Here is a paradox for you: A country consistently ranked among the top three nations where people are "least likely to become entrepreneurs" has somehow become the startup capital of the Balkans. A nation losing 15% of its population to emigration since joining the European Union in 2007 now houses over 800 startups and ranks 37th globally in the startup ecosystem index. This is the story of Bulgaria—a place where the very forces that should have crushed innovation instead became the catalyst for it.

There's a principle in complex systems that small changes, occurring at precisely the right moment, can have enormous consequences. Bulgaria's startup revolution is a perfect illustration of this phenomenon. The tipping point didn't come from government policy or foreign investment. It came from four friends in a cramped Sofia office in 2002, making what seemed like an insignificant decision about whether to build an outsourcing company or create their own software products.

The Pattern Recognition Problem

"Everybody did it and it looked harmless," recalls Vassil Terziev of their initial outsourcing idea. But there was a problem with the conventional wisdom. "Nobody has ever heard of them abroad and in Bulgaria finding customers for an outsourcing company is a tough job as the companies can't understand why they should pay for something virtual, something 'you can't touch'."

This wasn't just a business problem—it was a pattern recognition problem. Terziev and his co-founders at Telerik had identified something that economists call "the middle-income trap": the moment when a developing economy gets stuck because it can't compete on cost anymore but hasn't yet built the capabilities to compete on value.

Most countries facing this dilemma make incremental adjustments. They offer more tax incentives, build more infrastructure, or try to attract more foreign investment. Bulgaria's founders did something different. They decided to leapfrog the entire development model.

"Unlike other multinational companies, which are focused on local markets, we are an absolutely global entity," Svetozar Georgiev, Telerik's co-founder and co-CEO, explained to Forbes Bulgaria in 2013. "We don't care where our customers are. And our customers are not interested in how the company is globally spread."

This wasn't just a business strategy—it was a cognitive revolution. In traditional economic thinking, companies start local, prove themselves, then expand globally. Telerik inverted this logic entirely. They started global and happened to be located in Bulgaria.

The Multiplication Effect

When Progress Software acquired Telerik in 2014 for $262.5 million, something unexpected happened. Instead of brain drain—the expected pattern where successful people leave to pursue bigger opportunities elsewhere—Bulgaria experienced what we might call "brain multiplication." More than fifty companies were founded by former Telerik employees.

This defied conventional wisdom about talent retention. Economic theory suggests that when a major employer gets acquired, the most talented employees scatter to established markets where they can maximize their earning potential. But the Telerik alumni did something counterintuitive: they stayed and started competing with their former employer.

Hristo Borisov, a former Telerik product director, founded Payhawk in 2018. In 2022, Payhawk became Bulgaria's first unicorn, reaching a $1 billion valuation in less than four years. To put this speed in perspective: it took Klarna 6 years to hit the $1B valuation, while Wise (Transferwise) needed 5 years. Payhawk did it in under four.

"Becoming the first unicorn in Bulgaria is a huge testament to the hard work and resilience of our team over the last three and a half years," Borisov said. "We are just at the beginning of our journey."

But the real significance wasn't the speed—it was the demonstration effect. Payhawk proved that the Telerik success wasn't a one-time anomaly but a replicable pattern.

The Weak Ties Advantage

Sociologist Mark Granovetter discovered something counterintuitive about how innovation spreads: it's not through strong ties (close relationships) but through weak ties (acquaintances, former colleagues, distant connections) that new ideas and opportunities flow most effectively. Bulgaria's startup ecosystem is a perfect illustration of this principle in action.

The country's geography should have been a disadvantage. Sofia, which hosts 86% of Bulgaria's startups, is not a major global hub. It lacks the dense networks of Silicon Valley or the financial infrastructure of London. But Bulgaria had something more valuable: a diaspora network of technical talent scattered across global technology companies.

"Bulgaria has also managed to establish a good connection with its diaspora – successful entrepreneurs and investors living abroad. For example, Bogomil Balkansky, who is a partner at Sequoia Capital, Stefan Zlatev, an investor at Breakthrough Energy Ventures, and Mina Mutafchieva, principal at Dawn Capital."

These weak ties became Bulgaria's secret weapon. According to Balkansky, "Before UiPath became a hugely successful public company, we had a lot of explaining to do and many investors didn't even know where Romania or Bulgaria are. But now, there is an awareness that something interesting is happening in both countries."

The diaspora network didn't just provide capital—it provided pattern recognition. Bulgarians working at top-tier global companies could see opportunities and market gaps that might not be visible to someone who had never left Sofia. When they returned or invested remotely, they brought global perspective to local execution.

The Paradox of Low Expectations

Here's where Bulgaria's story becomes truly fascinating: the very factors that should have prevented a startup ecosystem from emerging may have actually enabled it. "There are very few people in Bulgaria who are ready to start new companies, compared to the rest of the world. We are always in the top 3 of countries where people are least likely to become entrepreneurs," explains Veneta Andonova, a professor who studies Bulgarian entrepreneurship.

This created what we might call "the paradox of low expectations." In ecosystems like Silicon Valley, entrepreneurship is so normalized that starting a company carries enormous pressure to succeed quickly and scale massively. In Bulgaria, where entrepreneurship was culturally discouraged, the few people who did start companies faced almost no competitive pressure from local peers.

"Because of the legacy of our recent past, we also tend to go into fields that turn us into wage earners; that is, on a cultural level, entrepreneurship is perceived by the older generation as an unnecessary risk," Andonova notes.

But this cultural skepticism had an unexpected benefit: it filtered for only the most committed entrepreneurs. If you were willing to start a company in a culture that discouraged entrepreneurship, you were probably solving a problem you cared deeply about, not just following a trend.

The Brain Drain Reversal

The conventional narrative about brain drain treats it as purely negative—smart people leave, taking their human capital with them, and the home country becomes progressively less competitive. But Bulgaria's experience suggests this narrative misses something crucial about how talent flows work in a globalized economy.

A study by the Bulgarian Association of the Software Companies (BASSCOM) revealed that "almost one third of the Bulgarians who live abroad would come back and most of them consider this step because of the thriving IT industry." The Association launched a campaign to attract talent from the Bulgarian diaspora as the booming local IT sector already experiences labor shortages.

"Reversing the brain drain trend would allow the Bulgarian software industry to accelerate its growth with rates of 25-50% instead of the projected 10%," the study found.

But this wasn't just about people returning—it was about people returning with capabilities they couldn't have developed if they had never left. The diaspora had accumulated experience at global companies, learned international best practices, and built networks that could be leveraged for Bulgarian startups.

Consider the pattern: someone leaves Bulgaria to work at Microsoft or Google, spends several years learning how global technology companies operate, then returns to start a company that can compete internationally from day one. This isn't brain drain—it's brain circulation.

The Infrastructure Paradox

Traditional economic development theory emphasizes the importance of infrastructure—roads, telecommunications, universities, government support. Bulgaria had some of these advantages: Sofia ranks 3rd in Europe when it comes to cost-effectiveness and foreign direct investments strategy, and the country enjoys a multilingual pool of over 65,000 IT specialists.

But Bulgaria also had significant infrastructure gaps. "Bulgaria doesn't offer startup visas and the process of acquiring a blue card could take more than five months," notes one analysis of the ecosystem. The regulatory environment has been "characterized by complexity, lack of transparency, and arbitrary or weak enforcement."

Yet somehow, the startup ecosystem thrived despite these obstacles. This suggests something important about how innovation actually works: the presence of perfect infrastructure may be less important than the presence of passionate people willing to work around imperfect infrastructure.

The real infrastructure in Bulgaria wasn't physical—it was social. When Telerik's founders were designing their academy and mentorship programs, they made a crucial decision: "anything to do with support, networks, mentoring, etc., should be offered on a voluntary basis; it shouldn't be someone giving advice for a fee. This was very important. In my opinion, this created a sense of community and support that did not exist before."

The Collaboration Advantage

"When I think about our entrepreneurial community, I primarily consider our financial resources and wealth of knowledge. But an essential element is our spirit of collaboration. We have a thriving entrepreneurial ecosystem that truly values cooperation. People are genuinely eager to support one another, particularly by sharing the insights and experiences they've gained over many years; something that isn't as common in many other societies," explains Ognyan Vasilev, founder of Start Up, Bulgaria!

This collaborative culture created what economists call "positive-sum thinking"—the belief that one person's success doesn't require another person's failure. In many mature startup ecosystems, there's intense competition for talent, capital, and market share. In Bulgaria's emerging ecosystem, there was enough opportunity for everyone, so collaboration made more sense than competition.

The numbers support this collaborative approach: Bulgaria leads in Southeast Europe when it comes to the number of locally-based VC funds, with around €500M capital under management by Bulgarian-based GPs. Rather than competing destructively for limited local opportunities, these funds often co-invest and share deal flow.

The Scale Problem and Solution

Bulgaria's startup ecosystem faces a fundamental constraint: market size. With fewer than seven million people, the domestic market is too small to support major technology companies. This should have been a fatal disadvantage. Instead, it became a forcing function for global thinking.

Because Bulgarian startups can't succeed by serving only the local market, they must think internationally from day one. This creates what we might call "premature globalization"—companies that develop global capabilities much earlier in their lifecycle than companies in larger domestic markets.

Payhawk exemplifies this pattern. The company provides financial management services to customers in 30 countries, including international corporations like Chevron, Boeing, Toyota, Barclays, Nike, IBM, and Roche. It would have been impossible to reach this scale serving only Bulgarian customers.

The constraint of small market size forces Bulgarian startups to develop what we might call "global-local capabilities"—the ability to understand global markets while maintaining the cost advantages of a local base.

The Timing Element

Bulgaria's startup success wasn't just about having the right factors—it was about having them at the right time. The country joined the European Union in 2007, just as cloud computing and social media were making it possible for small companies anywhere to compete globally.

The timing created a unique window of opportunity. EU membership provided access to global markets and talent mobility, while technological changes reduced the importance of geographic proximity to customers and suppliers. For the first time in history, a small team in Sofia could build software used by Fortune 500 companies worldwide.

But timing cuts both ways. The 2008 financial crisis hit just as Bulgaria was establishing its startup infrastructure. Rather than crushing the emerging ecosystem, the crisis may have actually helped it by forcing entrepreneurs to focus on capital efficiency and sustainable business models rather than growth at any cost.

The Current Reality

Today, the numbers tell a remarkable story: Bulgaria ranks 37th globally in the 2024 Global Startup Ecosystem Index and ranks #2 by combined enterprise value per capita in Southeast Europe. €1B has been invested in Bulgarian and Bulgarian-founded deep tech & AI startups.

But the ecosystem also faces real challenges. In 2024, Bulgaria's startups raised only €52.7M by September, compared to €101M in 2023. "Five or six years ago, VCs were willing to invest in startups with just a great team, idea, and technology, even without an MVP or customers, whereas today, they expect some traction and customers before providing funding," explains Vassil Popovski, VP of Engineering at Alcatraz AI and angel investor.

The ecosystem has also struggled with founder commitment. Local VCs consistently report a shortage of quality projects, partly because many founders treat their ventures as side projects rather than full-time commitments.

The Bigger Pattern

Bulgaria's startup transformation reveals something important about how innovation actually spreads. It's not a linear process of building infrastructure, attracting capital, and waiting for entrepreneurs to emerge. Instead, it's a complex adaptive system where small changes can have enormous consequences, where weaknesses can become strengths, and where the conventional wisdom about economic development may be incomplete.

The country's success suggests that we need to rethink our assumptions about what makes startup ecosystems work. It's not just about having the best universities, the most capital, or the most supportive government policies. It's about having people who can recognize patterns, connect across networks, and create something valuable from available resources.

"There's always been tech talent here, it's probably one of the best in the world," says Ivan Osmak, cofounder and CEO of Bulgarian-founded startup Gtmhub. "This gives it a bit of self confidence, because all you need is someone to show that it can be done."

That demonstration has now been provided, multiple times over. The question isn't whether Bulgaria can produce successful startups—Telerik and Payhawk have answered that definitively. The question is whether this success can scale beyond individual companies to transform an entire economy and culture.

The early indicators suggest it can. Campus X, built by Telerik's founders, represents "the largest private incubator of technology companies and talent in Southeastern Europe," with capacity for over 1,000 jobs. More importantly, it represents the institutionalization of the collaborative culture that made Bulgaria's startup success possible.

Bulgaria has reached its tipping point. The country has moved from being a place where entrepreneurship was discouraged to being a place where it's celebrated, from being a source of brain drain to being a destination for brain circulation, from being peripheral to the global technology ecosystem to being an integral part of it.

The transformation didn't happen because Bulgaria had perfect conditions for startups. It happened because a small group of people recognized that imperfect conditions could be turned into unique advantages, and they had the persistence to prove it. Sometimes the most unlikely places produce the most remarkable innovations—not despite their disadvantages, but because of their willingness to think differently about what's possible.

Usefull reading

https://www.telerik.com/blogs/absolutely-global---telerik-cover-story-in-forbes-magazine-bulgaria

https://www.telerikacademy.com/blog/details/absolutely-global---telerik's-cover-story-in-forbes-magazine

https://payhawk.com/blog/payhawk-becomes-first-ever-bulgarian-unicorn-after-raising-100m-in-a-lightspeed-led-series-b-extension

https://www.businesswire.com/news/home/20220301005056/en/

https://emerging-europe.com/business/bulgaria-gets-its-first-unicorn-fintech-start-up-payhawk/

https://www.eu-startups.com/2022/03/bulgaria-gets-its-first-unicorn-as-payhawk-picks-up-an-additional-e89-million/

https://www.aubg.edu/aubg-today/aubg-alumni-founded-payhawk-becomes-bulgarias-first-ever-unicorn/

https://www.pymnts.com/news/investment-tracker/2022/payhawk-becomes-bulgarias-first-unicorn-after-100m-round/

https://www.unleash.ai/hr-technology/payhawk-is-bulgarias-first-unicorn/

https://siliconcanals.com/payhawk-raises-100m-at-1b-valuation/

https://startupsmagazine.co.uk/article-payhawk-becomes-first-ever-bulgarian-unicorn-after-raising-100m