Interview with Rossen Ivanov, Managing Partner of BlackPeak Capital

Resalta was founded in 2011 by Gorenje, Geoplin and Energetika Ljubljana (under the name GGE, under which it operated until 2018). In 2015, Geoplin exited the company and two private equity funds joined the shareholder structure: Blackpeak Capital and Postscriptum Ventures. Four years later, BlackPeak Capital owns nearly 20% of Resalta, which has grown from a small company with big ambitions to an ESCO industry leader present on 10 markets in Central and South-eastern Europe.

Rossen Ivanov, Managing Partner of BlackPeak Capital, a co-investment growth equity fund focused on investing in high-growth Southeast European small and medium enterprises, sat down to answer a few questions for Resalta. BlackPeak Capital is funded by the European Investment Fund, part of the European Investment Bank, through the JEREMIE initiative for support of the SME enterprises in Bulgaria.

Prior to establishing BlackPeak Capital, Rossen Ivanov co-founded Entrea Capital in 2007 and subsequently established it as the leading independent Bulgarian investment banking firm and exclusive affiliate of Rothschild for the country.

Rossen worked at McKinsey & Co. in New York and at the European Bank for Reconstruction and Development in London, where he was responsible for structuring debt and equity investments across Eastern Europe. Rossen holds an MBA degree from the Harvard Business School and a BA degree in Economics from the American University in Bulgaria.

What qualities would you say companies need to have to attract investment?

The most fundamental factor are the founders, who have created and drive the companies. There are many aspects that we explore – who they are, their ambitions, what they have achieved so far and how far they want to go with our help. We check their integrity on the market very carefully and spend a lot of time understanding their professional and personal ambitions.

In terms of types of companies, we look either for niche export-oriented companies or domestic market leaders in a very specific niche. With respect to export-oriented companies, we invest in SMEs which have some clear competitive advantage on a regional or global scale, which is not cheap labor. To build a global company out of Croatia or Serbia is much more difficult than it is from Switzerland or the UK, for example. Therefore, the people who have already done it, are by definition exceptional. We are lucky that we have been able to invest in companies, which are innovation leaders on a global scale, such as Walltopia, Software Group, and International Power Supply. If they’re on the domestic market they need to be very clear leaders in a very specific niche, like Resalta in the energy efficiency market. We continue to find amazing entrepreneurs in Southeast Europe and I think the region needs to believe a bit more in its own capabilities to produce world-class companies.

How involved are you in developing the businesses that you are shareholders in?

Normally our stakes in our companies vary between 10 and 40%, so we’re a minority investor. We want to leave the majority of the company with the founders because we want them to keep the main motivation to develop and grow their companies.

We are very involved with our companies in multiple areas. Based on our experience, we lead all acquisitions, which bring inorganic growth. We have made size add-on acquisitions for our investees, including two in Germany and one in the US. It is not very common for SMEs out of the region to acquire companies in the EU/US, and this is a trend we are looking to reverse. We also lead all initiatives for raising funds for the next stages of growth. We have done multiple follow-on equity rounds and recently brought the European Investment Bank to invest in venture debt, its first such deal, in Bulgaria. We work a lot with our investee to improve corporate governance and make them exit ready. We don’t get involved operationally, except where needed. We also support our investee by helping them with the recruitment of middle management, especially CFOs.

You’ve identified an opportunity in the region because there is very little investment in SMEs from abroad - what do you think companies need to do to attract investment and what needs to happen to develop further the regional investment ecosystem?

There are multiple factors for a company to attract a financial or a strategic investor. Clearly it starts with the team and the product/service of the company. Important are its position on the market and its growth prospects. Beyond these fundamentals, the company needs to be run as a proper corporation and not as a single proprietorship. Strong middle management, processes, systems, and corporate governance are very important.

One of the issues that all of us need to overcome is that the region is still viewed less favourably than the rest of the EU. Many investors are not looking at Southeast Europe as a core market and often the news that they associate it with are not positive. Therefore, it requires extra efforts and steps to convince investors to come to the region and invest in a company – in some ways, the transparency and corporate governance need to be even at a higher level to give investors additional comfort.

What is very positive that there is an emerging ecosystem of younger entrepreneurs, especially in the technology sector. There are a few important elements in this ecosystem, which are beginning to take shape and reinforce each other in all countries in the region. First and most important, there is now a generation of young entrepreneurs, many of them with Western experience and education, who have the self-confidence to start businesses and compete globally. In addition, the European Investment Fund and other institutions, including the various governments in the region, have invested in quite a number of accelerator and venture funds, which help to support the emerging ecosystem of technology start-ups. A number of successful entrepreneurs in the region, who have exited successfully their companies in multi-million deals, are also investing back in the ecosystem and also setting up private educational initiatives such as schools and universities for programing, mentoring initiatives, and others.

What is still lacking is the active participation of pension funds in the region in the support of the emerging private equity funds. Croatia and Slovenia are already advanced in this direction and Romania and Bulgaria are catching up with the legislative changes to allow pension funds to invest in private equity funds. There are significant financial resources in the region already and therefore it is really not necessary to continue to rely on European institutions and development funds to support our own innovation ecosystems, while at the same time our own future pensions are often used to invest in bonds and stocks outside of our own economies.

What I am truly happy about is that what we do ultimately supports the regional economies. We actually started as a €30m co-investment fund from recycled funds from other EU programs with the support of the European Investment Funds. We have attracted more than €80m in additional co-investment in the region from investors from China, US, Germany, Saudi Arabia, Greece, Luxembourg, Slovenia, and Bulgaria. Our companies have created more than 2,000 new jobs and have built five new factories, some in areas with high unemployment. We obtained one US patent on one of our technologies and have brought multiple innovations on the market. Resalta has enabled the annual saving of 30,000 tons of carbon dioxide through the energy efficiency projects that it has implemented. We remain optimistic about the region.


How did Blackpeak Capital decide to invest in Resalta?

Mark Crandall and Dimitar Enchev from Postscriptum Ventures introduced us to Resalta. They were co-investors in two of our other investee companies and by that time we already had a good working relationship. We were together in Belgrade when they told us about an energy efficiency company that they were looking at as a possible investment. Honestly, at first I agreed to look at the opportunity simply because I was being polite – I had never thought about investing in energy efficiency previously nor did I know much about the sector. But after Dimitar sent me more information and I met Luka [Komazec, Resalta CEO], I started to reconsider. I remember Luka made a huge difference for our decision because of his energy and vision for the kind of company he wanted to build. As an investment thesis, Resalta also made sense – it operated in a market characterized with significant real and potential demand, which however was very fragmented on the supply side.

Most ESCO companies in the region, and also as it turns out in the whole of Europe, are small due to lack of capital, management talent, ambition, and ability to scale. So, the idea behind the decision to co-invest with PostScriptum Ventures was to create the leading Southeast European ESCO supplier. In all honesty, we would not have invested without being reassured by Luka’s vision and ambition. Even to date, I have not seen another company in this sector in the region in which I would invest, despite the positive investment thesis.

How has Resalta performed compared to your initial expectations?

I don’t remember the original business plan because it changes constantly – we’re probably a bit behind the original projections, but I would say in all of our investments the original projections are more optimistic than they should have been. I guess optimism is a core feature of entrepreneurship.

Resalta has been very impressive in terms of the speed and scale with which it has grown and the number of countries we are present in. Our geographic presence, which now includes Slovenia, Croatia, Serbia, Bulgaria, Montenegro, North Macedonia, Italy, the Czech Republic and now Romania and Poland, is certainly an area in which our expectations have been exceeded. I have seen many companies talk about pan-CEE expansion, but few have done it with the speed and success of Resalta. We also continue to have a very impressive pipeline, which speaks to the strength of the entire organization. Since Resalta’s business is very capital intensive, we have done multiple financing rounds, which we also didn’t expect. Luckily, with scale we have been able to secure direct equity financing from the European Investment Fund and SID Bank and we are increasingly attracting the attention of larger financial and strategic players. Overall, I see Resalta as a success story of building a great organization and also doing something very positive and much needed for the environment.

How do you see Resalta’s growth and now that you know more about the energy sector, how do you think it should develop?

Sustaining high levels of growth is actually very difficult, and we see it in all of our investments. Resalta has grown its asset base by a CAGR of 68% for the period 2015-2019, an impressive result. It is very difficult to manage growth, you need to constantly find a balance between finding funding, hiring people, installing processes, and spending your available funding carefully to ensure good return on investment, and you really don’t have a big margin of error. If you don’t have funding, you cannot grow. If you get funding, you have to spend it carefully; if you don’t spend it carefully, the sales don’t come and then you have too many costs and a potential liquidity crisis. So, managing growth is not very easy.

What Luka [Komazec] has managed to do well is to build a very strong middle management team, and implement good processes, systems, incentive schemes, and corporate governance, which are at a much better level than those of most companies of similar size in the region or probably in the EU. Sometimes there is resistance within an organization towards the implementation of systems, processes, KPIs, etc. because they often lead to additional bureaucracy. However - and we’ve seen it time and again - without these, growth eventually stops or even collapses the entire organization. What is actually very exciting is to see that growth in Resalta is not done recklessly, but really with a vision towards building an intelligent, larger platform. We are now in a position with a significant geographic presence, solid bases, strong pipelines and sufficient funding to continue to develop successfully.

Do you believe Resalta is on its way to becoming a pan-European ESCO leader?


The amazing thing with companies, as well as people, is that the only limit is the size of your ambition. There is no reason not to believe that this is just the first step and that it can be taken much further. You can really dream big and it’s a question of dreaming big and making it happen. So, I definitely think that the model we have now in Central and South-eastern Europe can be scaled up on the wider European level.

What about BlackPeak? What are you looking to invest into next?

We started BlackPeak Capital five years ago and we have invested close to €30 million in 12 companies. We are fully invested and our focus currently is to develop our companies and prepare them for exit. We have exited one investment fully and one partially and are working on a number of exit processes. We love the space in which we invest, which is growth equity, because it focuses on scaling businesses regionally and globally, not only pursuing a financial return. We do not invest in start-ups, but in more established SMEs with a proven history of growth and profitability.

Our funding enables these companies to sustain high growth rates via a combination of organic growth and also via acquisition of competitors. This instrument has enabled us to invest in some of Southeastern Europe’s most dynamic companies alongside very impressive entrepreneurs. Not many funds do this in the Balkans and we are now looking to scale our fund more regionally. We’ve done investments in Bulgaria, Serbia and Slovenia and now we want to add Croatia and Romania as core markets. We are currently raising a new fund which will hopefully allow us to invest in all these countries with slightly bigger tickets. We are also putting together a more regional team.

Stay tuned.

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