How to build a startup ecosystem: lessons from Sofia Investment Agency

The foundation of a thriving economy is successful startup companies that are able to generate growth, create jobs and innovate in different areas of the economy. This is particularly important in times of change and uncertainty when businesses need to be flexible and adapt quickly to new market conditions. Living in such dynamic times, we invited Maria Hristova, CEO of the Sofia Investment Agency, to share how the start-up ecosystem is being built, what its key elements are, and what the future of Sofia offers to such startups.

What are the key elements needed to build a successful startup ecosystem?

Startups need comprehensive support. Any advice related to their company's business development, assistance and information on funding opportunities, access to a peer network, and mentorship are all necessary prerequisites for their success. The key is an individual approach and flexible solutions for each startup.

Sofia city (and Bulgaria in general) has a well-developed and connected ecosystem of startups, and this is especially true for those applying technology, whether it is direct software development or the application of technologies such as AI, IoT, automation, or others, in areas such as prop-tech, biotech, agritech, e-commerce, logistics, ecology, gaming, creative industries and many many more. The capital city has opportunities for the high growth of startups and is better positioned than most of the neighboring countries in South East Europe. And this is not just my opinion, this is also the analysis of the international entrepreneurial organization Endeavor, with which a year ago we worked on a report to map the state of the technology and startup environment in Sofia, for which the data was collected and analyzed together with BESCO, the Fund of Fonds and our experts.

How does the Sofia Investment Agency help to improve the environment for the development of startups in Sofia?

Sofia Municipality has targeted programs to support the environment - the green card for administrative services, provided by the Investment Agency, which I represent, the Startup Sofia Accelerator, implemented by the Europe Program, at Sofia Municipality, together with the Municipal Guarantee Fund and the Investment Agency. The sandbox for innovative project ideas of metropolitan companies that are tested in a real urban environment to evaluate their effectiveness, initiated by the Directorate responsible for digitalization in the Metropolitan Municipality, and many others.

Our Agency's main priority is to stimulate startups by assigning them real projects of ours, as well as to assist in the assignment of such projects by other municipal companies. This is the way in which, on the one hand, public funds are returned most quickly to the new business in the city, on the other hand, they learn from us, we give feedback, and corrective actions and support their growth and also we become an institutional partner, part of the startup's portfolio, thanks to which the confidence of their potential business partners and customers rises.

How do you identify promising opportunities and encourage their growth?

The criteria are peculiar, and I would highlight the following:

• a project in a direction related to innovative industries, in line with our city's priorities
• experience of the team that created the company
• validated business idea model
• realistic and clear objectives

With an eye to the future, how do you see the startup ecosystem in Sofia developing in the coming years?

Bulgaria is increasingly in competition with other dynamic cities in CEE, but the ecosystem here has significant advantages - a simpler regulatory framework compared to neighboring countries, well-functioning structures and strong interconnections between entrepreneurs, institutional entrepreneurial support in terms of access to capital, know-how, etc. Of course, more support is always needed for companies, especially at a more advanced stage, to move towards international expansion and attract foreign capital. This is where the risk capital funds play a major role, which in addition to growth investment provide companies with mentoring and contacts with partners, including for external markets.
Sofia's goal is to create more startups that enter an accelerated level of growth after their second year. According to the study I quoted, about 16% of the companies that have gone on the exponential growth path actually create the vast majority of new jobs - over 80% - and the startups that grow to over 50 employees are the ones that are most beneficial to the economy.