Bulgaria has been maturing as a major digital hub of Southeastern Europe for the past several years. The third study of the local digital ecosystem InnovationShip conducted by the open network EDIT reveals key trends in the development of the landscape – domination of service businesses, specialization in machine learning, data and platform building, slow down (compared to last year) of complex technologies such as VR and automation systems, rise of blockchain enthusiasm.
The Innovationship report suggests that those particular fields of specialization underlie the foundational technologies for a burgeoning fintech cluster. Especially in this vertical, there seems to be transfer between the typical local digital companies with small-scale teams of up to ten and the larger established companies. With global companies like Visa and MasterCard intensively working with local partners through different initiatives, a trend of specialization in digital payment products is getting more visible.
Profitable as a Service
The local digital ecosystem doesn’t seem to be growing in huge steps, but there are indeed well performing companies with revenues of up to €500K and close to 10% have broken the glass ceiling of €1M.
More than the half of the companies that participated in the study seem to be cash flow positive and two thirds of them have never ever received external funding. One possible explanation for this surprising result is the service orientation of the sector, which allows companies to sustain their operations and even be profitable without burning cash in extensive R&D. This, however, are not typical startup cases.
Need VC, don’t need VC…
Тhe venture capital, be it local, foreign, private or public, goes predominantly to product companies. According to the study, only 8% of the companies are still seeking initial capital to start their ventures, which could mean that the pre-seed and early stage VC market is well covered by the existing players. More than the half of the probed companies are not planning to fundraise in the next year, but the rest need fresh capital in order to grow their teams, invest in R&D and acquire new markets.
As of markets, even though a lot of the surveyed companies are now operating on the Bulgarian (80%) and European (56%) markets, they are all planning globally and looking towards US, Asia and the Middle East.
“My three conclusions from this report are: internationalization, professionalization and globalization. Firstly, two thirds of the employees and 13% of founders are foreign citizens. Secondly, half the founders have previous entrepreneurial experience. And third, but not least, close to two thirds of the companies sell internationally”, Anton Gerunov of Center for Modeling Socioeconomic Systems and author of the study, stated.