Jan Brøgger Andersen is a Danish serial entrepreneur with eleven ventures to his name. He has been living in Bulgaria for the past six years and is currently working on Sheetly, a startup company aspiring to help web merchants easily manage product data across multiple stores. Prior to his arrival in Southeastern Europe, Andersen has interacted with numerous innovation ecosystems – Denmark, The Netherlands, Germany, UK, Ukraine, Pakistan, and India. Given his experience with startups, investors, accelerators, and innovation drivers across multiple geographies, we decided to ask him about his stance on the innovation environment in Bulgaria.
Trending Topics: You have seen the development of many innovation and startup ecosystems. Should Bulgaria follow the example of any other country?
Jan Brøgger Andersen: When I started my first enterprise back in Denmark, in the 90s, you could either get funds from family and friends or in most cases go to a bank and present a business plan. Back then there were no mentors, no VCs. You had to show that you can make a profit. End of story. Out of Silicon Valley, this whole startup and VC ecosystem thing started maybe 15 years ago and the market has evolved a lot since then.
The US is still far ahead in the game, Western Europe has reached a decent level, Bulgaria and these emerging markets are catching up so quickly but there is no real way to make a comparison. When Denmark entered this transition ten years ago, we were only five years late to the party and talent is the same. There are many bright tech developers in Bulgaria as in Denmark. It’s just that if Danish entrepreneurs comes up with an idea, there is a more developed economy to support their product.
I think that it just requires this combination of government involvement, corporate participation, and community engagement to change the existing mindset, which is slow. It’s slow in any market. I am impressed with how much Bulgaria has progressed as a country since communism. Prior to Sheetly, I was working in Ukraine and there are more leftovers of the Eastern Bloc type of thinking. Bulgaria is catching up as fast as it can and is making a shitload of mistakes. You just make different mistakes than the more mature markets did because you have different realities. Also, you are moving way faster than Denmark, The Netherlands, and the UK were. So it’s as unfair to compare directly Bulgaria to Denmark, as it is unfair to compare Denmark to Silicon Valley.
But at the same time, we are still reading the same books and the same blog posts of how you are supposed to do startups. I think every market has to find its own footing and not copy from somebody else and I think that Bulgaria is copying too much from other realities like Silicon Valley, which are fundamentally different from the dynamics in Bulgaria.
So, what’s the missing piece of the puzzle in the Bulgarian ecosystem?
One of the main things that’s still missing is the coming together of corporates, government, and the startup community and investors – for the greater good of Bulgaria and for their own. That’s not really happening yet. With small exceptions like the ex-Telerik guys, everybody is either not a part of the game or they are playing their own game. In a small market like the Bulgarian, you have to put the resources together to reach a critical mass. That said, the old-school VC model where you need warm intros to become part of the network is still predominant here. In Denmark, it’s a much more open conversation. I mean, you need to make sure that one plus one plus one equals five. Then, create one or two incubation or acceleration environments.
Do you think all the R&D centers that international corporates have been opening-up in Bulgaria lately will have a positive impact on our ecosystem?
To be honest, I am not sure all those R&D centers are indeed so good for the innovation environment in Bulgaria. These big corporates are coming in with deep pockets, with more money than any local startup can get from a VC, and they are sucking up the talent. They create this comfort bubble – why would software engineers leave their super high-paid job to join a startup? Not everyone’s an entrepreneur. Entrepreneurship means sacrifices and having nothing for a long time hoping eventually to turn it around. Most people are not built like that. If you have this on one side, and corporate job with twice the salary and work for big brands that everybody knows on the other, you’d probably choose the second. For a big corporate, 7000 BGN net salary is nothing, for a startup, it’s a lot. So, I don’t think that corporate R&D centers coming from abroad is necessarily positive for the local ecosystem.
Corporates boost the economy and can bring some best practices from abroad but once the Bulgarian market is mature enough, they will move on to the next emerging one. Affordability still plays a big role. Big corporates don’t come to Denmark or The Netherlands setting up R&D centers there unless they want specific talent, specialists in a given domain only available in these locations.
What should the Bulgarian corporates do?
Well, very few of the Bulgarian corporates are actually innovating. They are still learning the capitalistic playbook and how to make money now and there is no innovation playbook. In Holland, one of the most important moves in that direction was made by Startupbootcamp’s co-founders Patrick and Ruud who started Innoleaps and taught big companies to think like startups, actually learning how the innovation process works. But if that’s a focused effort even in Holland, then, of course, it’s much more difficult to drag the Bulgarian corporates into this. It’s a move that’s starting but it’s one of those realities where Bulgaria is 2-3 years behind.
A lot of startup innovation also get stifled because the local corporates are not that accessible for testing and experiments, mentoring, or feedback on what’s required. They need to get into the mindset that by funneling money back into an innovation environment that benefits their industry, corporates will indirectly reap benefits as well. It’s not that hard to have ten corporates pooling together 100k euro per year to incubate and accelerate startup projects.
Why are incubators and accelerators so important? Isn’t VC backing enough?
Creating an incubation or acceleration environment is like building a goldmine – it takes lots of heavy equipment and significant effort but once you find the gold, it’s there for everyone. At the same time, investors in small markets like the Bulgarian often act like gold diggers who look for gold on the street, for the ones who already have obvious potential. Yes, you can get rich but it’s not sustainable.
As far as I know, a large percentage of the VC money in Bulgaria comes from the Fund of Funds. The goal of that money is to develop the regional innovation ecosystem and yet, way too often investors are following the traditional Silicon Valley VC business model: 10 highly-scalable investments in the portfolio, let’s hope one of them makes it. So, innovation money becomes purely capitalistic. You take money not to innovate but to get to the next fundraising round and hopefully exit one day.
And I think that the pendant is going to swing back when it comes to burning money to get an IPO. Profitability has to be a factor in startups more and more. So, I expect to see new models of innovation funding pop up. The VC one has shown many limitations and it’s not fueling sustainable business practices. Today it’s too much about disruption – you have to tear something down in order to build another up.
Then what are the alternatives to the traditional VC model?
Back in Denmark, it’s the job of the government to further the economy in general, to maintain a focus on creating innovation. If some of it fails – it’s okay. Think about universities, we have accepted that not all research has to produce a Nobel Prize.
The micro VC model is also interesting to think about. I know an investor in The Netherlands who would put money not in 10-12 companies but in 50, just smaller tickets. Then, based on empirical evidence, they would invest more in the startups that with time have shown the most progress.
Another answer is probably regulation. Which done in a progressive, constructive way is a good thing. Government and EU money, in particular, should be spent towards a clear purpose. For example, “50% of the money are to be invested in startups with women founders.” Maybe VCs should have separate funds – one focused on making a difference for society, and one on making as much money as possible. These two things require a completely different mindset and probably shouldn’t be mixed in the same bottle.