Bulgaria’s biggest fintech deals

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Bulgaria’s biggest fintech deals

Fintech companies’ strong growth draws interest from investors and VC funds

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In recent years, the Bulgarian fintech sector has been growing rapidly in terms of the number of companies, the volume of revenues, and the investments made. According to a recent report by the Bulgarian Fintech Association (BFA), the number of companies operating in the industry has reached 100, mainly startups, in nine different branches. Most of them are active in the field of payments, whereas some are providing services in lending, blockchain, and insurance. Revenues in the fintech sector in Bulgaria exceeded 360 million euro in 2019.

Funding

The rapid growth of companies has naturally attracted the interest of VC funds. According to unofficial data, the volume of investments in the sector already exceeds 50 million euro, attracted primarily over the past two years. According to BFA, about 60% of the funding goes to companies offering payment and billing solutions. The industry expects this trend to continue in the coming years due to the accelerated deployment of digital payment technologies.

Most of the fintech investments target early-stage companies. Bulgarian funds like LAUNCHub, Eleven, and NV3 are joined by foreign investors, which shows that Bulgarian startups and solutions are attractive opportunities. The coronavirus crisis has decreased the inflow of investments in the sector but the first few months of 2020 saw some of the biggest deals so far in the Bulgarian fintech industry.

The top 3

The largest investment in a local fintech company refers to a US-based startup with Bulgarian co-founders and the participation of a Bulgarian fund. At the end of 2018, Charlie Finance raised 9 million dollars in a Series A funding round led by the US fund Propel Venture Partners. LAUNCHub Ventures, which was among the first to back the young company two years prior, also participated. San Francisco-based Charlie Finance was founded by Bulgarian entrepreneurs Ilian Georgiev and Ivo Parashkevov, and their American partner Rob Luderman.

The company has developed an application to support personal finances with the help of artificial intelligence. Through chat and SMS, the product advises users on how to save and what products to use. The target group is young people with low to medium incomes.

The second-largest deal in the fintech sector in 2020 was one of the largest seed investments in Bulgaria so far. Last year, shortly before the coronavirus outbreak, the local startup Payhawk raised 3 million euro. Leading the round was Berlin-based Earlybird Venture Capital with 2 million euro invested. The remaining 1 million was raised from current investors - Sofia-based Eleven fund, business angels like Telerik co-founders Vasil Terziev, Svetozar Georgiev, and others, as well as another Berlin-based fund - TinyVC, and industry experts.

Payhawk was founded in 2018 by Hristo Borisov and Boyko Karadzhov. Their platform helps SMEs with the issuance and management of corporate cards, and their software collects and analyses data from invoices, receipts, and other accounting documents, automating their reporting. The platform is very convenient for companies whose employees travel often for business and have office expenses.

The third-largest investment also took place at the beginning of the pandemic last year when non-bank financial institution Paynetics raised 2.5 million euro. Bulgarian fund New Vision 3 (NV3) and Bulgarian-American Credit Bank (BACB) invested 1 million euro each. The other participants in the round were angel investors and an international payment company. Paynetics offers overall payment solutions and card issuance for merchants and firms. In recent years, the company has bet heavily on the development of electronic solutions for payments and financial services. Paynetics is primarily owned by Valeri Valchev and Ivo Georgiev.

The fundraising was part of a larger investment round of some 5.4 million euro which included two other companies related to Paynetics- Phyre and Phos. The two companies got 1.6 and 1.3 million euro, respectively, which places them at fifth and sixth place in the overall ranking of investments in the fintech industry in Bulgaria.

Phyre, Phos and Colibra

Phyre, also co-founded by Valeri Valchev and Ivo Georgiev, is one of the most popular digital wallet aplications in Bulgaria. It enables users to store all of their credit, debit, and loyalty cards in the app and use them directly to make mobile payments. The software was developed in cooperation with credit card operator Mastercard. The project is backed by entrepreneur and current CEO Konstantin Dzhelebov. Phyre has also developed the digital wallets of Bulgarian telecoms A1 and Vivacom.

Phos is developing a technology that turns any Android phone into a POS terminal and thus helps retailers easily introduce card payments into their business. The main shareholders in Phos Bulgaria are, again, Valeri Valchev and Ivo Georgiev. NV3 invested 1 million euro into the company, and the remaining close to 300,000 euro came from business angels.

Following Paynetics, in fourth place is the insurance platform Colibra. Founders Kaloyan Georgiev, Miroslav Zaporozhanov, and Ivan Belomorski aim to develop a system for easier overall claims processing, regardless of whether it's for delayed flights or accidents, using blockchain technology. The funding round raised 2 million euro and was led by American fund Asterion Capital. Eleven Ventures also took part.

Following the outbreak of the pandemic, funding activity in the sector decreased. There is, however, positive news, like the 500,000 euro investment in insurance platform Boleron. BFA expects companies with sustainable models to continue attracting investors' interest this year as well. "Despite the crisis, we are seeing an increase in investor interest in fintech solutions, and more and more sources are paying attention to the industry," BFA chairman Valeri Valchev told Capital Weekly.

"The fintech sector will be just as important when the pandemic is over as it was before the outbreak, both for the local and the global market," Viktor Stoyanov Head of Remote Services and Digital Channels at UniCredit Bulbank, told Capital Weekly. "Digital and fully remote processes, particularly in the banking sector, will continue to develop and be the preferred mode of everyday banking even after Covid-19 - it's an interaction model that appeals to both customers and financial institutions," added Stoyanov.

In recent years, the Bulgarian fintech sector has been growing rapidly in terms of the number of companies, the volume of revenues, and the investments made. According to a recent report by the Bulgarian Fintech Association (BFA), the number of companies operating in the industry has reached 100, mainly startups, in nine different branches. Most of them are active in the field of payments, whereas some are providing services in lending, blockchain, and insurance. Revenues in the fintech sector in Bulgaria exceeded 360 million euro in 2019.

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