On 7 November 2024, Boyanov & Co. with the support of the European Investment Bank organised the international conference “Life-Cycle Challenges of the Start-Ups”. The event focused on navigating the landscape of the Bulgarian start-up ecosystem through its major challenges in 2025; government programs, grants, and EU funds for financing start-ups in 2025; and broadening horizons for international expansion of the CEE start-ups and venture capital funds. With this conference, Boyanov & Co. reaffirmed its commitment to supporting the start-up ecosystem in Bulgaria.
Here are some of the key takeaways from the event:
The increase in the number of high-tech startups in Bulgaria is a significant trend. There is a high potential for the development of startups in the coming years in the following sectors: biotechnology, fintech, Internet of Things, smart cities, artificial intelligence (AI), virtual and augmented reality, robotics, electric vehicles (EVs) and autonomous cars, drones, 3D printing, process digitalization. To achieve more results in the long term, the Government of Bulgaria continues to make efforts to improve the conditions for doing business, and for the development of startups in Bulgaria: the legislative regulation of the “Variable Capital Company” – as a form of startup business with advantages for equity investors; the “Startup visa” – as a measure to attract entrepreneurs from third countries to the Bulgarian market, to create enterprises that use high technology and implement research and development activities; Bulgaria’s accession to the Declaration on the introduction of the “EU Startup Nations Standard of Excellence”.
From the viewpoint of the Bulgarian Government, all this makes Bulgaria one of the best countries in Europe to start a new business. Bulgaria also has all the prerequisites to establish itself as a startup center. The strategic documents and the programs that are being implemented: the Program “Competitiveness and Innovation in Enterprises” 2021-2027, and the Recovery and Resilience Plan, give priority to implementing measures for improving access to financing, diversifying sources and instruments for financing, promoting the use of alternative sources of funding, and overcoming the shortage of qualified personnel.
Southeastern Europe (SEE) is the fastest-growing region in Europe in terms of funding start-ups over the period 2019-2023. In Bulgaria, the anticipated injection of 520-620 million EUR public capital over 2025-2029, alongside the Eurozone joining, is expected to leverage the start-up ecosystem development to the next level. Bulgaria leads the charts in terms of start-up density across SEE.
The Bulgarian Fund of Funds (Fund Manager of Financial Instruments in Bulgaria – FMFIB) will triple its resources for equity instruments until 2027 (from EUR 125 million to EUR 345 million). Approximately 7-10 new equity funds supported with EUR 345 million from FMFIB will be available in the next few years in the following fields: Innovation and R&D (Equity Fund “Innovation in Enterprises” and Venture Debt), Digitalization and Industry 4.0 (Fund for High-Risk Projects for Digitalization and Start-Up Fund for Digitalization); Entrepreneurship (Family of Funds “Entrepreneurship”); Education (“Equity for Students/PhDs); Technology Transfer (“Technology Transfer Fund” amounted to 56.6 million EUR).
The main challenges, lessons learned and the way forward for FMFIB could be summarized as follows: build capacity and expertise for managing financial instruments at the national level; complex regulatory framework (public procurement, European Structural and Investment Funds or ESIF management rules, state aid, regulation of alternative investment funds, anti-money laundering legislation, etc.); invest in the capacity building of other key stakeholders in their better understanding of financial instruments (managing authorities, ministries/commissions, etc.); possibility to award resources through open, transparent and non-discriminatory procedures outside of public procurement rules; stimulate private institutional investors (pension funds, insurance companies, asset managers, etc.) to invest in Alternative Investment Funds (AIFs).
The conference emphasized the necessity for start-ups and venture capital funds to navigate complex legal and regulatory landscapes effectively. Establishing holding companies in jurisdictions with favorable legal frameworks and ensuring compliance with evolving regulations are crucial steps in facilitating growth and securing investment in start-ups. Selecting an appropriate legal structure that aligns with the start-up’s goals and facilitates future investment opportunities is crucial for its success. Safeguarding IP assets is a matter of vital importance. Venture capital funds should comply with relevant regulations, including securities and anti-money laundering requirements. Start-ups need to structure their capital to attract investment while start-up entrepreneurs retain control. For both start-ups and VC funds, planning an exit strategy is a significant legal challenge in terms of legal considerations such as the sale structure, the protection of minority stakeholders, and the management of due diligence processes.
Additional challenges and current problems were identified as follows: lack of funding at the end of 2024 with hopes for new sources of funding in 2025; necessity for restoration of the competitive edge of the Bulgarian start-ups; need for Bulgarian institutions to take more active role in removal of obstacles for pension funds to invest in start-ups and VC funds; need for a stable government with a horizon of more than 3 months; significant portion of the investment in start-ups are related to AI, while greater diversification of the local start-up ecosystem may be positive in the long term; need for attracting more private investors; positioning of Bulgarian start-ups on the international markets and customers’ perceptions (given Bulgaria’s limited local market); R&D centers should play a significant role in supporting start-ups; need for in-depth knowledge on the side of the start-ups on picking up the right partner; increase of the access to international capital; presentation of more attractive projects related to start-ups and overcoming the current situation with a deficit of projects of high quality.
Other important points discussed could be summarized as follows: the need for a legislative initiative to lift some of the restrictions on pension funds investments (pension funds to invest in open-end investment funds) and pension funds assets; developing special visas for digital nomads renewed annually.
By Borislav Boyanov, Managing Partner, and Nikolay Zisov, Partner, Boyanov & Co
