By BORYANA DZHAMBAZOVA - below and excerpt from the New York Times Article
“I believe it’s only a matter of time before we have a Skype-level success from the region,” said Lyuben Belov, managing partner at Launchub, a seed fund based in the Bulgarian capital, Sofia, which invests in digital start-ups in southeast Europe.
“Someone will make it big on the global market,” he added, predicting that a Balkan company would be traded on the Nasdaq in New York one day.
Some Balkan start-ups, like Emailio, a company co-founded by a Bulgarian high school student working on a mobile app to de-clutter inboxes, have moved to Silicon Valley. Flipps, an app that lets users stream video from mobile devices to a television, has also swapped Bulgaria for the Bay Area.
In another fillip for the region’s start-ups, Facebook announced in July that it was buying LiveRail, a video ad company co-founded by two Romanians, for a reported $400 million to $500 million. In October, Progress Software, based in Bedford, Mass., said it planned to acquire Telerik, a Bulgarian software company, for $262.5 million.
For years, big international companies have outsourced information technology work to Eastern Europe. They have been attracted by relatively cheap labor, low rent and a pool of qualified software developers, whose skills reflect a tradition of strong math and engineering education that goes back to communist times. Low business taxes help — Bulgaria, for example, offers a flat rate of 10 percent. Now, those very same reasons are encouraging Balkan entrepreneurs to start their own businesses.
But the Balkans are up against tough competition from Europe’s top start-up destinations, like London, Berlin, Helsinki and Stockholm, where access to venture capital is easier and the start-up scene is much more advanced.
While Balkan entrepreneurs are blessed with ambition, tech know-how and enthusiasm, these would-be billionaires also face red tape, a dearth of government incentives and their own lack of business experience.
Balkan governments are slowly getting more involved in the sector. Serbia has an Innovation Fund financed by the European Union, which has awarded 53 grants, amounting to €6 million so far.
Sofia is building a €50 million technology park — also with funding from Brussels — to link local businesses and universities and foster innovation. President Rosen Plevneliev of Bulgaria declared at a groundbreaking ceremony in July that it would be “the heart of start-up culture” in the country.
Back in Nis, VetCloud’s team has been developing a cloud-based software for vets, which stores medical records, handles appointments and sends alerts when new supplies of medicine are needed. To win investment for their company, they did not go to Belgrade, the Serbian capital, but to Sofia, where more tech money resides.
“While there was a community in Belgrade, there was already an ecosystem in Sofia,” said Mr. Vesic, the company’s chief executive.
The firm has received €200,000 from Eleven, an accelerator fund that offers a training and mentorship program in return for a stake in the companies it supports. The VetCloud team spent three months in Bulgaria, learning the nuts and bolts of starting and running a tech company.
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“We got the money and advice we needed,” Mr. Vesic said.
Launchub and Eleven manage a total of €21 million as part of a European Union-sponsored initiative to support small and midsize businesses, named Jeremie. They have distributed €9 million among 120 start-ups from the region in the past two years and plan to fund around 200 firms by 2015.
In comparison, German and international venture capitalists in Berlin invested €133 million in start-ups in 2012, according to a McKinsey study from last year. But a small amount of funding goes a long way in the Balkans, where costs for starting a business are much lower than those in Berlin or London.
Entrepreneurs have had to overcome the long tradition of outsourcing in the Balkans to want to work for themselves and come up with the next must-have app or big e-business success.