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Funding a startup each week in a single small country

Yavor Gochev, a Senior Investment Manager at Innovation Capital, is tasked with funding 220 early-stage Bulgarian companies over five years. Two hundred preseed investments of 50,000 Euro; twenty seed investments of up to 1MM Euro. The team is about halfway through and on track to finish on budget and on time.

That is not a small task. Bulgaria is not a huge country. I’m proud to say that Founder Institute is routinely part of his deal flow. But, that is many more companies than we can provide from one small country.

The EUR50k checks are meant to enable companies to get basic market validation within 6-months to a year. That puts those companies in a position to get follow-on funding.

 
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Innovation Capital is primarily funded by the Fund of Funds of Bulgaria itself, so it has stricter report criteria and requirements than a typical venture fund. At the top of Yavor’s intake checklist is the proper setup of banking, account, and legal details. I’m sure Yavor doesn’t count these as just “details.” There, they are substantive, and in Silicon Valley, they’re a detail.

Bulgaria is a small place and very much a tight-knit community. The abilities and character of a founder are easier to know than they would be in a larger ecosystem. In Bulgaria, everyone really does know everyone. While everywhere, a founder not being up to snuff is a huge red flag, in Bulgaria, it’s a red flag with a massive spotlight showing on it.

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When Yavor thinks about founder readiness, he has an extra issue that we don’t have in Silicon Valley. Founders in Bulgaria often fail to realize that they are not in Silicon Valley. Valuations are lower, markets are smaller, and infrastructure support is less strong. Getting startups in Bulgaria to understand that they are in Bulgaria is a major huddle to making them fundable. Part of that understanding is seeing the need for a plan to quickly expand into foreign markets.

Because the companies are generally VERY early, the key factors that Yavor focuses on are related to the team.

On the team, he’s looking for passion, and that starts with them having already started the project rather than waiting for outside funding to arrive. Concretely, he’s looking for 300-1,000 person-hours over at least 3-months of work already put into the project—ideally, skin in the game in the form of cash, at least $5,000. And, of course, skills and expertise that he can verify through the small world nature of Bulgaria.

Definitely a different world than Silicon Valley. In a few years, we’ll get to see how startup investing in Bulgaria has turned out.

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Written by Russell Brand

Russell has started three successful companies, one of which helped agencies of the federal government become very early adopters of open source software, long before that term was coined. His first project saved The American taxpayer 250 million dollars. In his work within federal agency, he was often called, “the arbiter of truth,” facilitating historically hostile groups and factions to effectively work together towards common goals

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