CEE Rounds Review #JUN’20

When Covid19 hit Europe and EU countries introduced lockdowns I started looking at round announcement in the region. I was curious to see what will be the impact on the investment landscape when there is no travel and there are no startup events.

I decided to look at 10 CEE countries -> Estonia, Latvia, Lithuania, Poland, Czechia, Slovakia, Romania, Hungary, Bulgaria, Slovenia. CEE can be probably defined in a number of ways. I picked those 10 countries as I visited all of them except Romania, which was on the list for this year.

Those ten countries represent a vast region and are home to some of Europe’s greatest tech companies. By reviewing announced rounds I was hoping to learn more about interesting companies and investors who are active in the region.

Usually, I go with Dealroom for this kind of research, but this time I decided to try Crunchbase. I was told that Crunchbase tracks more rounds, so I wanted to give it a try. That said, all my opinions are based on the data I could find on Crunchbase.

In the past, I saw many people post content based on these data sources without doing a manual refinement. Since the idea behind my research project is to learn about the CEE ecosystem, I checked and verified every company behind every round announcement. As you might guess some of the data was more directional than accurate.

Some of the challenges in relying on these types of data sets:

• wrong labelling of round type eg. I wouldn’t call a €2M round a Series B
• some rounds were announced without any numbers
• local currencies, which make it difficult to compare rounds

As for now, I’m mostly interested in discovering who is who in CEE I didn’t spend much time correcting the data. I might come back to that in the future.

What I do want to focus on is the following:

• commenting on rounds in B2B SaaS companies in the region (my domain expertise, and also the area where I invest)
• tracking active local VCs and international VCs investing in the region
• understanding round structures (stage, size, investors)

Few words about the potential impact of Covid19 on the number of rounds announced.

• each month of Q2'20 brought a decline in the number of rounds announced. April-27, May-16, June-9. YoY is even worse. To put things into context. Between 2017 and 2020 more than €800M was raised by VC funds in those 10 countries. In 2019 I counted 104 active funds in the region. Below is a snapshot of the most active funds. It seems that the investment pace has slowed down or that rounds are not being announced.

• It may also be the case that what we are seeing now in the numbers are the rounds which were closed before Covid19 but only announced recently. This would suggest an even stronger slowdown. It will be interesting to see what will Q3 bring and if we will see a pick up from Q2 levels. Just for the record — Q3'19 saw 151 rounds being announced.
• Based on the number of active funds and also how much they have raised in the last 4 years — I’m assuming a lot of dry powder waiting to be deployed.
• What is also interesting is that rounds which were announced were done by not were well known and established funds. Hopefully, I’m not offending anyone. The point I’m trying to make is about the “VCs are open for business” statement. That might be true, but most probably many top tier funds have become even more selective and we are not seeing them in the rounds which do get announced.

Here is the list of rounds which were announced in June 2020

In June we saw notable investments made by Speedinvest (Estateguru), Startup Wise Guys (Ondato) and a host of great pre-seed/seed funds into Zitcity.

Some of the amounts should have been in Euro — sorry for that small typo.

I’m planning to publish similar posts on a monthly basis to track progress. I’m still trying to figure out a good way to track active funds — will have to work on that a bit longer.

I would also like to share with you some of my early observations after discussing this data with some of the other VCs in the region:

• Thanks to EIF/EBRD we are definitely seeing more local funds emerge. Some of them with very good managers. Change Ventures recently announced that they closed a €40M fund with EBRD.
• There is more competition. Rounds in good companies (strong founders) get closed fast.
• The success of UIPath has paved the way for many international funds to look for deals in CEE, although I’m not seeing that in the data just yet.
• Poland (I might be biased) is somewhat of an outlier when it comes to the number of VC funds. PFR which acts as the local Fund of Funds is definitely accelerating its investment pace. I’m not sure if we really need that many funds in Poland — time will tell.

Feel free to reach out if you have a different opinion or insight about what’s happening in CEE.