The Startup Ecosystem of Bulgaria

Bulgaria has a relatively small market, but checks several boxes for a robust startup ecosystem: strong digital infrastructure, variety of support programs, and top tech talent. Bulgaria has so far created a strong startup support environment with a number of successful accelerators and incubators. The local startup ecosystem has also achieved a major milestone in 2022 with its first unicorn, Payhawk. This success story has brought new breath to the ecosystem as Bulgaria grabs the attention of the American and West European VCs. The Bulgarian startup scene is a hotspot for European entrepreneurs and digital nomads, lured by the low cost of living and smart and effective special tax benefits offered by the public sector. Bulgaria boasts one of the lowest personal and corporate tax rates in the European Union, which helps attract foreign investors and tech talent. More promising steps are being taken with the government establishing new agencies to promote entrepreneurship and attract global startups, such as Invest Sofia, and launching initiatives like the startup visa. We were impressed to discover Besco, an interesting example of a startup ecosystem think tank which helps the public sector shape policies related to startups and macro economic environment supporting the growth.
On the flip side, Bulgaria lacks the resources to support its own startup ecosystem, and is heavily relying on EU funding. This funding was crucial in allowing the ecosystem to jump start, but might slow down further growth. The current mechanisms that are being copied from the EU playbook, such as the Fund of Funds, could distort the natural growth of the ecosystem and drive it towards micro management with a lack of market focus and private sector investment. The Bulgarian ecosystem could use less micro management and more infrastructure work on its promotion and strategy. One of the biggest challenges of the ecosystem, which has become an IT outsourcing hub, will be to convince its potential entrepreneurs to give up on excellent conditions while working for foreign companies and dive into building their own startup.