When the coronavirus hit in the spring of 2020, Miroslav Miroslavov, co-founder and CEO of OfficeRnD was worried. The Bulgarian company, developing software for managing co-working spaces, was ready to take a serious hit now that everyone would be working from home. Miroslavov himself told Capital back then that the new strategy was aimed at "keeping the business afloat". Eighteen months later, he starts the interview by saying something pretty obvious: "Our belief that we would be fighting for survival, was clearly mistaken."
It is obvious, because in October 2021 the company, founded in 2015, announced that it had raised 10 million dollars in a financial round led by the American VC fund Runa Capital. Bulgarian fund LAUNCHub Ventures, the first investor in OfficeRnD back in 2017, is also participating. Without revealing specific numbers, Miroslavov says that the investment is being made on a valuation of "around 50 million dollars".
This is one of the biggest financing rounds for a Bulgarian startup. OfficeRnD was founded by Miroslav Miroslavov and Miroslav Nedyalkov in 2015 and has received 14 million dollars in funding so far. Around 120 people were working for the company at the end of 2021, 100 of them in Sofia and most of the others in Atlanta.
The new niche
Shortly after the pandemic struck, OfficeRnD not only managed to survive, but succeeded in exploiting the perfect storm in its sector. Co-working spaces not only sustained themselves, but even thrived on account of their flexibility. In addition, traditional offices transformed themselves into what Miroslavov now dubs the "hybrid office".
"Larger companies with more than 100 employees asked themselves how they would face the future of work. Is everyone going to be in the office, is everyone going to be at home or is it going to be something in the middle? It looks like the world already decided that it would be the third option, the hybrid model," Miroslavov says.
And just as co-working spaces need software to manage all small and big things around it - which desk is empty, who will be there or who will be absent, how many spaces are there in total, and so on - the same applies to the hybrid office. Hence, right from the onset of the pandemic, OfficeRnD started revising its platform to tap into this new niche market.
To Miroslavov, this is a separate market, which requires different products and marketing strategies. The biggest geographical markets, however, remain as they were: the US, the UK, Australia, and to a lesser extent Europe, mostly because of its fragmented market and linguistic divisions. Miroslavov says that money from the investment will not trigger a more aggressive expansion in Europe and the focus will stay on English-speaking countries.
Time for an investment
"In April 2021 we decided that not only would the pandemic not deter us, but it would help us. We decided that this is our moment for fresh capital. We made a list of investors, we talked with around 150 possible ones and got five serious proposals. By July we had already chosen the investor," says Miroslavov.
Significantly, the company declined offers for a larger investment. The main reason was that the company's team wanted to retain a large share of the ownership. Without directly quoting percentages, Miroslavov says that current ownership is divided roughly evenly, 50/50, between investors and the company management. Aside from Runa Capital and LAUNCHub, American fund Flashpoint Venture Capital also has a stake in the company, and it participates in the latest round.
Another big reason for choosing Runa Capital is that Miroslavov considers the fund "pure venture capital". In other words, "they are giving us, as entrepreneurs, very good terms: it's like they're saying 'we are giving you money - now make the company worth a billion dollars. Don't be anxious if you are going to fail or whether or not we are going to double our money.' They don't think about it as an equity fund, where the idea is not to lose money. Most European funds are like banks; they think about not losing their money. The mentality of Runa is how to make things happen."
The investment itself goes through the British legal entity OfficeRnD. The company is legally based in the UK because of its participation in the accelerator program Pi Labs at the beginning of its existence. But the British registration turns out to make investments from Western funds far easier.
"London was and, to a degree, still is, the bridge between Europe and the US. This was a positive we discovered later on. For example, the current investment would be a lot harder if it were being conducted through a Bulgarian legal entity. We are, however, a Bulgarian company. The team is here and everything is being done here," says Miroslavov.
Too early for an exit
Venture capital funds are not the only ones showing interest in OfficeRnD. With numerous series of financing, a good team and a strong position in a niche market, the obvious question arises: is it time for an exit? Especially considering that Miroslavov is coming from Telerik, the most successful Bulgarian IT deal to date. As it turns out, there is no lack of opportunities for such a scenario.
In other words, 2021 could have been very different for the company. A few months before closing the investment, OfficeRnD had two big offers for acquisition, coming from American entities. The company declined. This is probably the biggest proof of Miroslavov's faith in the market niche and OfficeRnD. He says that the market is expanding and he wants to continue leading the company.
"The possibilities connected to the evolving office are endless. Fortunately, we are a flexible team and we can move in quickly, when we see a new trend," Miroslavov says. "We see a lot of things that we can add and it's still not the time for an exit."
This is the third investment by Bulgarian fund LAUNCHub in OfficeRnD. According to insider sources, 80% of the money from the last round came from Runa Capital, while 20% was divided between LAUNCHub Ventures and Flashpoint Capital, which are already existing investors in the company. The Bulgarian fund has about 10% equity in OfficeRnD.
Todor Breshkov, managing partner in LAUNCHub, says that the fund doesn't plan to exit its investment anytime soon and is in for at least 7 or 8 years. "Especially with the company doing so well. The pandemic slowed business for a while, but they managed to get even bigger clients and get out new products. The team is expanding and we are very happy with the company. We consider them a success story, because they make a product at a world-class level," Breshkov says.