Anyone who’s ever been in venture capital knows that the best deals are those where three key components fall into place: a formidable team tackling a huge opportunity, with a killer competitive advantage that no one else has. Sometimes that advantage is the product, sometimes it’s runaway traction, and sometimes it’s hard-fought insights from the founders’ previous work experience.
In reality, most deals we do tend to sway towards one of the three; team, market, or advantage. Usually two of the three qualities are good enough, and the third one is abundantly better. Or one is ok, and the other two significantly better. With an early-stage, high-volume, industry-agnostic and location-specific fund like ours at Vitosha, it’s often too much to ask that all three aspects are at champion levels.
But once in a while, we do get to hit the jackpot at deal sourcing and selection. That’s exactly how we felt when we first met founder Kremena Stoyanova, and learned about her plans with Elca.bg.
If you speak Bulgarian, you know that “elka” is the colloquial word for calculator. Generations of Bulgarian school kids grew up with the slang term, and when you hear it, it takes you back to warm memories of endless school days and afternoons of skipping class or homework.
Kremena and her team came up with the play of words one sunny summer day, exactly the kind of day you would skip class on, sitting on a beach not far from her hometown of Burgas, on the Black Sea. Short for “electricity calculator”, Elca is a platform for comparing energy providers, on the soon-to-be-liberalized Bulgarian electricity market, for both commercial and household customers.
Max Gurvits and Kremena Stoyanova
When we talk about the team at Elca.bg, it’s hard to imagine someone more capable than Kremena. After a stellar career at E&Y, she joined Bulgaria’s biggest electricity provider, which covers the entire western and most populous half of the country, the local subsidiary of Czech electricity giant CEZ Group. At age 30, Kremena became CEO of the supply business, responsible for all the client accounts. As she likes to joke, having the responsibility of sending more than 2 million electricity invoices every month at that age really made her ready for any big opportunity in life.
And that opportunity is the second part of the equation: the market. Bulgaria is an interesting place when it comes to energy. Despite being one of the biggest per-capita producers of electricity in Europe, it’s also the last EU country that still hasn’t completed full market liberalization of electricity supply. The licensing of private and independent providers is already there, but some important steps related to design of wholesale market and empowerment of customers are still being finalized. As it’s an EU-mandated move, the process is being prioritized by the government, and that of course couldn’t come at a worse moment than the 2021/2022 winter in which wholesale prices are 300% of what they were last year.
As we sat down with Kremena this week at the Vitosha office, she gave me a detailed and fascinating overview of how the entire market works, with all the benefits that legacy utility companies have over market entrants, the system of subsidies that needs to gradually be done away with, and most importantly the incredibly lucrative business of energy comparison platforms. When such platforms are successful, they pivot to adding other utilities and recurring services, and have led to valuations in the tens and even hundreds of millions of euros in other EU countries.
And then, finally, we have the competitive advantage, the famous “secret sauce” that gets VCs excited about startups. In the case of Kremena, her co-founders, and Elca.bg it’s excellent timing multiplied by the best possible preparation. After leaving CEZ, Kremena became a leading expert for energy innovation in Bulgaria, launching a successful consultancy business that worked with regulators and private companies in helping them implement reforms and new business models. Elca.bg’s CTO Kiril has been the brain behind the design of electricity trading and comparison platforms in some of the most advanced liberalized markets in Northern Europe. With the founders’ joint skill sets and with the mandatory full liberalization of Bulgaria’s energy market due latest in 2024, Elca.bg is very well-positioned to allow millions of Bulgarian energy consumers to pick the fruits of competition and differentiation between energy products and their providers.
Of course, the winter of 2022 is as volatile a time as you can imagine for introducing new products in the European energy consumption market. The wholesale price of electricity is through the roof, and national regulators, including ours here in Bulgaria, are scrambling to offset the volatility to keep energy affordable, especially now in the midst of an unusually cold winter season. But spring is just around the corner, and with it the long-awaited opening up of Bulgaria’s energy market competition. As Elca.bg gears up to launch its products to millions of local households and businesses , our Vitosha team is mobilizing the resources we have to ensure as big an impact as possible. And it might just be that a bet on a stellar team changing the way an entire industry works, turns out to be exactly the textbook venture capital success story that we realize with Kremena and her team at Elca.bg.