What does it take to raise Seed or Series A, in the CEE region, in the second half of 2023?

Tomasz Swieboda
Inside Inovo
Published in
5 min readAug 2, 2023

Not more than 12 months ago we published the CEE Meter 2022 — our own version of the P9’s Investment Napkin, but focused solely on the CEE market. In one of the first paragraphs, we wrote that both investors and founders should be prepared for a drastic change. So, has the change arrived?

A brief macro overview

If anyone, one year ago, was still counting on a spectacular rebound of emerging tech stocks, those hopes are now gone. The last four quarters have made it very clear — we are not going back to the 20–21 era, neither in the context of exit multiples nor the “growth at all cost” paradigm.

Data from the BVP Cloud Index shows it well — during last 12 months the average EV/forward revenue multiple oscillated around ~5.2x — far from the 16x peak from Q1'20 and even below the 5-year average from ‘15-’19 years (~6.3x).

Looking at the companies featured within the BVP Index, we also no longer see any players with >100x, >50x or even >25x multiples, with only MongoDB and Snowflake currently trading at >15x forward revenue.

The BVP Nasdaq Emerging Cloud Index

The private markets suffered as well, with the total VC funding raised by startups being down 80% from Q1'22 to Q1'23. Carta’s research regarding the Private Markets in Q1'23 leaves no doubt — the startups have already started to adjust to the new reality:

  • At least 40% of all investments in Series A/Series B comanies were bridge rounds
  • Approximately 1 out of 5 venture investments were down rounds (x4 increase vs Q1'22).

The changes described above lead us to think that mediocre companies will heavily struggle to find any funding, which goes along with Coatue’s reflections from their EMW conference. Such a conclusion creates a natural need for a definition of a good/great company and the benchmarks such a company should meet.

Here’s our view regarding the CEE.

Coatue’s 2023 EMW Conference

Here is what you need to deliver to raise a top round at a given stage in the CEE region

Once again, we asked VC funds* investing in the CEE region about their requirements for good and great deals. Below they are marked as “Base” deals and ”Top” deals (because no one does bad deals 😎).

⚠ Disclaimer: the numbers are opinion-based

Here is a link to a high-quality graphic🎨


*Thanks to our colleagues from 10xFounders, Credo, ff VC, Kaya, Market One Capital, PortfoLion, VentureFriends & other funds, who agreed to share their opinions and insights with us

What is the METER methodology?

📏 METER stands for the most important areas that VCs assess before investing. Here you can watch the presentation by Tomasz Swieboda, but in short, it covers:

  • 🗾 Market size. The bigger, the better. Different VCs have different requirements depending on their fund size. But as a rule of thumb, small VCs get excited by $1B TAM. Bigger VCs like Sequoia are looking for $5–10B.
  • 💰 Earnings. At the earliest stages, VCs look at your revenues and compare them to other deals that they’ve seen. As a founder, you probably have heard that you need EUR 1M ARR to raise good Series A — there are benchmarks for most of the rounds. Make sure to keep your revenues at proper margins — a healthy SaaS margin is around 80%.
  • 🤷‍♂️ Team. This point is obviously difficult to quantify and assess objectively. Some VCs are excited by serial entrepreneurs, some by top product managers, and some by the best people worldwide in a given technological field. The similarity is that they need to see the archetypes of the founders that they like to get excited about the deal. Don’t forget about the team you hire — VCs want to see super-stars joining you at VP/Head of X levels.
  • 🚀 Exponential growth. VCs are looking for hockey sticks. They are difficult to find, but if you went from 0 to EUR 1M ARR in 12 months, you are more likely to spark the interest of investors.
  • 🧲 Retention. The users’ stickiness is one way to measure how great your product is and whether you have a product-market fit. You will have different benchmarks depending on whether you go B2C or B2B.

What are other things that do MATTER?

This list could be quite long, but let us focus on the 3 most important things that weren’t covered by METER.

  • 📊 Unit Economics. Know your CAC, know your CLTV, and make sure that they make sense. Preferably keep CLTV/CAC around or above 3.
The Importance of CAC Payback in Today’s Market Environment
  • 🔥 Burn multiple & Capital Efficiency. This almost forgotten metric becoming important again is probably the biggest change we’ve seen vs 20–21 years. Keep your burn multiple lower that 2, and if that’s currently our of your reach, make sure to show a clear view how you’re going to get there in the future.
Burn Multiple by David Sachs
ESOP Guide from Index

Inovo VC backs early-stage, post-traction startups that can grow 100x. We partner up with ambitious founders like Stefan from Booksy, Maja from Zowie, or Marcin from Spacelift. We invest between €0.5–4m in startups from Poland and the CEE region.

For more information visit: inovo.vc

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Tomasz Swieboda
Inside Inovo

Managing Partner @ Inovo Venture Partners. Ex-Penta and ex-Rotschild, 10+ years investment experience, including early stage investments since 2012.