Why Sofia and Vienna Will Be ‚Cities of Choice‘ For Entrepreneurs in the Near Future

The Bulgarian and Austrian municipalities have officially entered into a partnership this Monday. Gerhard Hirczi, Managing Director of Vienna Business Agency and Vladimir Danailov, Managing Director of Sofia Invest, have signed the agreement in Vienna. The mayor of Sofia Yordanka Fandakova and her colleague Michael Ludwig, the mayor of Vienna presented it in the town hall. Sofia is the second City-to-City contract for Vienna after the one with London. Sofia has also signed a similar agreement with London.

We met for a chat with Yordanka Fandakova, Gerhard Hirczi and Vladimir Danailov  to discuss the details of the agreement and in what way both cities will support startups in the global competition, called digitalization.

Why Sofia and Vienna, and not Bulgaria and Austria? What is the philosophy behind a city-to-city agreement?

Gerhard Hirczi: There are many  similarities between both cities and there are a lot of similar challenges we are facing. Collaboration instead of competition is the right way to go. It’s Europe versus the rest of the world at the end of the day. Strengthening our connections is the way to be globally competitive as a European ecosystem. We strongly believe in the City-to-City Agreements. In the past, we’ve had many cooperations with other regions and countries but the most concrete results are the ones from City-to-City agreements.

What are the particular benefits for the business from the City-to-City agreement that was signed?

Yordanka Fandakova: This is a great opportunity for both cities. This opens up bigger opportunities for both Bulgarian and Austrian companies for investments in these two capitals. The memorandum includes specific conditions for the companies to use discounts for use business spaces and accommodation. And of course, the two Investment Agencies will support this process by providing information or consultancy. One of the main goals is to lower the administrative burdens for companies willing to enter the respective markets.

Hirczi: Both Sofia and Vienna need to foster the innovative ecosystems. Being supportive to the startup ecosystem is an area we need to develop further. In the past 5-7 years, Vienna has improved a lot and has become less bureaucratic. The hurdles when registering a company decreased. We have space to exchange and learn from each other. Vienna has a strong market and elaborated ecosystem in funding and servicing. Every year around 50M EUR are spend in developing the ecosystem and in particular startup projects. We are open for Viennese but also international companies.

What is the role of the city in the process of fostering an innovative ecosystem?

Fandakova: For me, as for any major, the development of the economy of the city is very important, the opening of quality positions and jobs and attracting new investments. This gives new opportunities for every citizen. Cities play a crucial role in developing the infrastructure, which would allow people to live better in a city.  

Hirczi: One of the biggest things that connect us, is that both cities are growing rapidly in terms of populations and similar challenges appear – building social, public and transport infrastructure, education to name a few. We have traditional urban challenges and it is the role of the municipality to find solutions to those.

“I’m deeply convinced nationalism is pure poison for all our ideas.” – Gerhard Hirczi

There are nationalist waves all over Europe. How important are such agreements between cities to keep up to global mindset of young entrepreneurs?

Fandakova: This year we had our first Balkan hackathon and we had participants from the entire region. Our intention is to continue organizing this as a sign of cooperation on the Balkans. More education and communication are the solutions for the issue you named.

Hirczi: I’m deeply convinced nationalism is pure poison for all our ideas.

Fandakova: We have around 30 different forums in the tech domain, both international and local. We as city have started an initiative to organize hackathons in the field of culture, social, healthcare, education and they provide us with interesting solutions to issues we face.

“We provide incentives like orientations programs, office spaces, discounts for accomodations.” – Vladimir Danailov

What are the particular programs that Sofia and Vienna could offer startups and also companies willing to enter the respective market?

Fandakova: In Bulgaria there are branches of around 300 Austrian companies, most of them are based in Sofia. Part of them are enterprises. At the same time, the development of the startups is very important to us. With the city of Vienna we share the vision to develop them and the priority is the improvement of IT in different verticals, biotech etc.

We founded the Sofia Invest Agency with several priorities, one of which is the startup ecosystem. From this year on, we have a program to support startups with financial guarantees when applying for bank loans.  We have around 20 companies that have already applied.

Vladimir Danailov: We provide incentives like orientations programs, office spaces, discounts for accommodations. I believe that both our organizations understand the responsibility of bridging the ecosystems. Right now Sofia is becoming a vital startup ecosystem. Some six years ago, it was a different story. The first investment funds started with EU funding, but now there are many private investors. This means private sectors believes in this.

We have 15 funds that are supporting startups, also 500 companies. In terms of numbers, the ecosystems in Vienna and Sofia are similar. If I may build upon something that was mentioned earlier, I think the companies that have their ground in  both Sofia and Vienna could be very competitive on global scale.

Hirczi: The public institutions, we represent, have high commitment to those processes. If you are talking of financing, we indeed need to get more money for growth stage. There is enough for early stage and startups but we could bare more of the private investment in the later phases. Another space for improvement is getting more women to participate in this process.

One of our ambitions is to have more women into the startup scene. We do that on different levels – we have funding programs targeting female led ventures, we offer female businesses programs etc.

Where are the strengths of both cities that will contribute to a fruitful exchange?

Hirczi: We believe Vienna has a very specific role for CEE countries due to our history and geographical position, and due to our specific competences. Here we’ve build EU relevant competences in the past 20-30 years. There’s a traditional relation between the cities – Viennese agency has its offices in Sofia and we’ve recently increased the number of employees in order to foster this cooperation.

In addition, we’ve learned that a lot of expanding companies are going to Sofia. Vienna could also be a very good first step for Bulgarian companies to start their internationalization and expansion to the Western European markets.

Fandakova: Sofia is attractive for investments for several reasons. Of course, that’s the stability of the city, the tax predictability and the talent. For Austrian companies it’s very important that we have high language proficiency in English, German and other European languages.

The administrative servicing is still a hurdle. That’s one of the first tasks of the investment agency. On the other hand, we have great result regarding women in tech. This is a big topic on European level. Women make up 45 % of the local IT sector.

Where do you see Sofia and Vienna in five years?

Fandakova: I hope that in five years, we see Sofia as a greener  and more innovative city and this will happen thanks to the active young people. It will remain our focus to support startups and SMEs.

Hirczi: My wish would be that our cities to be cities of choice – Viennese companies willing to expand to Eastern Europe to go straightly to Sofia and vice versa. Today Vienna has economic growth rate of 1.8 % and Sofia has 3.6 %. I would like to see those rates double in 5 years.

“I personally think this is the chance for Sofia to keep the well educated people here and to attract the once who are studying abroad.” – Jordanka Fandakova

The brain drain – young talents heading towards other European cities instead of founding companies in Bulgaria was a main issue. Has this trend changed?

Fandakova: In the past years, Sofia indeed became attractive for IT companies and that allowed young and qualified people to have career opportunities here. These are well-paid positions that allow them to have high life standard. I personally think this is the chance for Sofia to keep the well-educated people here and to attract the once who are studying abroad.

A lot of global brands have opened their R&D centers in Sofia and a lot of them rely on the innovative energy generated within the startup ecosystem. Here we have the best universities of Bulgaria and the Bulgarian Academy of Sciences.

It seems that huge VCs are interested in Sofia. How do you make sure that the money reaches the entrepreneurs?

Fandakova: The funds that are targeting entrepreneurs are goal oriented and go directly to them. Programs such as OP Competitiveness practically finances directly the businesses and this is a huge opportunity thanks to the European funds. Especially,  for the startups that’s a great opportunity.

Today we are here along with 11 companies – biotech, fintech, that will have the opportunity to exchange with their partners in Vienna. Sofia is third in CEE regarding the count of fintech companies.