Opinion on a Draft Ordinance on the Terms and Procedure for Issuance, Extension, and Revocation of a Certificate for a High-Technology and/or Innovative Project, referred to as a “Startup Visa”

TO

THE MINISTRY OF ECONOMY AND INDUSTRY OF THE REPUBLIC OF BULGARIA

POSITION

Regarding: Draft Ordinance on the Conditions and Procedure for Issuing, Extending and Revoking a Certificate for a High-Technology and/or Innovative Project, called "Startup Visa"

DEAR LADIES AND GENTLEMEN,

In connection with the public consultation on the Draft Ordinance on the Conditions and Procedure for Issuing, Extending and Revoking a Certificate for a High-Technology and/or Innovative Project, called "Startup Visa," we present to your attention:

The Position of the National Representation of the Bulgarian Startup Entrepreneurial Community (BESCO) on the Draft Ordinance on the Conditions and Procedure for Issuing, Extending and Revoking a Certificate for a High-Technology and/or Innovative Project, called "Startup Visa" (hereinafter "the Ordinance").

1. The title of the Ordinance should be refined in the part "extending...a certificate..."

The title of the draft Ordinance implies that the text will contain provisions regarding the conditions and deadlines for extending the "Startup Visa" certificate. The presented draft lacks such explicit provisions, which creates ambiguity and a contradiction between the title of the subordinate legislative act and its content.

We consider that the title should be clearly and unambiguously refined by removing the word "extending," or that the draft Ordinance should be reworked so as to contain explicit regulation of the scenario in which the certificate is extended.

2. The control over the subsequent activities of companies should be increased and focused.

The procedure set out in the ordinance currently provides control over the activities of applicants, but it can be improved. The "Startup Visa" certificate is open-ended within the meaning of the content of the Ordinance, but the long-term residence permit is time-limited and is renewed annually. Applicants reside in Bulgaria on the basis of the long-term residence permit, while the "Startup Visa" certificate is merely the basis for the issuance of a document for lawful residence. After 12 months in Bulgaria, applicants prepare a report on their activities every 6 months, which is reviewed by the Expert Council, and if there is a deviation from the declared activity, the Minister of Innovation and Growth revokes the certificate, notifies the relevant services, and the right to reside in the country is revoked.

Our proposal is to add two further scenarios related to the report accounting for the activities of the companies:

• If they fail to submit the report within the specified deadline, their "Startup Visa" certificate shall be revoked by the Minister of Innovation and Growth, the relevant services and in particular the Directorate "Migration" shall be notified, and the right to reside in the country shall be immediately revoked as well.
• If the report contains false information, their "Startup Visa" certificate shall be revoked by the Minister of Innovation and Growth, the relevant services and in particular the Directorate "Migration" shall be notified, and the right to reside in the country shall be immediately revoked as well.

In this way, if they carry out activities other than those declared, if they fail to submit a report within the respective deadline, or if they provide false information, the "Startup Visa" certificate will be revoked and proceedings for the revocation of the right of residence will be initiated. Thus we will have a functioning mechanism that will guarantee that, however widely the door to Bulgaria is opened, only those who are genuinely developing a high-technology and/or innovative business and meet the requirements will remain.

3. The requirement to accumulate at least 9 points for a candidacy to be considered must be reworked.

The maximum number of points a company can accumulate is 17. The Startup Visa is aimed both at recently launched companies/projects/teams and at those at the concept stage. Some of the most valuable companies we could attract are those with a high degree of research and development activity. For such companies it may take 1–2 years to attract an investor, and then 5 to 7 or more years before they generate sales.

The "Customer Network" criterion awards between 1 and 3 points based on proven realised sales. If the company has not yet generated sales (as is the case for most startups — we can even take Dronamics, of whom we as Bulgarians are so proud, as an example) 3 points are automatically lost, which may be crucial to reaching the minimum of 9.

The "Investment" criterion awards between 1 and 3 points based on attracted investment from an equity and venture capital fund operating with funds from the European Structural and Investment Funds and/or the European Investment Fund. Without this, the minimum required threshold may also not be reached.

The above applies with particular force to the criterion "Valid patent or valid certificate of registration of a utility model." It should be noted here that in the scenario of a service-oriented startup, the likelihood of patenting or registering a utility model is not fully applicable, especially if the service in question is a somewhat familiar one but carried out in an innovative way, for example. Thus, such early-stage companies would not receive any points from this category whatsoever.

Any company that has no sales, no investment from a fund operating with money from European structures, and no patent or utility model registration, has no way of having its application considered.

4. Art. 6, para. 5, item 6 must be fundamentally reworked.

The criteria described in item 6 were discussed in previous working meetings as reasons for a company to receive a "fast track" and be directly approved.

At present, these same criteria serve as criteria for deciding whether to consider an application at all. In this way, the bar is raised to a level that would deter even the small number who would decide to apply in Bulgarian and without a well-designed platform through which to do so.

We attach a comparison of the application criteria in various European Union member states. We believe that the team of the Directorate "Economic Policies" at the Ministry of Economy and Industry has already reviewed all these procedures and is familiar with them, and it is incomprehensible to us why Bulgaria needs to have criteria that are many times higher than those of any other country in the European Union.

Country / Criteria

Estonia

1. A technological, innovative and scalable business. Your business model is expected to have potential for global growth. Think Airbnb and Uber, not restaurants or single-person consulting. Startup Visa is aimed at technology-driven startups that solve big problems, disrupt industries and serve millions of people.
2. Approval from the Startup Committee, stating that you are a startup and may use the Startup Visa. Your application will be reviewed by people who work with startups daily. They have "eagle eyes," so traditional companies will not succeed.
3. At least 160 euros for each month you wish to spend in Estonia. This means 1,920 euros for a one-year visa. This is the minimum required by law.
4. You register a company. (No formal criteria against which the Startup Committee approves!)

Lithuania Step 1: The company applies online through the "startupvisalithuania.com" platform. Step 2: An online interview is scheduled, where the company pitches to a Startup Committee formed by experts from the startup ecosystem. Step 3: If approved, you register a company. (No formal criteria against which the Startup Committee approves!)

Latvia

1. Proof of 6,000 euros in the account.
2. A plan for activities over the next 3 years.
3. A document confirming no criminal record. (No formal criteria against which the Startup Committee approves!)

France

1. An innovative business project they wish to develop in France.
2. The project must be approved by a Startup Committee attached to a public body.
3. At least 18,654.96 euros in the account. (No formal criteria against which the Startup Committee approves!)

Netherlands

1. Working with a local mentor/facilitator.
2. The product or service is innovative.
3. The startup has a clear idea of how to turn the idea into a sustainable business.
4. The startup and the mentor/facilitator are registered in a special register.
5. The company's account holds sufficient funds to live for 1 year in the country. There are guiding examples of innovation, but they are not restrictive. No other formal criteria.

Spain

1. 564.90 euros per month for each member of the company and the same for each family member.
2. The exact economic activity of the company must be declared.
3. A business plan must be submitted including at least: a description of the project and activities; a description of the product or service; a market assessment; financial information; the added value to the Spanish economy.
4. The business must envisage the creation of new jobs in Spain.
5. The education and experience of the applicants are important.
6. The business must have potential to attract investors.
7. The business must fit into their developing technology ecosystem. The decision is made by a public institution based on the completeness of the documentation and subjective assessment!

Portugal

1. You must develop your business in Portugal, even if you have not yet started operations there.
2. You may already have a startup in your home country and wish to relocate it to Portugal.
3. You must not have permanent residence in another Schengen country.
4. You have no criminal record.
5. You are 18 years of age.
6. You have at least 5,146.08 euros per year per person in the bank.
7. The project/business is technological.
8. The business will create new jobs in Portugal.
9. The startup shows potential to achieve a turnover of at least 325,000 euros or assets worth at least 325,000 euros 5 years after commencing operations in Portugal. Portugal has certified 93 incubators, and each applicant must obtain approval from 1 of these 93 incubators! They assess it, and after approval the applicant may come to the country and begin.

Denmark Denmark uses 5 criteria to evaluate companies:

1. How innovative is the business model?
2. How attractive is the company's market?
3. How scalable is the business model?
4. What are the capabilities of the applicant or team?
5. Overall assessment of the company/idea/project/team. Assessment is carried out by the Danish Startup Secretariat, a specialised unit for working with startups.

Italy Option 1: Through a certified incubator

1. Presentation deck of the idea.
2. Motivation letter.
3. Official application to the incubator.
4. Proof of available funds in the bank.

Option 2: Direct application without an incubator

1. An application form is completed with a description of the business idea.
2. Information on available financial resources. Assessment is carried out by the ISV&H Committee and is based on the completeness of the documentation and the subjective judgment of the assessor!

Finland

1. At least two founders.
2. Intention for the company to be registered, developed and grown in Finland.
3. An innovative business plan.
4. The applying team must own at least 60% of the company.
5. Proof of available funds in the bank sufficient to live for the first months in Finland.
6. Proof of access to financial resources and investment for the first steps of the company's development.
7. Assessment of whether the team has a good understanding of what need their product or service addresses.
8. The project must have potential to reach a turnover of at least tens of millions of euros on a global market.
9. The business idea must have a competitive advantage.
10. The team must have identified potential clients and a monetisation model.
11. The business model is scalable on the global market.
12. The team's previous experience is important.
13. Assessment of the potential market is important.

Austria Austria uses a points-based assessment system, with a maximum of 85 points.

1. Team qualification – 30 points

• Professional course in the field of activity (20 points)
• Completed programme of at least 3 years at a higher education institution (20 points)
• Completed bachelor's, master's or doctorate in Austria (30 points)

2. Professional experience – 10 points

• 2 points for each year of experience

3. Language skills – 15 points

• German A2 – 5 points
• German B1–B2 – 10 points
• English B2 – 10 points
• German C1–C2 – 15 points

4. Bonus points – 30 points

• Proof of additional investment of at least 50,000 euros – 10 points
• Approval from a business incubator or funding from the Austrian Startup Agency – 10 points
• Under 35 years of age – 10 points A minimum of 50 points out of 85 must be accumulated for the applicant to be approved.

Sweden

1. Previous experience in the industry.
2. The team must own at least 50% of the company.
3. The business idea must be potentially profitable in Sweden.
4. Proof of equity sufficient to support the team and their families. An independent online self-assessment test is first conducted, in which general closed-ended questions about the team and their idea are asked; if the test result is positive they may proceed with the application.

Ireland

1. No criminal record.
2. Investment of at least 50,000 euros.
3. An innovative business plan. Assessment of the innovative business plan is made by a Startup Committee and is subjective!

Bulgaria (draft)

1. Investment of at least 100,000 euros from a VC fund operating with funds from European Structural Funds or the European Investment Fund.
2. Existence of a patent, a pending patent application, or registration of a utility model.
3. Proof of sales of at least 100,000 BGN over the last 2 years.
4. Financial security of the team.
5. Financial projections.
6. Business plan assessment.
7. Readiness to hire 10 employees in the first year.
8. Readiness to commence business operations within 6 months.
9. At least one of the following must be fulfilled:

• A diploma from a university ranked in the top 50 of the CWUR World University Rankings is presented, along with a reference for the project applicant attesting to membership of the top 10% by academic performance;
• An invoice or other supporting expenditure document is presented showing that the products and/or services under the project have been sold and paid for by at least one client that is a Fortune 500 company;
• A copy of an investment agreement with a fund operating with European Structural Funds or EIF;
• A Seal of Excellence under the Horizon 2020 or Horizon Europe programmes for the project — programmes aimed exclusively at EU member states and a further 16 European countries;
• The project has been awarded at a specialised competition or contest in the field of innovation and entrepreneurship organised by the European Commission or the European Space Agency — competitions aimed primarily at EU member states;
• Proof of at least 2 articles published in the upper quartiles Q1 or Q2 in the international databases Scopus or Web of Science.

Assessment is carried out by a committee in which key opinions are held by civil servants with no experience with startups and the IT industry in general!

❖ Not a single other country has a requirement related to the patenting of a product! ❖ Not a single other country has a requirement related to investment from an equity and venture capital fund operating with EIF or European Structural Funds money! ❖ Not a single other country has a requirement related to generating sales at the time of application! ❖ Not a single other country has a requirement for creating a fixed number of jobs! ❖ Not a single other country has a requirement for a deadline by which the business must begin operating! ❖ Not a single other country has a requirement for entrepreneurs to hold a university degree! ❖ Not a single other country has a requirement related to what clients they have and success in selling to Fortune 500 companies. At present, only a handful of companies in Bulgaria manage to sell to Fortune 500 companies. The chance of a startup selling to Fortune 500 clients approaches zero, because many of these companies do not work with partners with fewer than 5,000 employees! ❖ Not a single other country that is also an EU member has requirements related to Horizon 2020 or the Seal of Excellence! ❖ Not a single other country has requirements related to participation in and victories at competitions! ❖ Not a single other country has requirements related to publications! ❖ In no other country is assessment carried out by deputy ministers and civil servants! ❖ Only one other country conducts assessment based on a points system (Austria). There, 58% of points must be accumulated; in our case, 70% of points. There, you can accumulate the required points if you speak German, have 5 years of professional experience and are under 35 years of age. In our case, if you have a good business plan, are financially secure, have good financial projections, have generated a turnover of 100,000 BGN, have an investment of even 1 million euros but from a private fund, you will have accumulated insufficient points.

Our proposal is to introduce a fast track, as well as to move comprehensively towards an approach that — following the good example of other countries — evaluates solely:

✔ whether the foreigners have the means to live for 1 year in Bulgaria without resorting to the country's social assistance system; ✔ they must be obliged to register a company here, holding at least 10% of the capital; ✔ they must have a project with potential for global markets; ✔ there must be a limit on the number of foreigners who can apply with a single project — up to 4 foreigners; ✔ and an Expert Council composed of entrepreneurs must subjectively assess the projects.

For most countries, it is sufficient to guarantee that a company will be registered in the country, to show that the team has a minimum amount of money to live on for the first months, and to convince a Startup jury that their idea is innovative. For reasons that are incomprehensible to us, Bulgaria raises the bar higher than anyone else. Much higher! The country that sits at the bottom of every ranking for innovation and business conditions. The poorest country in the European Union, with the potential to be unable to reach the living standards of others by the end of the century. The country that periodically tops the ranking for the fastest disappearing population on the planet. The country where barely 3% of people have any desire to start their own business. This country decides to create criteria that are higher than anything anyone else would imagine.

We can safely say that if Facebook, Apple, Microsoft, Amazon and many others had applied at their inception for a Bulgarian startup visa, there would have been no way they could have been approved, because they would not have met our criteria.

5. The composition of the Expert Commission that evaluates candidates must be changed.

There are three practices in other countries:

• Assessment is carried out by a Startup Committee composed entirely of people who work with startups, have experience with startups, and come from the private sector.
• Assessment is carried out by a specialised state body for working with startups.
• Assessment is carried out on the basis of approval from a local certified incubator, facilitator, investor, etc.

There is no practice of assessment being carried out by a state body with no experience working with startups. We treat the Expert Council proposed in the Ordinance as such, because over 70% of its members are civil servants.

We consider it unacceptable for civil servants who have entirely different primary duties in their respective institutions to be engaged in evaluating the idea of some foreigner and their group of friends! It is possible (if the procedure works) that tens of thousands of applications will arrive annually. This means that the civil servants on the Expert Council, in addition to their other duties, will also have to assess dozens of startup projects every week.

6. The Ordinance does not follow the good practices from the European Union regarding access to information and the application process.

There are three options for applying for a Startup Visa in the European Union: a) through a dedicated website/platform; b) through an external website; c) through submission of documents by email.

The Ordinance opts for the third option — documents to be sent by email to the Ministry of Innovation and Growth — without specifying a dedicated email address for this purpose (e.g. startupvisa@mig.government.bg), but instead sending them to the general email address of the ministry, alongside dozens of other emails. This may lead to additional delays and even the missing of applications.

We consider that Bulgaria must follow the best practices, not the most mediocre ones. We must strive to stand out when doing something new and to be assessed as the best in the world. Within the working groups and working meetings, we proposed setting the best possible solution: a dedicated platform to be built and connected to the domain www.startupvisabulgaria.com, and to achieve the highest possible global-level presentation of the programme.

Here are a few good practices from other countries:

Estonia: https://startupestonia.ee/visa Lithuania: https://startupvisalithuania.com/ Denmark: https://startupdenmark.info/ Italy: http://italiastartupvisa.mise.gov.it/ Malta: https://startupvisamalta.com/

7. Applications must be possible in English.

At present, the application is set up to be submitted in Bulgarian. This does not follow the good example and practices of other EU member states. The text of the Ordinance creates administrative burden and the need for entrepreneurs to seek translators to translate from their language into Bulgarian. This will lead to a more cumbersome procedure.

If we look at some other EU member states that apply the "Startup Visa," we see the following:

Country

Official Language

Language of Application for Startup Visa

France

French

French or English

Estonia

Estonian

English

Latvia

Latvian

English

Czech Republic

Czech

English

Lithuania

Lithuanian

English

Netherlands

Dutch

English

Spain

Spanish

Spanish and English

Portugal

Portuguese

English

Denmark

Danish

English

Italy

Italian

English

Malta

Maltese

English

Finland

Finnish

English

Sweden

Swedish

English

Austria

German

German or English

Bulgaria

Bulgarian

Bulgarian primary and English

Ireland

English

English

There is only one country that requires applications in the country's official language — Spain. The Spanish language is official in 21 countries worldwide and is spoken by nearly half a billion people.

The decision of all others is correct and logical, because the goal is to attract investors and entrepreneurs, not to feed the business of local translation agencies and create additional burdens for businesses. Even in France one can comfortably apply in English.

Proposal: During the working process, BESCO proposed a solution that would make it possible to apply in English — through the platform. It is important to note here that 99% of high-technology and/or innovative projects, whether products, services or otherwise, are carried out, advertised and used in English as the primary language, and in some cases as the only one. A large part of the terminology in the IT sector has no precise and unambiguous translation into Bulgarian, and the logic of this approach is to use the language that is most widely used globally, so that the respective product or service can reach as many users as possible.

Separately from the above, there is another contradiction in the Ordinance — Art. 6, para. 3 states that the information is to be filled in in Bulgarian in accordance with Annex No. 1, but at the end of the draft Ordinance there is a version of Annex No. 1 in English. It is unclear what the creators of the Ordinance intended with this inaccuracy and why the English version of Annex No. 1 is explicitly present. We consider that such an oversight of the draft prior to publication only further complicates the already burdensome application form and leads to additional ambiguities.

8. The "Investment" criterion must be opened up.

An increasing proportion of Bulgarian equity and venture capital funds do not operate with funds from the European Structural and Investment Funds and/or the European Investment Fund. As written, the criterion entirely excludes an equity and venture capital fund that operates with its own private funds — which is actually the goal for all funds to become one day. Today, we invest public EU funds in funds so that they can develop the environment and in time operate entirely with private capital. The logic is not to spend public money indefinitely.

Most funds in Europe do not operate with EIF and European public funds. There are also numerous investment funds in the USA, Asia and across the world that are far superior to European ones. If a startup has received funding from Sequoia Capital (where a Bulgarian is one of the partners), which is one of the largest funds in the world — that startup will be unable to receive points to come to Bulgaria because of this criterion.

If we want Bulgaria to have a functioning Startup Visa, this criterion must be corrected and opened up to funds that are not necessarily linked to European structures.

9. Insufficient scenarios for the revocation of the "Startup Visa" certificate are envisaged, as well as no possibility for voluntary relinquishment of the certificate.

We consider that, with a view to the security of social relations and minimising the risk of abuse of the "Startup Visa" legal mechanism by third parties, further scenarios for revoking the certificate should be envisaged, such as: the activities of the project do not reach the parameters initially set out in the business plan; the foreigner carries out activities under an employment relationship or other activities unrelated to the project; supervisory authorities establish violations of labour and/or tax and social security legislation; etc.

Separately, it is important that there also be a possibility for the person who has received the certificate to voluntarily relinquish it at their own discretion, insofar as this may otherwise constitute a subsequent obstacle to the person applying for another type of residence (e.g. as an EU Blue Card holder).

In conclusion of all of the above, we express the position that the proposed text of the Ordinance is non-functional and imprecise. There is not a single startup company in the world that would want to come to Bulgaria and be able to meet these criteria, and if even one such company were to be found, it would have to go through such a burdensome procedure as to put it off entirely. We call for the texts to be corrected and refined, taking into account the opinion and expertise of the Bulgarian entrepreneurial community!