going public

Eleven Capital IPO: More Than Half Of The Shares Subscribed Before Public Listing. VC Considers Bridge Funding Forms For Portfolio Startups

Eleven Capital Team. From left to right, Vassil Terziev (board member), Ivaylo Simov (manager, deputy Chair of board), Daniel Tomov (executive director), Valeri Petrov (Chair of the board) © Eleven Capital
Eleven Capital Team. From left to right, Vassil Terziev (board member), Ivaylo Simov (manager, deputy Chair of board), Daniel Tomov (executive director), Valeri Petrov (Chair of the board) © Eleven Capital

Eleven Capital, the first venture fund in Bulgaria that decided to go public and thus open the door for startups to the public markets, announces a success. The company has managed to close the initial public offering (IPO) raising a bit over €1M (2.1M BGN), tells us the company’s manager Ivaylo Simov. More than half of the announced 500K shares have been subscribed, attracting various types of investors – including a pension fund, which is a precedent, and makes the IPO an even more important event for the Bulgarian ecosystem.  

We are really excited that we managed to close the IPO in such challenging times,” he adds. The negotiations with investors started at the beginning of March, right before the Coronavirus outbreak and the emergency measures throughout Europe. 

An official listing on the Bulgarian Stock exchange is scheduled for mid-April, but Eleven Capital is not planning to issue the rest of the shares. Almost all investors, excluding Eleven Management, Fusion Capital (owned by Telerik co-founders and angels investors Vassil Terziev and Svetozar Georgiev) and the investment firm Karol, can trade their shares. Altogether the three firms that have a lock-up hold 30% of Eleven Capital’s shares.

IPOing in times of crisis

Eleven Capital’s initial goal was to raise €2M issuing 500K shares. The IPO is considered successful in case 250K of the 500K listed shares are subscribed, in other words, if Eleven manages to raise €1M, reads the prospectus. In the course of the past month, a bit over 300K shares were subscribed at the price of 7 BGN (€3.58) making the public offering a modest success from a fiscal perspective, but also an important milestone for the tech ecosystem, as this time a new class of institutional investors is joining the VC industry – pension funds, and asset managers. 

“Apart from not raising the maximum amount, we actually managed to achieve all of our goals, namely to attract at least one pension fund (DSK-Rodina) and a broad base of other investors, including Expat Capital, i.e. one more asset manager besides Karol. Our test is successful and there is room to bridge the gap between the public markets and the VC world,” explains Ivaylo Simov. 

Around 90 investors have subscribed shares with an average ticket of 23K BGN ( €11.8K). Most of the investors are Bulgarian, but there are also two individual investors from Greece, tells us the team.  The rest of the shares will not be issued for the time being.. According to our sources, there were prospectus investors who withdrew their participation intentions after the Coronavirus outbreak in the region. 

In April, Eleven Capital will officially be listed on the Bulgarian Stock Exchange and all the investors, excluding Eleven Management (lockup 3 years), Karol (lockup 2 years) and Fusion Capital (lockup 1 year) who together hold 30%, can trade their shares. Yet, given the current circumstances, this is not what the team expects. “Given the volatility in the markets, we expect most investors will adopt a buy-and-hold strategy and there will be limited trading initially,” says Simov.  

Portfolio & expectations

The company itself will profit from exits and sold equity, and the profits will be distributed among all investors, with 20% dedicated to Eleven Management. The portfolio currently consists of 34 companies named to be the top performers of Eleven Management’s portfolio. According to Ivaylo Simov, manager of Eleven Capital, the aggregate revenues of the portfolio had grown four times since 2016. At the same time, most of the companies (not unusual for startups) are not profitable – see below.

A more detailed look into the numbers shows that 25 of the portfolio companies increased their revenue in 2018, six of them show a drop, and another three have no registered turnover. The top performers of the portfolio (by revenue over 1M BGN in 2018) are Kanbanize, Enhancv, Sensika, Novalogy, and CourseDot. Eleven Capital owns between 7.9% and 19% equity in the companies. The value of the investments in eleven of the companies has decreased, shows also the prospectus. 

The last available financial reports of the companies show that nine of the 34 companies were profitable in 2018. These are Kanbanize, Sensika, mBrainTrain, A4E, MaistorPlus, Gamera, Yanado, and Modular. It’s important to note that four of the startups are headquartered in the US and the UK, and most of them generate most of their revenues from foreign markets where they have offices too, which could partially explain the financial performance of the Bulgarian entities. 

According to the official news release of Karoll, there are eleven key portfolio companies: BI platform developer Sensika, IT education platform Coursedot, digital CV platform Enhancv, task management system Kanbanize, magic paint startup Escreo, cargo drone developer Dronamics, taxi app TaxiMe, data science company A4E, smart bench startup Strawberry Energy, editorial intelligence platform Content Insights, and EEG device mBrainTrain.

+++ Here’s what we can learn from the prospectus of Eleven Capital+++


Q&A: “We are working on several options for bridge financing”

Trending Topics: Given the current situation with coronavirus, what were the challenges? 

Ivaylo Simov: Obviously the timing did not play out well for us. Some institutional investors stopped investing at all, asset managers had liquidity and draw-down issues, retail investors were naturally apprehensive and hoarding their cash for the upcoming rainy days. We still pulled it off against all odds. And we are very grateful to all who trusted us.  

When are you planning to start investing in portfolio companies? Have you revised the plan in relation to the economic situation? 

We have already started investing as taking from our cash reserves, even prior to the IPO. The situation is very dynamic and changing almost daily, so we shall adapt on the go.

Some of the portfolio companies may experience difficulties and may need additional capital. Are you considering to offer them alternative financing mechanisms?

We are working on several options to provide debt, equity or other forms of bridge funding to the portfolio. The money raised during the IPO will help us in this respect as well.

Have your portfolio companies revised their growth and fundraising plans for 2020?

In the current situation, every business must take timely measures to mitigate the financial risks, optimize spending and keep growing. As the year unfolds startup fundraising may become a bit more challenging compared to previous years, but we believe that great companies will still manage to fundraise successfully. Overall, both we and the portfolio companies are well prepared to handle the crisis and emerge stronger after it.  


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