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Innovation outside the capital: Looking for the next wave of emerging startups in cities across Bulgaria

Angel Angelov and Ivan Manev
Image credit: Angel Angelov and Ivan Manev
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Finding co-founders, accessing high-quality talent, and being able to reach market adoption quickly are some of the typical challenges that pre-revenue founders in Bulgaria face – and these are exactly some of the gaps in the local ecosystem that the second accelerator program XLRadar by Innovation Capital aims to bridge. 

A few days before the start of the country-wide Roadshow of XLRadar, The Recursive team meets with Angel Angelov, Managing Partner at the fund, and Ivan Manev, founder and CEO of the vocabulary-building app Worddio who participated in the last season of the accelerator and received funding from Innovation Capital at the end of the program. We looked to find out what is the value-added for starting entrepreneurs, where Worddio is one year after its participation and what should interested founders expect from the program. 

Finding innovation in overlooked places

With the mission to accelerate pre-revenue ideas for the post-pandemic world and support the development of innovation ecosystems all over Bulgaria, the XLRadar program will be looking for aspiring founders from Sofia, Plovdiv, Varna, Burgas, Ruse, and Veliko Tarnovo whom it will award with a €25K equity investment and €15K worth of in-kind services, as well as opportunities for more investments at the Demo Day. Angel Angelov shares that their approach is to work with key ecosystem builders and local influencers that will gather the community in order to reach more potential candidates, support the development of ecosystems in cities outside of the capital, and meet the needs of local entrepreneurs who are usually different from the needs of founders from Sofia. 

“The first time around we were surprised how many untapped promising founders we were able to meet in these cities. Usually, they operate in smaller and cohesive communities that stick together, actively exchange information, and support each other,” notes Angelov.

However, he also explains that these founders usually have insufficient access to capital, network, opportunities, and sometimes even human capital. In order to support them overcome the obstacles, XLRadar has a curated portfolio of mentors such as Mihail Stoychev from SMSBump, Georgi Nenov from The Superhuman Podcast, and Dimitar Karaivanov from Kanbanize who are successful founders in the focus verticals and can share invaluable experience from their early-stage struggles.

“Hopefully their stories will influence the founders in the cohort and they will avoid some of the typical mistakes early in the game,” concludes Angelov. The jury of the Demo Day will consist of representatives of the major Bulgarian VCs and investors such as New Vision 3, Impetus Capital, Sofia Angel Ventures, Vitosha Venture Partners, CEO Angels Club, Eleven Ventures. The 3-weeks-long boot camp program, on the other hand, is quite concise, practical, goal-oriented so that it adds strong value to the businesses in the shortest time possible. 

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Innovation outside the capital: Looking for the next wave of emerging startups in cities across Bulgaria, TheRecursive.com
Angel Angelov, Managing Partner of Innovation Capital

Angelov also shares that Innovation Capital’s focus is on the local market and they aim to develop partnerships with pre-accelerators such as Founders Institute and with the local ecosystem in the different Bulgarian cities. “In fact, last year during our visit to Plovdiv we met some of our portfolio companies – Cloud Rack which develops sales tracking software, and the Sixth Hammer gaming startup, so our efforts turned fruitful at the end,” explains Angelov.

Ideas for the post-pandemic world

The logic behind focusing on the main four verticals of education, health, entertainment, and e-commerce Angelov explains with the fact that the world is changing even faster due to the pandemic and global lockdown which makes it tougher for visioners to make bets about the future. “Therefore, this is our attempt to work with innovators and true entrepreneurs bold enough to make a bet with their time and money on how our societies and our businesses will shift. We expect to see disruptive ideas that will fit the niches that the lockdown unleashed. We foresee that these four verticals will see a lot of new business models and will show real solutions for business and society, which of course will mean – more growth opportunities,” highlights Angelov. 

The four verticals are specific only for this acceleration program and the next program in the fall will be most likely focused on fast-moving consumer goods (FMCG). Outside the acceleration programs, Innovation Capital is sector agnostic and funds businesses in all verticals. 

Case Study: The success story of Worddio and its development after XLRadar

The partner of Innovation Capital shares that the main selection criteria fall down to the founders, their competence, and most importantly their grit, will, and ability to adapt and act quickly in an unfriendly environment. He explains that the decision to invest in Worddio as a B2C model last year was more of an exception rather than a rule in their investment strategy. “There were a couple of strong points in Worddio’s pitch that stuck out back then: 1. 60k downloads and over 30k users with strong global reach and potential and 2. Ivan has all the right skills and mindset for a successful entrepreneur – dedicated, passionate about the problem as he first-hand faced it and going deep to research the leanest way to tackle the typical startup problems,” says Angelov.

Before founding Worddio, Ivan Manev grew up in Pleven and had a corporate career in Jet Finance International but to him, it felt like working in a startup as his responsibility was to develop the commercial structure of the company, open offices, and incubate ideas. “This helped me to make the transition between the corporate world and starting my own business,” explains Manev. He remembers that after the acquisition of Jet Finance International, by BNP Paribas, English became the main language in the company. As Manev comes from a generation that did not study Western languages in school, the novelty posed a personal challenge for him, and it was then the need for a vocabulary-building app crystalized. 

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Ivan Manev, founder and CEO of Worddio
Ivan Manev, founder and CEO of Worddio

“In order to break the language barrier people don’t really need to focus on perfecting their grammar but instead to expand their vocabulary,” highlights Manev. The path was difficult because even though Manev had some form of entrepreneurial background behind him, he was never part of the startup ecosystem and had to learn how to start a company from scratch without having the support of a corporation that finances his ideas. In the beginning, Manev bootstrapped his app with personal finances while he was looking for external validation and financial support. 

In terms of product development, Manev shares that from the beginning until now the team has redesigned the app around 5 times in order to optimize the user experience. After the investment from Innovation Capital Worddio quadrupled their customer base gaining more than 150K users from all over the world and especially from Bulgaria, Ukraine and Russia. 

At the moment, Manev shares that weekly the Worddio team spares around 120 hours of coding. The team has focused on optimizing its back-end to develop individual learning plans for each user depending on their behavior by using ML algorithms without gathering any sensitive data. After the upcoming fundraising round of $450K at a $5M valuation, Worddio will aim to gain a total of 2 million users in order to improve its algorithms and optimize its predictive models. 

The startup closed their previous round with private investors, Innovation Capital, and the Canadian Loyal.vc. Worddio recently launched a holding in the USA with the goal to raise their next rounds there and enter the American market. 

In the long term, Ivan Manev shares that their vision is to become the first internationally scaled B2C startup from the Bulgarian ecosystem in order to show investors the growth potential of the local innovation landscape. “As we witness that many education and language startups worldwide are reaching unicorn status, we hope to someday also reach that stage,” notes Manev. 

Even though Manev expects that there will be challenges ahead such as the need to address the specific local need of the foreign market it plans to enter, he highlights that his app has a distinctive competitive advantage over its vocabulary-building competitors. The Bulgarian startup is the only one that instead of interactive, offers a passive mode of learning to enable users to learn while they do something else. “Our app makes it possible to learn language just as you listen to music – while you are in the bus, in the gym, and in the park,” simplifies Manev. 

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The program’s XXXL value-added

According to Manev, besides the existence of many funds, investors and business angels, the missing piece in the local startup ecosystem is that starting founders struggle to establish a more personal connection with investors. He explains that every investor feels most comfortable investing in a business that they are familiar with. Another financing problem for local first-time entrepreneurs is that international investors cannot make a reference to any scaled B2C business that has sprung from the Bulgarian ecosystem. This creates a form of barrier between the investors and the founders looking for funding, which posed an obstacle for the initial development. Just like most of the Bulgarian and regional accelerators and funds that focus on B2B startups, Innovation Capital took the risk and gave the initial boost to the team of Worddio which later allowed them to attract the interest of business angels and closed their first rounds of $100K.  

Manev shares that the value-added from the first XLRadar is that it helped them to understand how investors think and what they are looking for in startups. He also outlines that the portfolio of mentors with various expertise was very valuable to bridge the gaps in knowledge and skills that the team of Worddio had in the beginning. The most important aspect for Ivan Manev is that Innovation Capital provided the startup with the first external verification – something that Angelov shares happen with 80% of the companies they invest in. According to the partner of the Bulgarian pre-seed and seed fund, KPIs matter in investment decisions but Innovation Capital supports pre-revenue startups with the goals to develop the startup ecosystem in Bulgaria and give more starting founders the support and encouragement they need to make the first step towards realizing their business ideas.

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Innovation Capital is a venture capital firm managing 21.1M with a mandate to invest in equity and quasi-equity instruments in 200+ startup companies. It was selected by the Fund of Funds to operate a financial resource of 19.5M through the Operational Programme Innovations and Competitiveness and also attracted 1.6M from private investors.
Innovation Capital AD is the entity managing the fund Innovation Accelerator Bulgaria Fund KDA, which is co-financed by European Regional Development Fund.

The entire responsibility of the validity of the content in this document is held by Innovation Capital AD and by no means it can be inferred that it reflects an official statement or opinion by the European Union, the Fund of Funds (Fund Manager of Financial Instruments in Bulgaria EAD) or Innovation Accelerator Bulgaria Fund KDA.

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