As a Bulgarian-based venture capital firm, Innovation Capital focuses on providing critical funding to companies in their earliest stages. With over 150 deals in the past four years, the firm is well-known within the startup ecosystem and desired by entrepreneurs seeking financial support.

Yavor's investment strategy revolves around the significance of a strong founding team, market potential, and products or services that solve real problems. Despite the current economic challenges, he remains optimistic about the startup landscape.

In this article, we delve into Yavor Gochev's background, motivation for investing in startups, selection criteria, and insights on navigating the challenging economic environment for founders seeking funding.

Who is Yavor Gochev?

Yavor Gochev is an investment professional and a Senior Investment Manager at Innovation Capital, a Bulgarian-based venture capital firm. Yavor Gochev has been an integral part of the fund since its inception. It is known for its unwavering passion and commitment to nurturing startups and guiding them through their developmental journey.

“We are a Bulgarian-based venture capital firm in the last year of our investment period. We have a bit more than 21M euros under management.

Our mandate looks to support companies in their earliest stage. We invest up to 50K euros in pre-product, pre-revenue companies. We can also go up to 1M euros in companies working on their seed stage.”

While their main focus lies in pre-revenue companies, their investment mandate is limited geographically to Bulgaria.

“We’re a fund manager under the Fund of Funds, which means we have quite a strict mandate regarding the geography of investments. We are currently focused exclusively on Bulgaria.”

Yavor and his team at Innovation Capital are evaluating the expansion beyond Bulgaria for future funds. They are considering private funding and exploring the potential of EIF.

“There'll be a new batch of funds under the Fund of Funds towards the end of the year or next year. So, we are looking into that, but we are looking into private and EIF possibilities.”

Why is Yavor Investing in Startups?

Yavor Gochev's motivation to invest in startups and venture capital stems from his hands-on experience in innovation. After completing his business degree at the University of Dundee in Scotland, he pursued a master's degree at Copenhagen Business School, specializing in innovation and entrepreneurship.

“And after graduating, I moved back to Bulgaria. I wanted to share some of my experience working with startups and founders.”

This experience kindled his passion for helping early-stage companies thrive. As fate would have it, Yavor crossed paths with like-minded individuals, and together they established a venture capital fund, Innovation Capital, to provide much-needed financial support and guidance to promising startups.

“I joined an accelerator program, and I’ve been managing the accelerator for a few years. After some time, I met my colleagues from Innovation Capital.

So, transitioning from the accelerator to the venture capital fund seemed natural.”

How is Yavor Selecting Startups for Investments?

With over 150 deals in the past four years, Innovation Capital is widely known within the startup ecosystem, attracting entrepreneurs through proactive outreach and serendipitous encounters at various events and accelerator programs.

Yavor places central importance on the startup's team, particularly in the early stages of development. He looks for a team with expertise, strong motivation, internal drive, and a high work ethic, recognizing that the team's qualities are fundamental to success.

“In my opinion, the team behind a startup is very important, and the idea or the product/service comes only afterward. They can always pivot, but your team doesn’t.

They also need to be in a market with the potential to grow, which means a relatively big market. So, we always look for founders with expertise that know what it means to be part of a developing market or something that’s growing.

Third, and one of the most important things, we are looking for something that’s maybe not having an innovation but that brings something new to the business model of the product or service and solves real problems.”

Yavor Gochev's investment strategy in early-stage startups centers around providing crucial financial support for R&D, product development, and go-to-market design.

Beyond financial support, Yavor leverages his extensive network in Bulgaria to open doors for startups, connecting them with potential customers, assisting with marketing efforts, and facilitating connections with other investors, including business angels and larger funds.

“At Innovation Capital, we try to provide our founders access to our extensive network in Bulgaria. So, we create opportunities for potential new customers or help them be more visible in the market.

Their comprehensive support has witnessed numerous success stories within their portfolio.

We also help startups find investors for their next rounds, being either business angels or other venture capital funds.”

“One of our first investments, almost four years ago, is a company that was part of the initial accelerator program I mentioned. At the end of the accelerator, we invested 50K EUR in them and supported them through the process for another 100K EUR. They raised a round from private investors and another local venture capital fund from Bulgaria.

Thanks to this, they reached the break-even point and are now present in the international market. They’re now closing a substantially bigger round with a strategic investor.”

Economic Activity & The Future of Startup Funding

Yavor Gochev's perspective on the current economic landscape highlights the challenges early-stage startups and founders face, especially in Bulgaria.

“While many VCs focus on the struggles of bigger tech or FinTech companies with fundraising and valuations, I want to focus on the earliest stages of startup development, particularly pre-seed rounds, and pre-revenue companies.

In the early stages of development for a company, the valuations cannot go much lower than they are. So, valuations are not that affected, but founders are. Many experienced individuals are cautious about taking risks and are grappling with the decision to leave their well-paid jobs to pursue entrepreneurial ventures.“

The unstable environment has led to hesitation and has, in Yavor's view, negatively impacted the startup ecosystem in Bulgaria. Unlike the situation in the US, where laid-off employees from big tech companies have contributed to a thriving pre-seed stage, Bulgaria's founders are more cautious and hesitant due to economic uncertainty.

“Currently, in the United States, the pre-seed stage of startups is experiencing significant growth, with numerous new companies emerging.

However, the situation in Bulgaria is different, as people there are more cautious and uncertain about whether to keep their jobs or venture into startups.”

Moreover, inflation over the past couple of years has affected the value of funding provided by VCs, making it less favorable for aspiring entrepreneurs and early-stage startups. As a result, Yavor observes that founders may become more cautious about how they spend their money after receiving funding, given the challenging economic landscape and the need to make every penny count to achieve sustainable growth and success.

Final Advice for Founders

Considering the current economic situation, Yavor Gochev offers valuable advice for founders seeking funding. With the economic landscape being more challenging, he emphasizes that funds are now more cautious about their investments.

“A mere pitch deck is no longer sufficient; founders should have a comprehensive financial model and secure letters of intent from potential customers or partners. Being fully prepared with tangible evidence of market interest and viability will greatly enhance their chances of capturing investors' attention successfully.

In these cautious times, demonstrating dedication and readiness is crucial for founders to stand out and secure the much-needed funding for their startups.”

This level of preparation will instill confidence in investors and demonstrate the founders' dedication and seriousness toward their venture.

Resources mentioned in the discussion:

Connect with Yavor:

• Linkedin
• Innovation Capital - Website
• Innovation Capital - Linkedin