An interview with Milen Ivanov, Co-Founder and CEO of CEO Angels Club (Sofia, Bulgaria), the new member of the Business Angels Europe Club.
What? CEO Angels Club, the biggest angel investor network in Bulgaria.
Who? 54+ Business Angels and 3 employees. CEO Angels Club is a group of senior executives and entrepreneurs related to Bulgaria.
Why? CEO Angels Club looks for early stage, normally post-accelerator startups that are highly scalable and that can demonstrate how the company will get to a clear meaningful milestone (e.g. Seed Funding) within 12-24 months based on our one-time investment.
Since When? 2016.
Hi Milen, so how did you start angel investing?
My background is entrepreneurial. Personally, I saw the opportunity when I was an already an entrepreneur in the recruiting industry. My first investment was in a fellow entrepreneur I knew who had an idea for an online marketplace for event organisers and sponsors. I was actively involved in the idea development and later I had to take over as a CEO for a while.
Afterwards I invested in some other B2B businesses in the HR/Recruitment domain. I invested in areas I understood and which where associated with my core business at the time so I can help them with clients and resources.
First, though, I am an entrepreneur. Alongside my first angel investments, I started 10 startups projects myself.
I became more professional during the time I started a startup pre-seed accelerator in Sofia called Founders Institute. I was in charge of scouting founders, mentors and organizing the program. Then we saw a gap on the investment market for our accelerator graduates who had just polished their idea and started to get some traction. We saw that founders at this stage would benefit from angel investing and that there was not a formalized angel network in Bulgaria. That is why I decided to organize one myself.
Where there previous attempts to start an angel network in Bulgaria?
Before CEO Angels Club there were several attempts made for setting up an angel network in Bulgaria. We had to learn from them so I spoke with all previous network founders. Earlier groups had difficulties to find a sustainable business model, recruiting a critical mass of enough investors and getting a reliable deal flow. Also, investors stopped investing in risky assets because of the financial crisis in 2009.
Importantly, the Bulgarian startup ecosystem was not developed enough at that time. There were no accelerators, not enough educational resources for entrepreneurs, no venture capital fund, access to partners and success stories to inspire a generation of tech entrepreneurs.
However, we found ourselves in a better situation in 2016.
Which circumstances added to the success of CEO BAN?
In 2016, we decided to try it out, as we were getting a better deal flow and there were a few people asking to invest in interesting leads. There were already a lot of startups in the markets, experienced serial entrepreneurs that has just made big exits, but also some good VC firms available. It was the right moment.
I made a spin-off of a network club that I have been managing for 6-7 years called CEO CLUB BULGARIA and co-founded the CEO Angels Club with 4 other Board Members that I knew were interested and pro-actively recruited to help me lay the foundations. That is how we got started. Within 3 years, we had more than 50 paying members.
We realized from the very beginning that we should have a working business model. We have a membership fee (500€ annual) and a success fee for successful fundraising that is charged to the startup. We charge the entrepreneur 5% from the amount she manages to raise through us.
How do you cope with the challenges of finding deal leaders?
We do struggle with this. When we have a strong deal leader, the deal closes very quickly. We would double our amount of investors if we had more deal leaders. We are trying to be proactive in getting more people interested my matching their background with the project domain but it does not always work. We are thinking of encouraging a practice of allocating a carried interest to the deal leader.
You mentioned the importance of having strong VC’s in the ecosystem. Could you elaborate?
We have good relationships with all the local VCs, some of them are paying members of our network. In the last 2 or 3 deals we worked and co-invested with them. Regionally we were lucky that European Investment Fund created several early stage funds in Bulgaria 7 years ago that boosted the local ecosystem very much so that we became something of a regional Balkan startup hub.
Now we are in the process of closing a new co-investment fund with EIF as the main LP that will co-invest with angels and other private investors on the basis of 50/50 capital matching. The fund will be called Sofia Angels Ventures and the available matching capital will be 13 million Euro, so we will be able to deploy at least 26 million EUR in scalable start-ups - not only in Bulgaria but throughout all Europe investing. Together with European angels. This will allow us to do larger ticket sizes and accelerate investment decisions.
How would you like to see the network improve in 5 years?
We would like to have eventually about 200 members. Our target for 2020 was 100 members but now with this Corona crisis perhaps we will have a slow-down.
In any case I think there should be a much easier way to close a deal through an online platform. A place where (standardized) documentation is readily available, due-diligence is done efficiently and syndicating is easy.
I believe in the democratization of angel investing. It should be an investment asset class available and understandable for a broader range of people. There is so much unused potential. This means that I envision decreasing in the investment size per angel per investment and syndicating more investors in one deal.
I think the process of angel investing now could be too burdensome from legal and administrative point of view. It really puts people off when they have to deal with a lot documentation. Actually this does not add value to the start-up, but rather protects parties. And it is not fun. There should be standards agreed by all stakeholders in the industry, so founders and angels can agree (or not ) in an easier way and focus on developing the business.
I personally believe that if buying shares in a startup was technically as easy as buying shares on the stock-exchange, this will create a lot more opportunities. Perhaps STO and blockchain technologies will offer solutions in this direction suitable for angel investors very soon.
Which areas/industries does your ecosystem excel in?
In the times of the Warsaw Pact, Bulgaria was the chosen hub for computer sciences and engineering. We are still sitting on a deep pool of tech talent. Right now, Bulgaria is the number 1 IT and outsourcing destination in Europe. We have a lot of software and IT companies, both local and international development centers. Sofia is growing as a hub for the region, with a lot of people coming from Macedonia, Serbia, Croatia and northern Greece.
Tell me about your network starting a chapter in London.
We realized that in order for us to be interesting, we have to have the angels that help the companies in the markets they target. All of the startups we consider and invest in are with plans to scale internationally. That is why we are recruiting from the diaspora all over the world.
We see meaningful interest from the diaspora to connect back and invest in Bulgarian companies. Currently we have members from Silicon Valley, Brussels, Qatar, Frankfurt and London. In the latter location we identified a larger diaspora and a good deal flow of startups with Bulgarian founders living there. Therefore we decided to organize a local chapter to capitalize on this trend.
All members in UK chapter are actually members of the CEO Angels Club. We don’t have a new organization or legal entity. They pay membership fees to us, but we split it – same as the success fee - with the local chapter director as they also organize its own events .
What are your sources of knowledge and insight? What should we read and who should we follow on angel investing/entrepreneurship?
I was personally very inspired by the book ANGEL by Jason Calacanis whom I met 5 years ago in Silicon Valley. Actually, we translated and published the book in Bulgaria which turned out to be the first book on the subject on this market.
Finally, which of your startups in your portfolio is ready to scale in Europe (which one would you like to put in the spotlight)?
There are two companies that are interesting to mention:
Dronamics, a drone company which plans to disrupt and democratize airfreight and lower the cost of shipping in emerging markets through developing a new type of cargo airplane – small, unmanned and extremely fuel efficient. It can transport 350 KG ("Freakishly Strong") over 2,500 KM for a cost that's 50%+ lower than other airplanes. It flies autonomously, can be monitored and managed remotely via satellite, and the whole system costs less than a sports car.
The other one is called Edamam. It organizes and structures food and nutrition data and offers it as a subscription or licensing service to businesses in the food, health and wellness markets. Edamame’s proprietary technology leverages food domain specific Natural Language Understanding and the largest and most robust dataset of recipes (5MM+), consumer packaged goods, generic and restaurant foods (750K+) to deliver uniquely scalable and affordable solutions, such as real time, high accurate nutrition analysis or personalized meal suggestions.