Endeavor’s study was produced with the support of the Fund of Funds, the Bulgarian Development Bank and Sofia Investment Agency and in cooperation with the Bulgarian Startup Association (BESCO).
Based on that research, it is reported that the technology sector is the most rapidly developing industry in Bulgaria, with a threefold growth in recent years, which is faster than any other sector in the economy. In information and communication technology alone, this growth rate is up from 1.8% in GDP terms in 2011 to 7% in GDP terms in 2020. According to the latest data, the sector employs nearly 115 000 people at an average wage 3.4 times higher than the national average, and labour productivity levels are competitive with global ones. Endeavor's study points out that Bulgaria can be a leader in the entrepreneurial ecosystem in South-east Europe. These are some of the findings announced today at the launch of the Endeavor Insight Report. Participants in the discussion included Daniel Lorer, Minister of Innovation and Growth, Momchil Vassilev, CEO of Endeavor Bulgaria, and representatives of the partners that supported the project – Tsanko Arabadzhiev, CEO of the Bulgarian Development Bank, Martin Gikov, CEO and Board Chairman of the Fund of Funds, Dr. Maria Hristova, CEO of the Sofia Investment Agency and Nedyalko Dervenkov, CEO of the Bulgarian Startup Association.
The project illustrates the development of the technology ecosystem in recent years and the main challenges in the sector, comparing the development factors with those in other European countries. Based on the study, Bulgaria stands out because of its strong ecosystem, well-functioning structural set-up and strong interconnections among entrepreneurs. Bulgaria is in the lead among the countries in South-east Europe in terms of institutional entrepreneurial support in terms of access to capital, know-how and information. For example, the country has more than 17 private equity and venture capital funds and incubation/accelerator programmes covering the entire development cycle of entrepreneurial ventures.
The main challenges identified by the companies participating in the survey are access to qualified labour (68% of respondent companies report a shortage of technical talent and 56% report shortage of qualified managers), access to capital (more than 50% of mature companies report a shortage of financing) and a lack of regulatory framework and government infrastructure.
Based on the analysis, the authors identify suggest main strategic recommendations that would contribute to the development of the country's technology sector. The first recommendation includes activities related to retaining and attracting expertise and talent to the country, as well as well a system for capital and institutional support. The second one highlights the importance of continuing development of the ecosystem so that companies that are already successful can actively support the next generation of companies by becoming their mentors and investing in them. The third one deals with improving the legal and administrative environment and policies, including adoption of best practices from other countries, such as introducing modern mechanisms for providing stock and options to employees, streamlining the arrangements for attracting highly skilled staff and entrepreneurs from abroad, more active engagement of domestic pension and insurance companies as investors in investment funds, etc. The last recommendation encourages regional cooperation to strengthen the positioning of South-east Europe globally. It makes reference to the benefits of sharing Bulgaria's experience with other countries, promoting successful examples and identifying strengths and weaknesses at the regional level.
As an organisation working to influence the investment environment, it is crucial for the Fund of Funds to be well aware of the needs and challenges faced by businesses in terms of private equity investment. In this regard, this comprehensive and extremely well-systematized research, as well as our partnership with Endeavor as a whole, yield substantial support to our own efforts to maximize the impact of our instruments on the entire VC ecosystem. Moreover, the benefits of this interaction would carry over into our new programming period, when we expect to expand the scope and volume of resources targeting technology and innovative companies.’
Martin Gikov, Executive Director and Chairman of the Board of Directors of the Fund of Funds
‘Technological entrepreneurship has the potential to be the driver of our country's accelerated economic growth, and the strong entrepreneurial ecosystem built in Bulgaria in recent years can play a leading role in South-east Europe. For this to happen, a concerted effort and an enhanced partnership between the government and the private sector is needed in defining a clear strategy, policies and instruments to support the development of this "new economy". This study is a very good example of an important step in this direction, outlining the challenges and possible solutions. We are grateful for the partnership of the BDB, the Sofia Investment Agency, FMFIB and BESCO in carrying out this study.’
Momchil Vassilev, CEO of Endeavor Bulgaria
‘The Ministry for Innovation and Growth will support the entrepreneurial environment. We will work for a growth based on innovation and smart business that builds on new technologies, both for bringing them from abroad to this country and creating them in Bulgaria. The Ministry will also be the link between education and the sector. Bulgaria will start creating top-level scientific personnel. A PhD institute on artificial intelligence will soon open in this country.’
Daniel Lorer, Minister for Innovation and Growth
‘Entrepreneurs in the technology sectors, their ideas and development work all show that Bulgaria has its place among the leaders in technology-based industries. The Bulgarian Development Bank stands ready and it will be part of the process of building and strengthening that ecosystem. I am confident that in the coming years Bulgarian entrepreneurship and innovative companies will receive the necessary support so that they can develop even more extensively.’
Tsanko Arabadzhiev, Executive Director of the Bulgarian Development Bank
‘‘Invest Sofia supported the preparation of the report because it is important to examine not only the current status of the sector but also to explore where technology companies face challenges for their growth so that organisations committed to supporting the environment can adopt the necessary policies. One more thing. For the first time, concrete data show the support and interconnections within the ecosystem. It is extremely valuable that Sofia has such an environment. We should not just keep the trend going but make it a model for cities across Bulgaria and in South-east Europe in order to enforce the competitiveness of the region. Sofia has all the potential to be a key player in such a process.’
Dr. Maria Hristova, CEO of the Sofia Investment Agency
‘Knowledge-based economy and high value-added industries are not just pep-talk words, the transformation of the economy is a fact. It is up to us to accelerate it.’
Nedyalko Dervenkov, Executive Director of the Bulgarian Startup Association
About Endeavor
Endeavor is an international non-profit organisation with offices in 40 locations, providing support to entrepreneurs with big ideas and businesses to grow quickly internationally. The Endeavor entrepreneurs have the potential to change their countries and the world, they can be the key to long-term economic growth, job creation and innovation. Endeavor provides selected entrepreneurs with access to markets, capital and talent in its network of over 4 000 mentors and world-class investors. Endeavor launched in Bulgaria in July 2015 with the aim of expanding the organisation's presence in Europe. To date, the Bulgarian office has supported 100+ entrepreneurs from 50+ companies that have created over 2 300 jobs and generated revenues of BGN 320 million in the past year www.endeavor.bg
Download the full report here.
