Starting and self-funding a software business in Eastern Europe at the age of 23
Why I decided to share this story:
Being born and raised in a region like Eastern Europe comes with a very different set of challenges for aspiring entrepreneurs. The economy is not developed, making it extremely difficult to convince anybody to buy anything you try to sell them. People are pessimistic and desperate, most of the rich make money through corruption and criminal activities. There is little support or financing for running a legitimate business. Talent is scarce. There is nothing to compete over and nobody to compete with on a local level. All these factors add up to the stress entrepreneurs usually go through when starting a company. It’s definitely not the typical “founding a company” narrative you’d read on the internet or in the popular literature about entrepreneurship.
There were just a few days before my senior year started and I was trying to figure out what should I do to make the most out of my last few months at the American University in Bulgaria (AUBG).
I looked back at my last three years at the university. I was a good student — my grades were high, I was relatively active in sports and I had some achievements. But I hadn’t done anything impactful. I was too focused on keeping a good academic standing and getting ready for the job market. I was the typical student coming from a small town in Eastern Europe — my family was poor and I had to be an excellent student in order to keep my financial aid and scholarships. There was always this fear that If I venture into a more time-consuming extracurricular activity, I’d lose my good grades and lower my chances to land a successful career.
I wasn’t always like this. As a teenager, I used to do all sorts of things — direct short movies, participate into online gaming communities and play together with people from all over the world. In 2009, I founded World-Garage, a fan website dedicated to EA games now-defunct Need for Speed: World MMOR. We were one of the game’s first fan communities and received a lot of endorsement and sponsorship from EA Games.
World-Garage’s secret sauce was the great content and events it created — we made machinima, role-playing, car chopping contests and in-game gatherings. This won us a huge following and kept our community engaged. We earned thousands of views on YouTube and hundreds of registrations on our website on a daily basis. It was a blast. As a 16-year-old teenager living in a small Bulgarian town, being active on the internet was the best thing I could do — I was honing my skills in English, living in an international (virtual) community and learning various technical skills. If I hadn’t done this, I could have sold drugs, played sports or would simply hung around in town like most of my peers.
I longed to do something similar in my senior year at the university. I had made a few attempts to do get into the local startup community, but investors were understandably unkeen to fund an university student who was too worried about his grades. All my failed attempts, however, weren’t completely in vain because I managed to win a scholarship to go on a Summer Entrepreneurship Program in the US.
During the program, we visited entrepreneurial spots in New York and spent a month learning about entrepreneurship at Babson College in Boston. Our journey culminated with a week in the Silicon Valley, in the HQs of Airbnb and other multi-billion unicorns.
Seeing all the glam and grandeur of the US tech scene, I got into the mood I was back in my teenage years. The passion and zeal of the people I met during the program inspired me and I carried a piece of the Silicon Valley with me in Bulgaria. I was determined to start something. After all, I was about to be a senior, so I didn’t have to worry about grades and scholarships anymore.
I dialed my friend and fellow student Gavril and spent the next few hours talking what we could do in our last year. Gavril had won the national finals of Microsoft Imagine Cup almost by himself. His team members didn’t have the motivation to continue and just decided to call it a day. We discussed how the students at our university lacked the passion and ambition that the people in the Valley had. The students studying Computer Science at our university were highly individualistic and passive. They spent most of their time in their dorm rooms, writing homework and reading lessons.
The Computer Science club at the university was in a complete lethargy. They organized a few events and their topics were bland and boring. Attendance was low. Both Gavril and I had previously tried to become members of the club and shake things up, but both of us were denied membership without any given reason.
So we decided to take things in our own hands. We created our own student club where we could channel all the energy and passion we had for technology. Our plan was to take the students out of their rooms, put them together into a single space, and motivate them to use their skills together to create something. We wanted to show them the numerous opportunities and challenges the world had for them, because they were clearly oblivious of what they were missing out on.
Unlike the people I met in the Silicon Valley, only a handful of our tech-oriented students had participated in hackatons, contributed to open-source software, had started a personal blog or answered questions in online help communities such as StackOverflow. They were virtually invisible for the rest of the tech world.
Gavril and I didn’t have much time to think about a brand and a name, so we bootstrapped everything: We called the club AUBG Spaces (later renamed to The Hub) and put the logo of the startup company I created as an exercise for the Summer Entrepreneurship program. We printed a few motivational posters and sticked them around campus.
Our first event was a huge success. We highlighted all the problems we saw with the current situation in the university and received a lot of support from students and administration. We unofficially started gathering in one of the rooms in the Student Center and organized skill sharing sessions, mini-hackatons and trainings. We started inviting experts from the industry and organized field trips to local technology companies and conferences.
The winter break came and our newly-founded club was the hottest subject around campus. Gavril and I were so overwhelmed by having to train students, organize events and communicate with companies that we didn’t have time to think about what we would do after graduation.
Then, one of the professors at our university who was supporting our club got us in contact with a local company that was managing residential properties. The company had an issue with scaling their business processes. Every month, they had to organize the residents of several properties in different cities and manage the expenses of the buildings they lived in. They were doing this using paper and excel spreadsheets, and managing the process for an increasing number of properties was causing a lot of headaches.
Gavril and I went to their office to consult them. After gaining more in-depth knowledge about their issues, we agreed to create a business process optimization (BPO) software solution for them and they were willing to pay for it. During the winter break, we organized a few students and developed a prototype of the application for web and iOS.
When the winter break finished and we received our first payment for the project, Gavril and I thought that It’d be a waste to simply distribute the money and squander them. It was a bit too late to apply for a Master’s degree and we had too much fun to consider starting from the bottom of the hierarchy in the corporate world.
We invested all our money in founding Centroida — an end-to-end digital product development company offering consulting, software development and training for iOS, Android (native) and Angular using Microsoft technologies (.NET Web Api & Azure).
We came up with the name because the logo I had created seemed to represent a centroid and we couldn’t find any other entity having the same name anywhere on the internet. Then we bootstrapped a website, rented out a small space in the building next to the campus, bought a few desks and chairs, and threw a party.
This immediately struck the interest of students, faculty and administration. Student media and university media shared the news and we started to get more attention in general. People were curious and wanted to see what’s about to happen next, and we already had set the expectations high. Centroida had to deliver big in order to survive and the biggest challenges were just ahead of us.
It was March, two months away from graduation, and we continued developing the software solution for managing residential properties (also known block management). We figured out that there are other companies and independent managers struggling with the process our software optimizes. Our first paying client was the proof-of-concept, so it seemed logical for us to see where the product goes. The software solution now had a name — Centralproperty. We won a few local competitions which brought fresh capital in the company.
Despite the influx of funds, we needed to save more since we planned to move to the capital (Sofia) after graduation. Gavril had some money saved from his work during the summer and I started writing guides for Pluralsight . Another big issue was that we already started building a solid team, so we had to search for a suitable office where we could work.
Thankfully, the same professor who helped us land our first project contacted the university’s administration and asked if we can do some sort of exchange. They made us an offer that would solve the office problem: We agreed to completely revamp the university’s old course registration system in exchange for a room in one of the university’s buildings in Sofia — Elieff Center. Without the support of AUBG’s faculty and administration, it would have been much more difficult for us to expand in Sofia.
The month of May came around the corner and we went through the graduation ceremonies and parties quietly. Some of our fellow graduating students landed jobs, others got accepted into universities abroad, but me, Gavril and Teodor, who joined around the time we rented our first office, had another local startup competition coming and we had a business-critical delivery to do for our clients. We also had to pay salaries. After all the festivities around the graduation ended, we spent a few days in our hometowns packing our luggage and parted to Sofia, eager to set up our office there.
The next competition we had was organized by Junior Achievement Bulgaria and we were competing for the “Best student-run company in Bulgaria” along with other companies founded by university students. The event was held in Sofia Tech park and the prize to the winner was about to be given by the President of Republic of Bulgaria himself.
When we came to Sofia, we had only three days to set up our office and get ready for the event. We prepared as best as we can. This was our chance to get exposure on a national level.
To our surprise, the competition we met at the event wasn’t as good as we initially thought. Students from other universities were either building something that was in a very early stage or copied something that’s already out there. Our product Centralproperty, with a solid business plan, working prototype and paying customers easily stood out from the crowd. It was an easy win.
After a short celebration and a few calls from friends and families congratulating our success, we had to get back to work and get the office ready.
The biggest challenge was that we couldn’t get internet in the building. What was available was only AUBG’s internal network, and the university’s office of communications didn’t want to share it with us, so we had to think of ways to get internet as soon as possible. To keep the work going, we had to use our mobile internet, which was a few hundred dollars a month. It was unsustainable.
Then, Gavril decided to ask the people from the nearby buildings for internet. Wi-fi wasn’t enough — we needed a cable coming to our office somehow. One shop owner agreed to help us, so we called a telecom company to install a separate outlet for us in his shop. Once they installed the outlet, we had to get the internet to our office, which was on the second floor of Elieff Center. So we ran a 50m cable starting from the basement of the shop, went through a hole in the corner of one of the shop’s windows, ran through a small alleyway through the fence of the yard of Elieff Center, wrapped around one of the columns and came into our window. The shop owner wasn’t as cheerful as she initially had been when we came to ask for help but we did our best to mend the situation with some wine and sweets.
With an office secured and a small amount of funds saved, the future seemed bright. Little did we know that the most stressful and challenging times were ahead of us. We were about to leave what is known as the “AUBG bubble” and enter into the harsh reality of running a business in Bulgaria.
With internet up and running, we were ready to go full speed ahead. We had a few inquiries from Bulgarian clients about custom software development and some requests for demonstration of Centralproperty, so we got busy scheduling meetings.
The meetings with the potential clients of Centralproperty were tense. Some of the owners of block management companies felt threatened by the software — they thought we’d steal the information or steal their work. Others didn’t have particularly good computer skills and the idea of working with software scared them. There were also clients with outrageous feature requests for which they weren’t willing to pay. On top of that, the owners of these companies were somewhat slow and unresponsive. Many of them vulgar or rude to us. It was such a drag getting the process forward.
I experienced firsthand what it feels like to work with businesses in a developing economy: The owners of these small facility management businesses were not educated about digital products, business process optimization or any new technology. To me, it felt like those people are still stuck in the 90's.
There was an even more alarming pattern emerging: unlike our first client, most of the subsequent clients demanded that we “hide” some of the numbers in the software from end-users, their argument being that “they don’t really need to know that”. This made us suspect that the people and companies managing residential properties were cheating on the residents. Usually, most of the money collected from residents would go in a “black box” and magically get distributed as expenses. Using Centralproperty would add more transparency to the process and ruin the scheme.
All these experiences made us conclude that Centralproperty would be a hard sell in Bulgaria. The corruption and the toxic environment in the residential facility management business wasn’t letting us sell a product which could actually bring value.
Coming to such a realization saddened us. We had spent several months believing that what we’re building something that was helping property managers, but they didn’t want that — they wanted to keep the process difficult so that they could pilfer money from residents.
In July I went to a Summer School in Iceland, my expenses covered through an EU programme.
Despite physically being in Iceland for a month, my mind was constantly in Centroida’s office in Bulgaria. Every day I would spend a few hours developing features for Centralproperty and ask how things were going. The news weren’t good: Centralproperty’s potential clients were dragging us around, trying to change the software work in a way that lets them cheat on their customers. Clients asking for custom software development, on the other hand, wanted to have their solution developed for the quarter of the price it costs which put us in a threat to get into a death march and slow the growth of the company.
When I came back in the office, the atmosphere wasn’t as cheerful as it was when I left. Our team had grown a bit, but we were working for cheap. Our clients were mostly Bulgarian and they couldn’t afford paying us, so they bullied us with feature creeps and contractual obligations. It was so difficult to negotiate rates and conditions that are remotely comparable to the ones in the global market. Payments were delayed, so paying salaries on time started to become difficult.
Our main revenue stream was coming from the one foreign client we had. It was a startup in the US doing cannabis analytics. We managed their whole software development process. The rates weren’t very high, but we were being paid well for the Bulgarian market and we were paid on time. But knew that if we kept going like this, we’ll barely be able to support ourselves and our employees in the long-term. We wouldn’t be able to accumulate any capital.
Despite the difficulties, Centroida had its own charm. It was a small company with a young international team located in the heart of Sofia’s Student’s town. We spoke English, behaved differently and had a non-standard way of thinking. This made us stand out from the crowd. Everybody was curious what we’re about. We never lacked applicants for our positions. There was always somebody eager to work with us. But there were also some who called us “spoiled westernized brats”.
Our culture brought many bright-minded young people in our office, each of them willing to learn new technologies and build complex things. As founders, our time was now distributed between training the employees, addressing our clients’ needs and tacking the most difficult technical problems. I was working from 9 to 9 almost every single day. We put our heart and soul into developing the potential of our employees.
I felt the first signs of depression in the beginning of the new year. We were running out of runway very fast. We had accumulated a great deal of technical talent in one place and we couldn’t find work for them. With the whole world experiencing difficulty finding tech talent, the thought of being out of work seemed impossible. But we somehow ended up having almost no projects in our pipeline and we started wondering what we did wrong. In the same time, we knew there was huge potential in each of our employees and we didn’t want to let them go.
Then one day, all of a sudden, we realized we had made a mistake — we had focused too much on operational work and worked with the wrong clients: We worked with companies and individuals that were too small to pay us or bring us repeat business. Some of them blatantly ripped us off by not paying us or trying to pay us too little. We hadn’t made any effort to sell our services to clients outside Bulgaria and hadn’t put enough work into developing our business. The only cure was to abandon the local market and start competing on the global scene.
Gavril, Teodor and I gathered together and made an emergency plan to save the company. We planned to call all our contacts outside Bulgaria, send cold e-mails and spread the word about our services. The world had to know about Centroida and its great technical team.
We tried to stay positive in front of our employees and assure them that everything’s going to be okay, but the bags underneath our eyes suggested a more somber reality. With every passing day, the end of Centroida was becoming more of a reality than a possibility. The topic “What will we do if we don’t make it” started creeping in more often in our discussions. I always had issues with sleep deprivation since starting the company, but the problems exacerbated to a point during which I couldn’t sleep more than 4 hours.
The atmosphere around us wasn’t helping too: We live in the Student’s town, where most of the people lacked entrepreneurial mindset and favored rapid spending (mostly on vehicles and fitness supplements) instead of thinking about their future. They worked for long hours and they didn’t work to make their dreams come true, but to survive. Most of them were paid close to minimum wage, so they couldn’t even think about saving capital or investing. Neither they had time to think about if global warming was going to destroy the earth or when we’ll start traveling to Mars. It’s not the typical place you’d start a company.
And there I was, trying to run a software development business, working over 12 hours a day, trying to go against the tide. But I knew I was doing the right thing. I knew that our team had great potential that we can develop. We only needed to find the right people and companies to partner with.
One of the first steps toward opening up to the global market was to add our most recent work to our website and strengthen our online presence — it was the cheapest channel somebody from “outside” could learn about us. We asked our team to start writing content and participate in skill-sharing meetings around Sofia to get some exposure. We were one of the tens and thousands of software development outsourcing/consulting companies out there competing for projects so we had to prove the rest of the world that we were worth something.
Then, towards mid-March, just a month after we put our emergency plan into action, we slowly started receiving more and more inquiries. Our effort toward promoting Centroida’s work started paying off. We received inquiries from all over the world and we addressed each and one of them thoroughly.
Our team had become so good at what they do that we managed deliver faster than ever before and in just a few weeks, we came back on our feet.
All the recommendations and positive reviews that followed brought us numerous referrals and everything simply boiled down to us doing a good job for our clients. When dealing with global clients, we didn’t have to waste time renegotiating terms all the time, dealing with feature creeps or being bullied to work for free like we did with local clients. Since we went global, we had built partnerships with several businesses and we’ve stabilized the company’s cash flows.
Lessons learned
The crisis was averted, but what I went through taught me some important lessons about business in Eastern Europe:
Ditch the local market as soon as possible — If you’re young and your business has potential to go global, don’t be allured by the interest of clients and investors locally. They know you’re young and naive and they’ll try to exploit your talent until you realize what you’re missing out on. Remember: No matter how big everything they promise to give you sounds, they’re operating in a market that is several times smaller than the markets you could sell to. In most cases, It’s economically impossible for them to afford paying you more that you can bargain for with prospective clients/investors from bigger markets.
Promote an inclusive, international company culture — Eastern European culture is very conservative and this makes many local companies fail to attract more talent because of the prejudices of the company’s leadership and the workplace atmosphere. Try to build an inclusive culture and you’ll likely end up with many talented gay, colored people and, if you’re running a tech-oriented business, women with strong technical knowledge. With such company culture, you’ll win many loyal employees from various minorities.
Work and push your company like you would if you were in a very competitive environment — You’re operating in a developing economy and it may feel like your’e doing comparatively great, but think twice who you’re comparing yourself to - you should keep in mind that you have competitors all over the world. There are companies out there who have to compete both locally and globally and because of that they’ve built a more advanced work ethic and culture. Their environment makes them push harder on delivery and optimize everything they can. Try to follow the practices employed by countries who have high productivity and disregard the work culture in your local market because the lack of competition makes businesses slower and less effective.
Conclusion
Starting and running a business in Eastern Europe nowadays can be challenging. It’s worth mentioning, however, that there are positive factors as well, the main one being the low costs, which lure numerous investors to put their capital into Bulgarian and other Eastern European companies.
With such low costs and proximity to bigger markets, it’s cheap to fail a startup and you can survive longer in the initial stages of the company. In developed markets, some of the mistakes we had made could’ve seriously affected our chances of survivability, but being based in Bulgaria gave us more resilience since it cost us less to keep the company going during a crisis.
Low costs also allow you to do an arbitrage especially if you offer high value-added services and products. High-value added services will bring you clients who’re not hiring you for the bargain price, but for the quality of the service/products you provide. If you manage to connect the dots properly and have the right skills and background, you can accumulate a lot of wealth very quickly if you base your business in Eastern Europe.
Where to now?
Software development and consulting is a good business, but there are thousands of such businesses in the world. Our ambition is to gather enough know-how and funds to transform Centroida into a product company.
Our strategy is simple: Think what kind of future we want to see in 10 years and create it. Being into software development and technology gives us almost unlimited abilities to dream and experiment. One of the things we want to do is make it easier to create UI controls for WebVR (Centroida was originally intended to be a VR-focused company). We’re partnering with an AI startup to build chatbots. We have also looked into IoT with low-frequency bluetooth sensors. Time will tell where our focus will go.
As for Centralproperty, we have put the project on hold until we figure out what to do with it. One of the possibilities we’ve thought about is to internationalize it and open its registration to everybody. Currently, Centralproperty is responsible for the management of over 20,000 households, and by making the platform open, it will help the companies and individuals who want to be transparent work faster and better.
In the meantime, you can see what we’re up to on social media or check out some of the code we have shared. Would you like to work with us or just have a chat? Write us an e-mail.
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