Living in Germany for a couple of years now, I often came to realize that many Germans know only little about Bulgaria. For many, the first associations are Golden Sands or Sunny Beach – the resorts that evoke vivid memories about “Ballermann”- experiences in their teenage years.
My recent involvement in the rather small, but fine start up scene in Dusseldorf left me with the impression that even less people outside of the main German start up center Berlin are aware of Sofia’s recent transformation into one of the leading Eastern-European start up hubs. With over 150 ventures, which received support to set their beginning in Sofia, Bulgaria was ranked among the top 3 start up hot spots in Europe for 2013. Companies like Swipes, Dronamics and Halfbikes, just to name a few, are all a product of this amazing start up ecosystem.
Just to illustrate the dimensions of the start up scene in Sofia – for its productivity application, Swipes was awarded “Best Start Up for 2014” at the Evernote Platform Awards and was nominated for a Webbie Award – “the Internet’s highest honor”, according to New York Times.
Dronamics, in turn, develops inexpensive drones which can carry 350 kg and fly over 2,500 km and, thus, has the ambition to revolutionize cargo logistics, which could benefit developing countries immensely. Among 1,600 start ups from 90+ countries, Dronamics was the winner of the Pioneers Festival Challenge in Vienna this year. Halfbike, is another successful project, which 2,416 people from the crowd-funding platform Kickstarter supported with almost $1 million. The unique design of this “vehicle that trains your balance and reflexes in a completely new way”, as the company describes its product, is the winner of the Red Dot Design Award 2015.
A huge role in this mind-blowing scenario played venture funds like LAUNCHub and ELEVEN. According to the European Accelerator Report, published in 2014, ELEVEN is one of the top 10 investing accelerators and venture funds in Europe – this puts Bulgaria on rank 4 at European level in terms of investments made in start ups.
How it all started
Since some other cities and regions in Europe encounter countless hurdles on the way to building a healthy start up environment, I asked the Founding Partner of the venture fund ELEVEN – Daniel Tomov – what spurred the development of the start up ecosystem in Sofia and which were the milestones that gave today’s start up community in Bulgaria’s capital such a stable foundation.
“Sofia’s start up ecosystem we see today did not form in the last couple of years, its development started around 15-20 years ago,” Tomov said. Back in the 90s, amidst political turmoil and slow transition from a planned to a market economy, many engineers and software specialists in Bulgaria established their own IT businesses. This set the beginning of the first generation software companies in Bulgaria. These companies might not have carried the name “start ups” back then, but their achievements were not less fancy.
One example is Datex – a Bulgarian company which developed the first professional program enabling users to write in Cyrillic in MS Windows. The program was approved as the standard for communication software products and was applied by the Council for European Security and Cooperation. Datecs also invented the first language spelling and hyphenation software, which Windows purchased a license for in 1997, in order to integrate it in MS Word.
Another first-mover was Fadata – established in 1990 in Sofia, Bulgaria, it offers engineering solutions and services to businesses from the Financial, Public, and Utilities sector. With its flagship product INSIS – a modular software solution serving all aspects of insurance companies in Europe, The Middle East, Africa, Asia, and America – Fadata is still known as the insurance software specialist worldwide.
Learnings from the early Bulgarian successes
The common trait of most first generation Bulgarian IT companies, was their focus on the global market and not on the local one. Soon after their establishment, most of them already built international business partnerships and started discovering foreign markets. Another interesting fact about the early stages of the Bulgarian IT industry is the spirit of collaboration. Instead of fiercely competing against each other, Bulgarian software companies often exchanged clients and projects – not only due to their different competencies, but also for the sake of creating value, and thus competitive advantage, for the whole industry. In 2001/2002 Bulgarian software development companies also established a platform, where they could exchange experience, ideas, or find solutions to complex problems arising from their daily business – the Bulgarian IT industry association BASSCOM.
The second generation of Bulgarian IT businesses contributed further to the development of the Bulgarian IT business ecosystem. Founded in 2002 by four classmates from university, the software company Telerik has been driving innovation worldwide for more than 13 years by enabling developers at more than 450 of the Fortune 500 companies to create high-quality web, desktop and mobile applications. Telerik was ranked Bulgaria’s best employer by the management consultancy Aon Hewitt and won in the category “Human Resources Development” in Forbes Bulgaria’s Business Awards with only 5% employee turnover. In December 2014 Telerik was acquired by the U.S. company Progress for $262.5M.
Another pioneer from the same generation is the company Chaos Group. Its rendering software V-Ray® has become the standard rendering engine in renowned international film making studios. In other words, most Hollywood movies nowadays are produced using this software. Founded in 1997 in Bulgaria by a team of two, the Chaos Group has grown to an international company with offices in Europe, U.S., Japan and Korea.
One of the world’s leading in-door climbing wall manufacturers – Walltopia – was also founded in 1998 by two climbers in Sofia, Bulgaria. The company currently operates on 6 continents with offices in the U.S., UK, Canada, Germany, Russia and Asia Pacific and exports to 50 countries globally, with its headquarters still being located in Sofia.
Learnings from the second pre-start up stage
The second generation Bulgarian software companies not only continued the tradition of a great performance on a global scale, but also adopted the spirit of collaboration and the drive to work for the common good from their predecessors. Several large companies made great efforts to pave the way for a sustainable growth of the Bulgarian IT industry – to ensure that the number of competent IT specialists matches all those newly created job opportunities, including numerous job positions opened by large foreign companies, outsourcing to Sofia. Telerik was the forerunner, investing in its large-scale Telerik Academy, which offers world-class IT education to university and high school students, as well as to children. Several other IT companies followed. Again, instead of fierce competition, it was exchange of content that took place among the different academies. Telerik’s founders also became angel investors in order to help the next generation of founders grow.
The Start Up Stage
So, one thing led to another and the word “start up” was officially dropped in the Bulgarian business ecosystem. The year was 2007 and the “StartUP Foundation” was established. The 1st and 2nd generation Bulgarian IT companies had prepared the ground for the new entrepreneurship wave, so that once capital was available, it served as the last catalyst for the boom of Bulgaria’s start up ecosystem. “Sofia already earned a status of the most developed start up ecosystem on the Balkans,” said Chris Georgiev, a board member of the StartUP Foundation, who I also interviewed regarding the genesis of Bulgaria’s start up ecosystem. As a City Lead Organizer of the Start Up Weekend format, he has facilitated start up weekends in different European cities, recently also in Berlin. “The start up ecosystems of Prague and Budapest, for instance, are more advanced than Sofia’s, however, Sofia offers low living costs and a great number of high-quality IT specialists,” he said. According to Georgiev, 40-50% from the participants in Start Up Weekends in Sofia are programmers and developers, which he finds rather unique – “the rate in Western European cities lies at around 10-15%,” he explained.
Besides having witnessed the growth of the start up eco system in Sofia from its very beginning, Chris Georgiev is also working as an entrepreneur himself – he is the Co-Founder and Growth Engineer of Imagga – a start up developing an image tagging platform helping developers and businesses build scalable and image intensive cloud apps. Just a few days ago Imagga won the “Tech for Big Players Award” at the South Summit 2015 – as the only winner-start up, coming from a non-Spanish speaking country. King Felipe VI of Spain personally handed over the prestigious award to the winner start up.
Sofia’s start up environment is indeed speeding up – in the meantime, the establishing of a founder institute is on the agenda, Betahaus Sofia – one of the four Betahaus co-working space locations in Europe – is planning on expanding, foreign founders either reside in Sofia for a couple of months or use the city as a founding base.
So, why Sofia?
So, there are three factors which make Sofia so attractive for founders:
- The presence of high-quality IT Talent is one of the main ingredients.
- Another great advantage of Sofia as a place to establish a new business are the low living costs, which translate into low overheads. In support of this argument, Daniel Tomov, the founding partner of the Bulgarian accelerator and venture fund ELEVEN, told a story about a Bulgarian entrepreneur, who returned to Sofia to start up a company, after being the founder of a company of 500 Start Ups and the CTO of a company financed by YCombinator in the U.S. Not only could he take advantage of the start up ecosystem in Sofia, he could also invest his starting capital more efficiently than in the Silicon Valley.
- The third very important factor is the quality of life the city has to offer. The Bulgarian capital surprises with its vibrant lifestyle, numerous cultural projects, world-class restaurants, bars and cafes. What contributes to the high quality of life are also the amazing outdoor adventure opportunities located in direct proximity of the city.
The extra ingredient
However, the most essential characteristics of the Bulgarian start up ecosystem are the people. “Since founding a company is so difficult, entrepreneurs need moral support and sparing partners along the way – other founders to learn from, mentors, investors, partners, first clients,” the founding partner of ELEVEN said. He calls this “the founder’s cloak” – the environment which is beneficial to an entrepreneur and prevents them from failing. This environment is one of the reasons why founders from other Balkan countries lacking a strong start up ecosystem reside in Sofia for a certain period of time or found their companies in Sofia altogether.
So what did we learn?
Entrepreneurs involved in the start up scenes of, be it Berlin, Dublin, Cologne, London, Barcelona, or Dusseldorf, may have already noticed that some cities and regions have the “magic” needed for creating a start up-friendly environment and others have all the ingredients in theory, but seem to be unable to find the last piece of the puzzle. Every start up ecosystem, from Tel Aviv to San Francisco, has come about in a very individual way. According to the founding partner of the Bulgarian accelerator and venture fund ELEVEN, Daniel Tomov, the common denominator is in most cases the presence of a critical mass of interesting people building an eclectic mix – “beautiful minds”, as he calls it – creative people, engineers, technical people – and the interaction among them. For Berlin, the beautiful minds were the freelance designers and creative people, which the city attracted with its low living costs. For Tel Aviv it was the combination of very well-funded armed services and world-class universities – both producing highly skilled engineers. These unique mixtures caused an immense change in society for both regions, turning them later into start up hot spots. The story about Sofia and the eclectic mix, which led to what we experience there today, even if very individual, might help another “hot spot-to be” find out where to start looking for the last piece of their puzzle.