- VCs have flocked to startups in Central and Eastern Europe for efficiency and technical talent.
- The region is experiencing rapid growth, with VC funding increasing 7.6x from 2017 levels.
- Investor enthusiasm remains high despite political and economic concerns.
In 2017, Bence Jendruszak secured the first round of funding for fraud prevention startup SEON. The co-founder and COO raised about $55,000 and used that investment to cover his 9-month salaries for 4-5 software developers.
Five years later, the Hungarian startup has raised a whopping $94 million Series B round at a $500 million valuation led by IVP, even amid highly controversial parliamentary elections.
The success of Central and Eastern European start-ups like SEON has drawn investors to the region, with annual VC funding increasing 7.6x compared to 2017 levels, from $737m to $56m. billion dollars. The rest of Europe, according to a Dealroom report. According to World Atlas, Central and Eastern Europe includes countries such as Czech Republic, Hungary, Slovenia, Romania, Russia, and Ukraine.
Investors like Lightspeed partner Anoushka Vaswani told Insider that the region has become a hotbed for up-and-coming tech startups.
“There is a lot of incredible talent in the region,” he says, having invested in startups in Central and Eastern Europe, including Lithuanian clothing market Vinted and Copenhagen and Romania-based customer support startup Fullview. Mr Vaswani said.
According to Vaswani, Central and Eastern Europe’s potential begins with a strong surplus of engineering talent. The region’s technological prowess is also no coincidence, but the result of long-standing cultural trends, Ondrej Bartos, general partner at Credo Ventures, told his Insider.
“Eastern Europe was a former communist bloc, and during the communist era, one of the dangers for communist regimes was humanitarian subjects,” Bartos said. We actually have pretty good technical education in the region because we encouraged technical majors such as academics.”
In addition, Central and Eastern European start-ups are often more capital efficient due to lower labor and living costs, an advantage that founders like Jendruszak leveraged directly.
“combustion [$55,000] You could never do that in six months or more with four or five developers in London or New York,” says Jendruszak.
And flexibility, a key trait for founders who are constantly adapting, is second nature to entrepreneurs in Central and Eastern Europe, says Co-Founder and Head of Revenue of Grammarly, an online writing assistant company. says Max Lytvyn.
“This is what happened in Ukraine in the late 80s and early 90s. Every five years is somehow different from the previous five years,” Litvin said. “It just builds a lot of adaptability and different levels of risk tolerance.”
Optimism Despite Political and Economic Uncertainty
Investor concerns about political and economic concerns, Vaswani said, have led even early-stage start-ups in Central and Eastern Europe to have global clients due to the smaller market opportunities in the region, and the geography. is often mitigated by the fact that the potential risk is minimized.
“Especially with my focus on growth-stage investments, it is very important to have the DNA to go commercially across Europe and to enter the US,” said Vaswani. increase.
According to Jendruszak, many start-ups are mitigating region-specific risks by locating their holding companies outside Central and Eastern Europe, such as in the United Kingdom.
As for remaining concerns, IVP general partner Eric Liau said investors, like other investment considerations, should educate themselves by talking directly to experts and founders in the region. By educating, it says we need to weigh them.
Nonetheless, investors and founders say the region has made monumental progress in innovation, and they look forward to seeing what’s to come.
“There are role models and good examples of companies that have done it, which brings more motivation and incentives,” says Bartos. “This proves that great companies can be built anywhere in the world.”