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Innovation Accelerator Bulgaria: Will There Be A Pre-Seed Fund In Bulgaria or Not Right Now

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For the Bulgarian startup and venture capital ecosystem, the year started with one topic – what’s going on with the pre-seed investment fund Innovation Accelerator Bulgaria. The fund was supposed to launch with an investment capacity of €15.6M and back 220+ very early-stage ventures in the next three years. Yet, will it?

Following two social media posts from the already former CEO Leona Aslanova disassociating herself from the investment company she once initiated, we’ve been trying to put together the whole picture for quite some time now. 

The story has different angles and layers, yet what’s in the interest of the whole innovation and startup ecosystem are two topics: whether the fund will indeed start investing filling the pre-seed capital gap in Bulgaria, and does the new management have the required experience to implement the plan the former management and the major LP – the governmental Fund of Funds (FoF), agreed on. For the time being, we have collected the accessible facts and statements. 

The clear facts: All key figures (partners) who started the fund, besides founder and innovation consultant Leona Aslanova and management consultant Borislav Stefanov, have one way or another left the fund months ago. Since December, Aslanova is not the CEO anymore, but she is still a shareholder. Borislav Stefanov remains a shareholder too. There are two new CEOs – Vassil Christov and Dimitar Kostov, who have joined upon official registration of the fund manager (the company that actually invests in startups – ed.n.) in November last year. Both come from a banking background and have previously worked at the Bulgarian First Investment Bank. The major LP – the governmental Fund of Funds, that provides 90% of the finances, is in a situation, in which it tries to assure the public resources are spent appropriately, and has no interest in pulling the resources and the mandate of the fund back, as it has already chosen fund manager in accordance to its strategy. 

The official statements

To our great dismay, there was a hostile takeover of the fund, which resulted in: misappropriation of intellectual property since September 2017 – investment strategy, organizational capacity, documentation; exclusion of members of the Supervisory Board who oversee the moral principles and the implementation of the company’s strategy; illegal acts. As rumors are spreading on the market, we want to express our position on the issue, with which we hope to end them and ask the whole ecosystem to be alert and active,” comments Leona Aslanova in a social media post. On December 10, the management board (consisting of the four partners) voted that the two new partners Dimitar Kostov and Vassil Christov take over the CEO roles. According to the session protocol, Aslanova declared a will to give her shares away too, yet has not put a signature on the document. In a phone call, the already former CEO told us that she’s not planning to continue being part of Innovation Accelerator Bulgaria, but wants to be compensated for all her expenses around the fund structuring in the past three years and for her own capital invested in the fund. According to Aslanova, this is around €75K. The contract signed in May says the management of Innovation Accelerator is obliged to contribute €486.7K and attract investors who’d invest around another €1M. 

“Mrs. Leona Aslanova is not the CEO of Innovation Accelerator anymore, she’s still a shareholder and part of the management board, and we’d like to keep it this way. This internal situation does not affect our plan to start investing from March on when we hope all the questions will be answered,” tells us Dimitar Kostov, current CEO of the fund. He and his co-CEO Vassil Christov prefer to keep themselves away from bigger statements for the time being in the interest of their investors and say they are continuing to work and grow the team of Innovation Accelerator.

“We currently expect the fund manager to present a plan for the implementation of the investment fund and the achievement of the set objectives. Such a proposal should be legitimately endorsed by the fund manager’s bodies and in accordance with the applicable legal framework,” says the official statement of the governmental LP, the Fund of Funds (FoF). 

Now what?

In case a key figure, such as a 25% shareholder and management board member like Aslanova, expresses willingness to leave or needs to leave for other reasons, there’s a procedure described in the contract. The FoF has a maximum of 60 days to review a proposal for a new key figure with the same or comparable expertise to substitute the leaving person or propose a new key figure. In the meantime, no investments can be made.

The term of the fund is too short anyway  (till the end of 2023) to invest in 220+ companies and every delay means it’s getting harder to implement the plan.

Keeping the whole situation away from the public discourse seems to be the preferred option for the FoF and the current management of Innovation Accelerator Bulgaria. Thus, no rumors are fed and no chaos is created in the ecosystem. 

So far, the only public statements have been coming from Leona Aslanova on social media. “I was the face of the fund and it’s associated with my reputation. It’s important to me to inform clients and partners that I’m no longer part of this fund and prevent companies from the pipeline being misled,” explained to us Aslanova.

What happened last summer…

Innovation Accelerator Bulgaria first appeared in 2017 as one of the two applicants for a public tender aimed at choosing a pre-seed investment company that would manage €14.1M of public resources, and attract another around €2M private capital. Back then Cleantech Bulgaria was chosen to manage the capital. Aslanova and her team had announced they would launch a small private fund as they had developed a strategy and attracted private capital. Then Cleantech withdrew its application in late 2018 without further comments. One of the suggestions we’ve heard from the ecosystems is the structure of the fund and the close to an impossible task – to invest in 220+ companies in three years. So, at the end of 2018 Aslanova’s fund was the chosen contractor. In spring 2019, an official contract was signed. At the time, the partners of the fund were Aslanova, former president counselor Anna-Maria Vilamovska, entrepreneur Alexander Dzhoganov, and Borislav Stefanov, who’s a business consultant by background. Months after the contract was signed, our interview requests were constantly rejected with the explanation “it is too early”. 

The team, and advisory boars of Innovation Accelerator Bulgaria upon signing the contracts with FoF © FoF

In December, after reading the social media post by Aslanova, we were surprised to learn that Vilamovska and Dzhoganov had left the fund months earlier. According to Aslanova, the two had not contributed to the work, and couldn’t because of health-related issues and respectively for taking another job, which is against the rules set in the contract, therefore, they had been laid off. The other version: the two had detected practices, that were not in congruence with their moral standards, and left the fund not willing to participate in them. Documents supporting this thesis have been leaked to us. Who had scouted and invited the new partners is also a matter of interpretation and everyone has a version.

How, when and whether are open questions for now. Will Innovation Accelerator have to return the mandate withdrawing the plan to invest this €15.6M (€14.1M of which public)? What led to this inner dissonance in the investment company? Based on the available resources the outcome is not predictable yet. 

What we can clearly see, is that the fund definitely hasn’t been having a stroke of great luck, and hope the situation will turn out positively for the ecosystem.

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