

It’s actually the genesis of the leap-frogging effect, for which the region is known. Just to give you an example: one of our teams pitched a Farmville that would be connected to actual farm management on the back end. I haven’t heard anything remotely like that at western European start-up gatherings.


And so, as we move on to welcome our first teams in our brand-new accelerator space in September, we’re settling in for a very interesting ride in the coming years. Despite some of the issues above, I think there are many reasons that justify me being bullish on Bulgaria.

In a region known for its potential to unleash products like Skype, Prezi, and a bunch of lesser known game-changers, adding broad availability of seed money will truly invigorate the market, and may very well add an unexpected name like Sofia to the London-Berlin-Budapest axis of crucial European start-up destinations.