In the era of environmental startups - opportunities and challenges for small businesses in Bulgaria

Raya Lecheva

Start-ups are growing despite the crisis and the challenges they face with a lack of incentives. Entrepreneurial projects are a source of business innovation - of products and services that prepare and support the economy of the future. It is the innovations created by startups that have the potential to "lift" the entire economy.

Such examples are the startups created during the World Economic Crisis of 2008-2009: Instagram, Amazon, Zoom, Airbnb, WhatsApp, Square, Uber, etc., which today are major economic players. In the past year alone, Europe has created 18 unicorns - startups with a market capitalization of over $ 1 billion. Thus, their total number is already 60 and Europe is almost catching up with the United States on this indicator. However, Bulgaria is lagging behind these trends and there is still no unicorn in our country.

The reason - the lack of a developed environment for risky investment. This creates the danger that innovative Bulgarian entrepreneurs will leave our country and move their projects while they are still in the initial phase in countries with more developed startup environments.

In Bulgaria, there is still no legislative framework that allows employees of a company to receive shares in it, commented for Dir.bg Dobromir Ivanov, chairman of the Bulgarian Startup Association. It also does not entitle an investor to decide whether to receive a stake in the company or return the investment after a certain period of time, he added. These are changes that have been being prepared for almost five years and are only now ready in the Commercial Law, and we hope that they will be voted on in the first six months of the new parliament's work, he commented.

There is also a light in the tunnel in the National Recovery and Sustainability Plan. Pension funds will be given the opportunity to expand investments, opportunities will be opened and according to the new coalition agreement to create more opportunities for venture capital and angel investments, which so far in our country is more of a mirage for startups, said Ivanov.

Internationalization and cooperation are an opportunity for SMEs

One of the biggest prospects for Bulgarian small and medium enterprises is the internationalization and digitalization of business, which allows them to sell anywhere in the world. This was commented earlier today at a forum for small and medium enterprises of the International Network of Small and Medium Enterprises Boyko Takov, Director of the Executive Agency for Promotion of Small and Medium Enterprises. According to him, as well as the international partners of the forum, the cooperation of small businesses from the countries in the region is very important for finding common markets.

The main priorities in the recovery period from the pandemic are the need for the institutions to focus on several priorities, showed an analysis of the Organization for Economic Co-operation and Development (OECD).

In the first place, it is necessary to ensure faster access to finance. Analyzes show that unmet demand for microfinance in the EU is currently € 14 billion a year. Another important priority is the opportunities for advisory services, consultations and training of entrepreneurs and their teams in various areas of the economy. Next, every business needs individual support, and research shows that such personal schemes are much more successful in business.

In the crisis, much of small business has failed to digitize

In a crisis, only about 15% of small and medium-sized enterprises receive funding, compared to 45% in the years before the pandemic, said Lamia Kamal-Chaui, director of the OECD Center for Entrepreneurship, at the 17th meeting of SMEs on the INSME International Platform., cities and regions. Access to finance is the biggest problem for small and medium-sized enterprises. The smallest companies with up to 10 people are most at risk of going bankrupt, unlike companies with more than 50 employees.

There is a lot we have done for the entrepreneurial environment in Europe, because according to the latest data from 35 million entrepreneurs in the world, only 9 million are entrepreneurs in Europe.

During the pandemic, 75% of businesses went online, but the remaining 1/3 did not think to do so and relied on the return of pre-crisis times. "We also need to encourage this part of the business to go online. This is an option for their business to become international, and this is one of the biggest opportunities for small businesses, now more than ever they have a unique chance to find new markets, but they need support, "Chaiu said.

In Greece, the crisis has completely overturned the economy, and almost all administration services have gone digital, cutting red tape and saving small businesses, said Christos Skuras, director of international and institutional affairs, Enterprise Greece, Greece. World Bank analysts comment on our southern neighbor that it has made such a digital revolution that would normally take 20-30 years, said Skuras. In the last year alone, small and medium-sized enterprises have received additional support of EUR 300 million

Small companies make up an average of 70% of the economy and play an extremely important role in the recovery from the crisis and all changes in the economy. Simply because they can be easier to adapt on the one hand, but without adequate support they are more unstable.

More needs to be done to support young people in realizing their entrepreneurial potential. Surveys show that nearly 45% of students intend to start a business within five years of graduation, but only 5% of young people aged 18 to 30 are actively working on a start-up. Governments have renewed their commitment to support young people after the pandemic, so now is the time to step up support for youth entrepreneurship. Priority action must address the financial shortfalls faced by young entrepreneurs. Women are less likely than men to be involved in starting and running a new business. In the period 2016-2020, less than 5% of women in the EU were involved in starting a business or running a business under the age of 42, compared to 8% of men. This gender gap represents a missed opportunity for economic growth.

Entrepreneurship is a challenge in Bulgaria

In Bulgaria, the conditions for entrepreneurship remain a challenge, according to the OECD analysis. New start-ups face a serious administrative burden.

The coefficient of entrepreneurship at an early stage was slightly below the EU average for 2016-2020. This difference is largest among young people (5% in Bulgaria versus 7% in the EU). In addition, many of these activities at an early stage of entrepreneurship are due to the lack of other opportunities in the labor market, especially among the elderly (36%) and women (33%). Eliminating all gaps in entrepreneurial activity levels would lead to an additional 106,000 new business owners. About 60% of these "missing" entrepreneurs are women, nearly 60% are over 50 and another 15% are young (20-29).

In Bulgaria, nearly 80% of companies report direct or indirect losses due to the COVID-19 crisis. Therefore, the government has implemented several financial measures to support the self-employed and microbusiness. For example, the "60/40" program provides subsidies in the amount of BGN 3,000 to 10,000 (1,530 to 5,110 euros) for companies that have a reduced turnover of at least 20% compared to the previous year. Due to high demand, the fund was increased by BGN 20 million (EUR 10.2 million). Freelancers and independent artists can receive financial support of up to BGN 1,000 per month (EUR 510). A number of other measures were provided for SMEs, including a special agricultural program that provided BGN 70 million (EUR 35 million) to finance around 30,000 farmers from August to November 2020. But are these measures sufficient?

At the beginning of last year, the Coalition "For a Green Restart" proposed to create a Fund for start-up companies to the Fund of Funds, with a budget of BGN 100 million per year or BGN 300 million for the recovery program under the National Recovery Plan and sustainability. The coalition proposed the introduction of the requirement that the allocation of funds be in the form of equity investment or blended capital. He also called for the introduction of the requirement that after the successful sale of the shares (exit) the funds be reinvested in the Fund, so as to ensure the long-term nature of the initiative and after the "Next Generation EU" program.

The economy of the future is already here, and as the pandemic has shown us, the unprepared can fall off the board in days. It is time to begin the long-delayed transition from a resource-intensive and carbon-intensive economy to one with value and care for human health and nature. Only in this way Bulgaria will not lag behind the global green transformation and digital revolution. Support for innovative start-ups is only the first but important step, experts say.

Innovators are also "adrenaline" for new market ideas

Digitalization and green transformation are the two areas in which startup companies are most actively developing in Bulgaria. Despite the crisis, good examples can stimulate entrepreneurship in everyone. Only weeks ago we learned that the Bulgarian fintech company Rauhawk, founded two or three years ago, it has been valued at BGN 990 million and could become the first Bulgarian unicorn.

Awards for green innovations this week at the 17th Innovation Forum were given to companies such as Atlas Agro Science, which is engaged in the production of soil conditioner, the raw material for which is obtained by processing sludge from wastewater treatment plants. The finished product is used in organic farming, floriculture, etc., helping to nourish the soil and increase the yield and quality of production.

SMYK Ingredients produces liquid fermented herbs and spices for use in food and beverages with a "pure" label for direct consumption. The production technology preserves valuable vitamins and minerals when using spices in all temperature conditions. ZenHold creates an interactive virtual reality on real-life objects commissioned by the client. Its product can be used for extremely diverse purposes, including the development of protection against robberies and fires. Spark Vision creates smart glasses for the blind and visually impaired. They read objects and texts, which are then converted into sound. The glasses also recognize gestures, brightness of light, faces, can be used on the Internet, etc. IRIS Solutions - a fintech company that has developed a software application for merchants through which they can accept electronic payments. It can be integrated via Viber, WhatsApp and other similar applications to facilitate work. The company is currently a provider of open banking to 36 banks and payment institutions.

OMNIO has developed an artificial intelligence software solution to automatically check for money laundering in financial transactions.

And companies like Cupffee, which produces edible biodegradable waffle cups for hot and cold drinks, which it exports to more than 40 countries, and Orenda Group through its Woodenspoon brand to create Europe's first natural sunscreen lotion sold in both biodegradable and non-polluting. sugar cane packaging is completely changing our world.

Green innovators are becoming more and more and can turn our economy upside down, because every crisis creates its own heroes - today green innovators are on the move.