Bulgarian venture capital is half a century behind that of the USA. During the 1990s venture capital funds like Sequoia and Kleiner Perkins financed Google and PayPal. Meanwhile, Bulgaria was busy controlling hyperinflation. The first equity investment funds here started working in the early 2000s, and only in 2006 did the first Bulgarian fund manager appear - NEVEQ, financed by the European Bank for Reconstruction and Development (EBRD). By 2012, the first startup funds had started working - Eleven and LAUNCHub, after the selection of the European Investment Fund (EIF).
Although Bulgaria quickly went from not having a single venture capital fund to having about ten active ones at once, the overall strategy did not change significantly over time - most of the money was invested in many companies, with relatively small amounts, the weight of which was further eaten up by inflation.
Now begins a new season of allocating more than 1.5 billion levs of public money to startups, and in the sea of money there is a risk that it may turn out that good quality projects and ideas worth investing in are few and far between.
More than ten years after the first funds of Eleven and LAUNCHub, venture capital in Bulgaria is moving towards a change of model. The money is there - how much of it will go to startups is a matter of both finance and semantics, but putting that aside, equity money by the end of 2030 will be at a record high. At the beginning of the year, the Fund of Funds (FoF) began the search for fund managers for a total of 100 million euros of public resources, which it hopes will reach 130 million euros with private money. Interest in managing the money is high - for the three separate funds there are four, ten and ten candidates respectively.
Another 170 million euros from the FoF will be released under the same program. In February public discussion began on how to spend another 56 million euros on a technology transfer fund and a separate 32 million euros on "innovative enterprises".
More money will come from the European Investment Fund (EIF), which will allocate a total of 180 million euros under the Recovery and Resilience Plan to three equity investment funds, the value of which with the addition of private capital could reach 250 million euros. Another 120 million euros are added to them, to go through the EIF for new funds.
Current opportunities to fundraise locally are many and include funds such as Eleven, LAUNCHub and BrightCap Ventures, as well as business angel investors. Thus, the public money for equity investments alone should be at least 1.5 billion levs, to be invested by 2030. With additions from private capital, new iterations of old funds, angel investments and a resource from a potential large exit, the amount can easily grow to over 2 billion.
There is also bad news - due to the allocation procedures, 2024 will be rather dry, because the money under the previous mandate of the FoF has already been invested, which leaves early-stage startups relying on angel investors and bank loans.
Who will manage the money?
Many of the candidates for the FoF fund managers are well-known in the industry. There are four candidates for the initial stage investment fund worth 30 million euros: Innovation Accelerate, which includes some of the team members of the current Innovation Capital fund; Flow Mindset Capital, led by Ognyan Vassilev, a long-time manager at Salesforce; Vitosha Venture Partners II, a continuation of the current Vitosha Venture; as well as Planet 9 Ventures, featuring Kamen Bankovski's name.
Nine organizations and one individual applied for the fund for investments in companies with a developed product - with 30 million euros of public resources. All four candidates for the first fund participate here as well. In addition to them, the Morningside Hill team also applied with a second fund of the same name; Bayena Ventures, represented by Natalia Petrova; New Vision 5, which includes most of the partners in NEVEQ and NV3; NeoOpulence by Pavel Ezekiev (also a partner in the first two funds of NEVEQ); as well as Capital Point Bulgaria Consortium, in which Atanas Kirchev, a former member of the management board of the Fund of Funds, participates.
Applicants for a fund for companies in the growth phase, which will have a portfolio of 40 million euros of public resources, are the same as for the second fund, with one exception: Flow Mindset Capital does not participate and is replaced by Crest Capital, in which Dimitar Kostadinov and Ivaylo Spasov from Entrea Capital participate. Plamen Rusev from Webit applied for the last two funds as an individual fund manager.
Bulgarian venture capital is half a century behind that of the USA. During the 1990s venture capital funds like Sequoia and Kleiner Perkins financed Google and PayPal. Meanwhile, Bulgaria was busy controlling hyperinflation. The first equity investment funds here started working in the early 2000s, and only in 2006 did the first Bulgarian fund manager appear - NEVEQ, financed by the European Bank for Reconstruction and Development (EBRD). By 2012, the first startup funds had started working - Eleven and LAUNCHub, after the selection of the European Investment Fund (EIF).
Although Bulgaria quickly went from not having a single venture capital fund to having about ten active ones at once, the overall strategy did not change significantly over time - most of the money was invested in many companies, with relatively small amounts, the weight of which was further eaten up by inflation.
