2023 was a difficult year for technology startups around the world, with venture investment declining in Eastern Europe. However, the region is on track to recover strongly on the back of expanding ventures in AI and other innovative areas in the green and digital transition. Poland, Greece, Lithuania, Czech Republic, Estonia and Romania were the top performing countries.
The Eastern Europe Venture Report was produced by How to Web, a Romania-based technology connectivity platform focused on CEE, and reports on the performance of all 19 countries in Eastern Europe that completed venture deals in 2023. I investigated.
The report notes that the volume of venture deals has fallen by half worldwide compared to 2022. Accordingly, investment volumes in Eastern Europe fell by 57% from €4.3 billion to €1.9 billion.
However, a broader perspective suggests that the overinflated market will have corrected itself by 2023. Investment volumes in Eastern Europe in 2023 were still 18% higher than in 2020. There were also signs that Eastern Europe's startup ecosystem was “maturing, with a shift in focus towards sustainable business models and profitability,” the report said.
For example, late-stage investment in CEE was strong in 2023, with €442 million in Series A and €926 million in Series B funding. Series A is typically the first round of venture capital funding where a startup company begins to demonstrate how it operates. You will monetize your product in the long run. A Series B is expected to involve a larger capital investment as the startup prepares to expand.
One assumption is that Western investors who bought Series A and B tickets thought that Central and Eastern Europe could offer a little more stability, less valuation inflating, and the potential for high-growth, profitable startups. It means that he believed it.
Greece and Poland lead the championship
These follow-on rounds, i.e. additional investments in previously backed startups, accounted for 79% of the total investment, amounting to nearly €1.4 billion.
The countries that contributed the most to this change were Greece (421 million euros), Poland (230 million euros), Lithuania (199 million euros), Estonia (134 million euros) and the Czech Republic (119 million euros). million euros) and Romania (97 million euros). This represents 83% of the subsequent round's investment.
The same six countries accounted for 84% of total investment in Central and Eastern Europe, with a total of 1.56 billion, followed by Poland (466 million euros), Greece (423 million euros) and Lithuania (214 million euros). We contributed 1 million euros. , Czech Republic (€173 million), Estonia (€158 million) and Romania (€130 million).
The report also analyzes 20 Eastern European companies that raised the largest venture deals in 2023. The deals of these 20 companies were found to account for almost half of the total investment amount, amounting to nearly 840 million euros, with the following companies in the top five:
Eleven Labs (€89 million, Poland), PVcase (€89 million, Lithuania), EdgeQ (€75 million, Greece), LucidLink (€69.8 million, Bulgaria), Causaly (€60 million, Greece).
AI and innovation
The top 20 deals highlight that AI startups were an important exception to the decline in total investment in 2023. While most other companies are facing a tough funding environment, many of last year's winners are in the AI space, including Eleven, a Poland-based company specializing in AI speech generation and text-to-speech software; The lab is leading the way in this field.
According to the report, Eleven Labs not only won the biggest venture deal of 2023, but also achieved unicorn status in just two years, becoming a “beacon of inspiration across the startup world in Central and Eastern Europe.” That's what it means.
The company's rapid growth has proven that building a billion-dollar business and changing the status quo can be accomplished in an incredibly short period of time. The report also predicts that its success will prompt investors, especially the aforementioned Western late-stage funds, to seek out more promising startups in the region in the coming years.
And AI wasn't the only innovative industry attracting significant investment. Take a look at other startups involved in the top five largest venture deals. PVcase is a solar energy company, EdgeQ is his 5G microchip designer, LucidLink is a data streaming service, and Causaly is a biotechnology company.
In fact, more than half of Eastern Europe's investments in 2023 will be in energy (€305 million), health (€169 million), heavy industry (€159 million) and big data (€149 million). ) were associated with companies related to six industries. ), Cybersecurity (€136 million) and Browser developer tools (€129 million).
Such investments can be strengthened by instruments such as the Bulgarian Recovery Equity Fund of Funds (REF). REF aims to reinvigorate the country's venture business through three specialized investment windows: innovation, growth and infrastructure.
The documents reflect broader efforts in the region to strengthen economic resilience while promoting sustainable development and the green and digital transition, the report said. At the same time, they often rely primarily on EU institutions and need to embrace more private sector investment if this is to be a long-term commitment.
Looking to the future
While it's clear that 2023 posed significant challenges for startups around the world, How to Web's report claims that “Central and Eastern Europe appears to have weathered the storm with more grace.” Therefore, the remaining corrections in the market, combined with the momentum generated by last year's success stories, could result in a “healthy 2024,” the report said.
Additionally, the startup ecosystem is predicted to continue maturing with increased international investment and an increase in mega rounds. This could facilitate a shift from a regional system to a “Nordic-like system where companies and products are global from day one,” the report said.
Most importantly, we are building a strong team in Central and Eastern Europe, including many founders who want to “change the status quo in major industries, challenge the biggest technology companies, and have the biggest impact on our lives.” The technology talent base continues to evolve. With such “tremendous opportunities” in many innovative fields, especially those related to GenAI, the next few years could see “a wave of industry-leading startups emerging from the region.”
Read the full report for more details and analysis. here.
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