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Funding the next wave of unicorns with Ivaylo Simov from Eleven Ventures

patricia-borlovan

Patricia Borlovan

· 5 min read
Funding the next wave of unicorns with Ivaylo Simov from Eleven Ventures
“There's a giving-back type of mentality by successful entrepreneurs and a lot of peer sharing and support among like-minded people.” An honest talk about the strong potential in the Eastern European startup ecosystem and how Eleven Ventures is investing in the next wave of unicorns.

We return to Bulgaria to welcome a new guest from one of the local venture capital funds. Without further ado, we introduce you to Ivaylo Simov, Managing Partner at Eleven Ventures.

Ivaylo is among the pioneers of equity investing in Bulgaria. He started his career as a Financial Analyst in Caresbac, one of the first investment funds of its kind, and later became Investment Manager, then Director of Global Finance, and participated in some of the biggest regional M&A deals. At Eleven, his goal is to positively impact Southeast Europe's Venture Capital industry.

With successful names in their portfolio, such as Payhawk, DRONAMICS, Gtmhub, SMSbump, and many others, Eleven Ventures seems to have found the next wave of Bulgarian unicorns. We wanted to see how everything looked from the inside, and Ivaylo was kind enough to take us on a little tour.

“The success of companies such as Payhawk or GTMhub is creating a wave of positive effects, and the co-founders of those companies are willing to invest back in other founders.”

Success stories create a network effect to power up local ecosystems

"Bulgaria had a bit of a head start compared to other countries in the region because they dared to launch something earlier; the other reason is that we invested a lot in early-stage companies. This created a network effect in the upcoming years.

Although not all these companies were successful, the founders gained experience, started developing new ideas, and worked together on joint efforts.”

Today's success stories from different industries result from an early success that motivated young Bulgarians to take the entrepreneurial path.

“Another factor contributing to local acquisitions growth was the Telerik exit. This was one of the biggest ones in Bulgaria and Eastern Europe at that time. This case created the “Telerik mafia”, similar to the “Skype mafia.”

The way people from Skype supported the local ecosystem, people from Telerik started working on 20+ new companies, including our current unicorn - Payhawk. The co-founders of Telerik were among the most active angel investors and started a give-back mentality.”

The Central and Eastern European area is experiencing a massive network effect and is expected to grow into a more mature ecosystem in the upcoming years.

“I think that, nowadays, something similar is happening with the success stories coming from many local startups, such as the UiPath IPO, the exit of Green Horse Games, and many others.

If the founders of these companies choose to invest back in the community, this creates a flourishing environment. It might take a couple of years, but we’ll definitely see its impact.”

We are not slowing down but taking a more cautious path

Ukraine's unfortunate current economic situation is not necessarily slowing venture capital down. It seems like all the hype has disappeared, and investors have a clearer picture of what they should do next.

“The effects of the current events make investors a little more cautious about their investment decisions; they are more careful and diligent.

However, on the other hand, we see no immediate effect apart from the global macroeconomic situation. I don’t think there will be a direct effect of the situation in Ukraine over our local startup ecosystems with real consequences.”

Thinking twice before investing in a deal and connecting with other regional investors helps us take the ecosystem to the next level. This way, we have a mature community of founders and investors ready to support tomorrow's success stories.

“Some teams from Ukraine moved to different countries in the region, mainly to Poland. From my perspective, I think this will have a positive effect because we’ll have to start thinking about the region as a whole and promote it accordingly.

We might have to wait a few years until new unicorns enter the market, but I think it’s just a temporary phase.”

What sets Bulgarian founders apart?

“It’s not just Bulgarians. Most of the entrepreneurs from our region have solid technical knowledge.

On top of that, the local market's culture makes them build their startup with an international focus right from day one. Marketing and sales costs are relatively cheaper than in Western Europe, which gives them a competitive advantage.”

“It's not so much the individual entrepreneurs but the whole ecosystem. There's a giving-back type of mentality by successful entrepreneurs and a lot of peer sharing and support among like-minded people. The first success stories have also sparked a friendly rivalry and encouraged other founders that only the sky is the limit.”

Eleven Fund on the road to 10x growth

The educational system from 20 years ago formed a generation of technical experts ready to innovate in different industries. However, it’s not just engineering that needs strong innovation, but other sectors or activities too, and Ivaylo shares with us some of the critical areas they invest in.

With a community of +200 founders and +100 investors that constantly feed them projects, Eleven is on the lookout for startups across the following industries:

Fintech

“We have already made 14 investments with our third fund, and indeed, we have decided this will be more focused on industries such as fintech, the future of food, healthcare, future or work or e-commerce.

In Fintech, we started a joint initiative with VISA, and it’s currently operational in several countries. Payhawk is one of the first results we see coming out of this collaboration.”

Healthcare

“In healthcare, we also collaborated with one of the biggest pharmaceutical companies in Bulgaria to resolve an innovation problem they were having in this sector.

The industry underwent a series of changes, and recently we started to see it moving from treating illness to prevention.”

Future of food

“When it comes to the future of food, we think the next 1- year will change dramatically compared to the previous 50. The world population is growing fast and has reached 8 billion people. We have to be more environmentally conscious.

We believe startups are the only ones capable of disrupting and accelerating the changes we need in this sector.”

What to consider when evaluating a potential deal?

“There is a famous saying in the venture capital world:

If a great team meets a bad market, the market wins. If a great team meets a mediocre market, the market wins, and only when a great team meets very good market magic happens.”

Iterate and adapt with the right people around you.

You can’t grow a successful company without having strong team members to help you implement all the required actions. Sometimes things change fast and halfway through your journey. The people who have the flexibility to adapt are the winning ones.

“We learned that a product will undergo many changes and iterations before finding a great product-market fit.

However, you will always find the right path if you have a great team and identify the right solution for your customers.”

Ambition is a powerful ingredient fueling intelligent founders.

As we know, it’s not just about the perfect idea; it’s also about having a solid vision of how far you want to go. The founders who dream big enough and have the will and diligence to execute, whatever comes their way, are often those who succeed.

“The success of the startups from our portfolio comes from teams with a very ambitious idea. For example, DRONAMICS didn’t just want to build a plane; they tried to change the whole industry and how cargo is delivered.

We were impressed by these bold ambitions, and it is one of the main things we look for in our investment strategy. Of course, it’s not just the ambition and the brilliant people who have the idea but also the power of execution and how they transform it into reality.

If the project is showing good traction, we develop the trust that the team is particularly good at delivering their promise. In the case of DRONAMICS and Payhawk, they did a fantastic job besides aiming significantly high from day one.”

Consider having an employee stock option plan.

The network effect we see today in different countries and companies that get their “mafia” group formed, is the result of a great employee stock option plan, says Ivaylo. If those startups eventually become the new Uipath or Payhawk, they can later double down on a solid base to support other founders and companies.

“We usually insist that every company should have an employee stock option plan.

Not everyone in the region understands the actual value of it and thinks - don’t need an employee stock option plan.” But now, after the success of UiPath or Payhawk, we can see the actual value of it and how it turns employees into investors.”

Key takeaways:

  • The current uncertain times help us make wise investment decisions and healthily grow our ecosystem.
  • Local ecosystems need success stories to create a network effect and empower other entrepreneurs to leap.
  • Ambition is one of the biggest assets of a successful founder, but it needs constant iteration to find the best idea or product version.
  • A good employee stock option plan could create a network Mafia effect for a high-growth startup. __

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