SeedBlink Blog

Getting more context from experienced investors is essential to have a better picture of local investment trends and see the ecosystem through the lens of those actively involved in it.

We live in uncertain times, but this uncertainty holds an untapped potential for potential investment opportunities.

This is why we wanted to dive deeper and understand the driving forces behind our ecosystem with someone who has vast expertise in the industry. This is when Max Gurvits — Managing Partner at Vitosha Venture Partner, joined us to talk about the most current funding trends in Eastern Europe and what investors can learn from what’s surrounding us.

Country borders — still play a role in our modern economy

Max opened the conversation with a short overview of how history shaped Eastern Europe and why physical borders are still problematic for the modern economy.

“The borders in Eastern European countries are a nuisance. Because they were impenetrable until recently - they still play a huge role. Both Bulgaria and Romania have very similar cultures; even if we have different influences on food and language, you can still find similar traits in people.

I’m not originally from Bulgaria, but this is my home country right now. I was fortunate to be part of the local ecosystem from the beginning, and I could see people building it. Today, I’m amazed by how big it’s become.”

All we have to do is work together. __

“When I started in Bulgaria 11 years ago, I was one of the founders of the Eleven Fund, which was my first endeavour after moving from the Netherlands. With HowToWeb founder — Bogdan Iordache, we started going to each other’s events and trying to foster cross-border collaboration. At Eleven Fund, we invested in Romanian startups, for example, and we’re constantly following the development of the local startup ecosystem. However, there is still a Romanian ecosystem and the Bulgarian one, and in people’s minds, you can see fragmented perspectives. Things are moving slowly, and there is room for more cross-border collaborations.

On the bright side, you have opened your first office in our country, and there is also The Recursive team, which builds its team recruiting people from both countries. The links are getting better.”

Max also shared a perspective on how external funding help supported closed borders for an extended period.

“Today's situation is also shaped by institutional frameworks, especially when looking at investment money. Europe was focused for a long time on local investors, and a lot of their money was destined for each country individually. The European Union says that the next generation of funds will be a cross-border one, but they have kept saying this for a long time.

As soon as the European strategic and operational funding programs, which are the source of most investment planning, become less focused on these countries individually and more as a united ecosystem, we’ll see an explosion of cross-border funds and startup investments.”

Uncertain times hold great potential for different funding opportunities

There is still a lot of discussion about what can happen in Ukraine and how the events will impact us, especially if these actions escalate to a greater level. However, Max shared his view on the possible outcomes for the local investment ecosystem and what investors can do.

"Ukrainian talent is something that everyone was looking for, especially tech, even before the war. We have a more significant opportunity to work with these talented people than before. Many of them are now based in other countries, and there’s still uncertainty if they’ll return to Ukraine and when, so there’s a lot of room to explore international opportunities."

People will start integrating more and more with the communities where they live.

“Poland did a few steps before this war, and they already have a VC fund focused on investments in Ukrainian startups. As a Ukrainian founder, you have more opportunities to raise money because the attention is focused on the country.

There is already this idea of investing in immigrants in the US, especially for first and second-generation Americans. Y Combinator shows that most founders of the 500-600 companies that enter each batch are not born in the US. A similar pattern is happening in Ukraine. All investors concentrate right now on Ukraine. On the one hand, they are looking to help, and on the second, seize the unfortunate opportunity for talent leaving the country."

This perspective is completed by a sneak peek at what the future holds after the invasion ends and things go back to normal.

"Whenever the war ends, and hopefully that’s soon, there’s a period of mass construction following a series of investments. There will be trillions of euros or dollars worldwide from the EU, US, and private companies and corporations flowing into Ukraine.

There were already plans for European Institutional investors to set up some funds in Ukraine, and now, when the situation gets better, these things will come back, much bigger than before.“

Ukrainians working in tech have a bright future, regardless if they will be based or not in their own country.

A lesson of humanity from a united community

Right after the invasion in Ukraine started, we saw an announcement on Max’s Linkedin offering to help Ukrainian people leave the country or refugees find a home.

“On the morning of February 24th, when the worst of what we imagined started, I decided to call my team and discuss potential ways to help. When we started calling the people we knew, we were surprised to learn about many companies and organisations already working on different ideas and uniting their forces.

We have very active startup associations, such as BVCA — The Bulgarian Venture Capital Association, or BESCO — The Bulgarian Startup Association. Together with them, hundreds of other volunteers, and the help of government officials, we formed BG4UA, through which we started to organise transport from Ukraine to Bulgaria.”

Max also mentioned that he was lucky enough to be connected closely with Ukraine’s tech community, as he worked with the local community several times.

“Ukraine is the country where I’ve done most work after Bulgaria.

I helped several startups and venture capital funds and did some training programs. Last summer, I went on a 1000km tour across Ukraine with a friend from the US to meet startup founders and talk to them. It all started with the list of people everyone knew, and the rest is the credit to our volunteers’ work and the government's effort.

This was the first time we saw such a deep involvement from the Bulgarian government system. So far, history shows us that countries in Eastern Europe were the poor ones, usually asking for help, being the ones in need. Now, countries like Bulgaria, Romania, and Poland have the chance to step up and play the role of civilised western countries helping people.

We managed to recruit 3000+ volunteers, and 6000+ units of housing were given in these two months since the invasion started. More than 1000 families were located in these houses, and 100+ others received help with transport.”

There is one thing that everyone could see. People united their efforts no matter their country, ethnicity, or religion. People living close to the borders started to help Ukrainian refugees with housing, food, and other necessary items.

“I spent a day in Bucharest, where I could meet some friends and other people from Ukraine heading to Bulgaria. I could see tremendous help coming from everyone in such a short time.

One Ukrainian elder gentleman was going through Bulgaria with an advanced cancer stage. Unfortunately, he couldn’t travel further and decided to stay in Romania. He needed a doctor immediately and got pointed to a local NGO that typically was focused on other activities. Still, they mobilised efforts and doctors this time and managed to get this man hospitalised in Bucharest at a specialised centre treating cancer.

Everyone is doing their best.“

What makes Eastern Europe successful?

We couldn’t sit down and talk to Max without bringing its bread and butter from the past decade to the surface.

“The main ingredients empowering Eastern Europe are based on our hunger.

Our societies are still earlier in the development stage, and there is still room for technological disruption.

For example, when I started my first company, everything was tricky from 2008-to 2010. We were always going out of money. Living in a super developed conservative place like the Netherlands makes things even more frustrating. Everything you wanted to do, was already done generations ago; people were already rich, paid a good salary, and had a good life.

When you come to a place like Bulgaria, or any other country in Eastern Europe, it’s like going back in a time machine.

These countries are part of the European Union, they start to have a good development process, and you have the guarantee that the next decades will be great from that point of view. At the same time, nothing is done from the founder's perspective, and you can come up with very different solutions across multiple industries. Innovations are needed.

Countries not part of the European Union have a more difficult time, such as Ukraine, Moldova, Belarus, or Giorgia. The recent development of Romania, Bulgaria, Croatia, and Slovenia shows the region's untapped potential and how much more it can grow unless the apocalypse happens.

Fast forward thirty years from now, we’ll see pure growth in the region, just like Spain, Portugal, or Greece are seeing right now.“

Growth is always a good sign when we talk about it, but it comes with a few downsides.

“When there was no development, everything was stable, but there were no opportunities. When there is growth, there is a lot of development.

However, not all people are happy about this. People get frustrated with things changing too fast or going in the wrong direction, so they become frustrated.”

Industries thriving right now in Bulgaria

Max also emphasises some industries he sees thriving in his home country and what potential sectors might be attractive to investors.

Fintech industry

"Bulgaria has always been strong in fintech because we have a lot of good software engineering talent. Financial systems were one of the things that we started to work on as a nation right after communism.

Unfortunately, several of these works it’s also known to be illegal, and this is how our country got the fame of being one of the top places for a credit card or ATM scamming in the 90s.

Many people in Bulgaria built their first-hand experiences around these experiments, and some of these people are now working in fintech, having good companies, and making proper things."

Food-tech industry

“Another great area to keep our eyes on is food innovation, as we have a rich culture around fermented foods.

This startup area is growing slowly but surely; there are already 3-4 successful probiotic companies that make their supplements or companies that produce ingredients for other foods. A few of them are ProViotic, NOVIOTIC, Smart Organic, Harmonica, and Cheese The Queen.

Bulgaria has excellent potential to become a European leader in probiotic startups.”

Software solutions

“Additionally, there are various areas in business software solutions.

Bulgaria and Eastern European countries have a rich history of outsourcing tech knowledge and skills, and we already see successful examples, such as UiPath or GTMhub rising from this experience. Besides them, there are around ten startups above 100 million in valuation.“

Future thriving industries

“One of the industries with tremendous untapped potential is education.

We have a few successful domestic Edu-tech startups that are not yet internationally. For example, a startup launched about ten years ago - Ucha, found a solution for schools that can be quickly implemented after hours. Kids would join right from home and enjoy a fun experience.

This startup has many clients and is making millions right now. The proof is that we see every third Bulgarian school kid using their solutions. They are just one of the few examples from the country.

Because education is still so broken as a system in Eastern Europe, there are still a lot of opportunities.”

We’re ending our talk with Max by looking at his previous investments and extracting his biggest takeaways that other investors can learn.

“One of the things I learned repeatedly is that it’s super hard to predict investment outcomes. Most of the time, as an investor is the ones that you believe are the last and that positively surprise you the most. On the opposite side, the companies you believe in the most end up disappointing you.

Startup funding is a psychological process rather than a financial or legal one. When looking at a very early stage startup, it’s all about the founder’s idea, the vision he has, and how people can see that vision.

I learned that one of the critical metrics for any startup is how far founders are willing to learn things about things they don’t know about yet. Their adaptiveness is very important, and in our area of Europe, people are more conservative, so they tend to hold back and focus on what they know is already working.

If something works, most of the time, it’s a coincidence, and you don’t know why. It just happened.

My final advice for investors is to invest in talent for the long run. Most startups will fail, but people are not. With that idea in mind, you start building a relationship that will allow you to invest better in the future.

Entrepreneurship and venture capital, especially early, are just like musical instruments. You learn it by doing it. It’s all about experiential knowledge.”