In January this year, the Fund Manager of Financial Instruments in Bulgaria (FMFIB) selected three fund managers, Vitosha Venture Partners, Morningside hill and Bayena Ventures, for the implementation of the financial instrument (FI) “Entrepreneurship Fund” with a total budget of €100 million.
The goal was to establish three alternative investment funds to support businesses at various stages of their growth, ranging from newly formed SMEs in the conceptual phase to well-established companies with proven business models.
It was a long-awaited procedure to conclude. In February 2024, 24 applications were submitted, and upon completion of the process, the selection was made.
It was immediately after that appeals started to flood the Commission for Protection of Competition (CPC) in Bulgaria. Two of the appeals are from New Vision 5 Fund (NEVEQ), and the third is from Planet 9 Ventures. The main claim is that the scores for the selected funds were artificially inflated, while the scores for the others were lowered without justification.
As the result of appeals, The Commission for the Protection of Competition overturned the decision of the evaluation committee of the Fund of Funds (FoF) regarding two of the three procedures, totaling 70 million euros.
Concerns over FoF evaluation process
According to the Bulgarian media outlet Capital.bg, the CPC’s decision raises concerns about the evaluation committee of the FoF.
The alliances Bayena Ventures and Morningside Hill were initially selected to manage the funds; Bayena Ventures for at Position III: “Implementation of Growth Entrepreneurship Fund with a public financial resource of €40 million”, and Morningside Hill at Position II: “Implementation of Venture Capital Entrepreneurship Fund with a public financial resource of €30 million”.
Appeals were filed against the selection of Vitosha Venture Partners for Position I: “Implementation of the Early-Stage Entrepreneurship Fund with a public financial resource of €30 million”, but the commission rejected them.
What’s next?
The CPC’s decision could significantly delay the creation of two of the funds for an extended period.
As Capital reports, Fund of Funds may face two possible options to resolve the situation. One option is to follow the decision of the Commission for Protection of Competition and conduct a new evaluation. Alternatively, the FoF could appeal the decision to the Supreme Administrative Court of Bulgaria, which might lead to a prolonged legal battle.
Meanwhile, the investment period is ongoing despite the appeals, with the final deadline for capital deployment remaining until the end of 2029.
The Recursive will follow the situation and provide additional information and insights from the relevant parties in the coming weeks.
