CEE Rounds Review #3 AUG’20

With summer almost coming to the end, it feels good to be back in the office. September was always special, as it marked (at least for me) the beginning of the “VC Season”. Usually, the calendar was full of conferences and travel. In the “Year of Remote” it has a different feel to it. We will see how the rest of the year plays out.

After a pretty strong July with 19 round announcements, I was anxious to check the data for August. My intuition was that we are going to see fewer rounds being announced.

In the last few weeks, I had several conversations with fellow VCs in Turkey and I have decided to included Turkey in the Rounds Review. This means that from August 2020 I will be tracking VC round announcements across 11 CEE countries.

I’m still trying to find the right format for this review so please bear with me for a few more months. I would like to get to a clean and digestible form for quick reference. With each review, I’m picking up comments from other investors on my email list and I’m trying to incorporate that feedback. For the next review (Sep’20) I will try to introduce a quarterly view of round announcements and graphs to visualise trends.

Again as I reminder why I’m doing this, please visit my primer post. Any additional feedback will be highly appreciated.

Now let’s look at August 2020 numbers:

  • 11 rounds announced
  • ~ €19M raised (all rounds converted into EUR)*
  • The largest round was raised by Infermedica (announcement) ~ €9M**
  • Outside of local VCs I only picked up EBRD (London) as an international VC participating in a CEE round
  • Turkey was the most active country with 4 rounds. Lithuania picked up 3 rounds.

*as of the date of announcement
*Innovation Nest portfolio company

Announced rounds, captured by Crunchbase
Investors who participated in at least one round announced in August’20
Country ranking

My comment to August numbers

We are continuing to see a decline in round announcements. On a YoY basis, we are down ~75% (45 last year in August). This can be justified by saying we are in the middle of a pandemic but on the other side in 2020 there are more funds with more money than a year ago. CEE has seen an explosion in the number of VC funds raised. On a local level, it feels that the funding gap has been filled. There is an abundance of seed funds, and international Series A funds are actively scouting for deals in the region, yet we are not seeing that there are more rounds being raised.

It still might be a valid argument that rounds are simply not being announced anymore and that sources as Crunchbase and Dealroom have lost a chunk of their core value.

I’ve reached out to some fellow VCs in the region to double-check these numbers and it seems that data source quality might be a significant issue. Maybe there is a better way to track these rounds and work on more accurate data. Anyway, as I mentioned a couple of times before — this data is only directional to show market sentiment. In other words, I’m OK with it being not 100% accurate.

I’ve also reached out to Enis Hulli @ 500Startups to say a few words about Turkey to give a local context to the numbers.

“Despite the limited access to VC funding, Turkey has experienced immense liquidity from technology-related M&A from a diverse pool of acquirers coming for teams, products or just the market, either from East or West. Despite a slow August, I believe Turkey is en route to more than double what was invested into startups last year — which is quite impressive given all that happened this year.”

I would also like to mention Krzysztof and Tomasz @ Inovo.vc who have done a great job mapping the Polish VC Ecosystem. Here is the link to the original post -> https://medium.com/inside-inovo/the-ultimate-map-of-polish-funding-ecosystem-80b2d3bd89be and a corresponding landscape map.

Credit goes to Inovo.vc

From an insider point of view (I’m based in Poland) there is definitely a new level of competition on the Polish market. As I wrote back in June, Poland had the highest number of active funds in the region. There is not only an abundance of local capital but also more and more international capital — even at the earliest stages. My prediction is, that we will see a similar pattern emerge in other CEE countries. Estonia is also booming with new VC funds, especially the last 2 years were many EIF backed funds were announced.

On that note, I would also like to include a “call to action” for emerging fund managers in CEE. If you are managing your first fund — I would like to talk to you. With so many new funds across CEE it would be interesting to learn about their investment strategies, internal operations, dealflow generation. I guess there is a lot we could learn from each other and shorten the learning curve.

I’m a Partner at Innovation Nest, a seed VC fund focused on B2B Software. Helping SaaS founders with growth strategies and tactics.