No longer ‘one to watch’, SEE is a region to act in.
Dealroom’s Startups & Venture Capital in South Eastern Europe 2022 report paints a picture of a giant leap for the oft-overlooked region. For both tech companies and investors the promise of amazing potential proved true.
VC funding in South East Europe has grown 80 times in value since 2012, and LAUNCHub Ventures have been part of that process from the onset as one the first to focus on the underserved region, and not only on the home ecosystem.
Back in 2012 LAUNCHub Ventures started with €9 mln to grow into one of the largest funds serving the region with a €74 million warchest and over €100 million assets under management.
Data source: Dealroom, 2022
For the same period SEE startups registered 49.9x growth in combined enterprise value, at breathtaking speed compared to CEE (9.1x) and Europe (12.1x).
Has South East Europe caught up with the rest of the continent? Not quite. SEE’s enterprise value still constitutes a tiny fraction of European numbers. Behind it is, though the explosive growth tells a story of some region’s ecosystems maturing and others on fast track to make up for the years of arrested development.
6 signs SEE is no longer one to watch, it is a region to act in.
1. Pace of growth
The enterprise value growth of SEE startups outpaced the European average almost twice over the 5-year period. Since 2017 SEE’s tech companies both EV growth and investments soared 6 times.
Data source: Dealroom, 2022
Data source: Dealroom, 2022
2. SEE has been attracting significant interest from abroad
European and American Investors, treading water not long ago, are now flocking in numbers. Although with local and regional money still having precedence over European funding, ditto American and Asian money. Still, the caliber of international investors SEE attracts is promising, and this year’s H1 alone almost matched the 2021’s $1.5 billion in foreign investment in tech startups. Names such as Insight, Sequoia, and Lightspeed have pulled deals.
Data source: Dealroom, 2022
3. Global-first attitude
Aiming at global markets appears to be the only viable direction for the region’s tech. Fragmented and small markets in SEE push the ambitions of startups to continental and global reach from the onset. 70% of SEE startups EV comes from SaaS, Fintech and Automotive, these are companies that do not act locally. They serve the world’s demand for Enterprise software. Although with a strong tradition in bootstrapping, once backed by investors many of them relocate closer to their main markets to European and American tech hubs, while keeping sizable portions of their teams based at home.
Data source: Dealroom, 2022
4. Unicorns R Us, and giving back
The region is the birthplace of 9 unicorns to date, with a plethora of soonicorns breathing down their necks. Companies in SEE are gaining value twice as fast nowadays than ten years ago. Outliers make the most of the region’s weight in value — SEE’s unicorns comprise 48% of it, with an overspill effect already making the impact visible.
5. Early-stage, the latest attraction
Beyond the megarounds dominated by international investors, both regional and overseas VCs are increasingly looking for opportunity in early-stage businesses. Seed and Series A investments tripled since 2017. Investment ecosystems in Romania, Greece, Bulgaria, and Slovenia are maturing: local startups have a great chance of getting backed by VC early on.
6. The unexplored welcomes pioneers
The region is booming. Yet still pronounced is the disparity between EU-members and ecosystems outside the EU. Case in point is Croatia’s fairly recent accession to the European Union: although 10 years behind neighboring Slovenia and 6 after Romania and Bulgaria, the EU membership gave the country a head start. Producing two unicorns and registering the highest growth in enterprise value over the 5-year period, Croatia’s success story is a tale of two outliers in Infobip and Rimac, unicorns that are shaping the tech landscape of the Adriatic country.
At the other end of the spectrum, Bosnia and Herzegovina, North Macedonia, Albania, Montenegro, and Kosovo lag behind while Romania, Greece and Bulgaria amount to 70% of SEE enterprise value. A startup in Kosovo is 3 times less likely to get VC-backed than a Bulgarian company, catered by the region’s record number of local funds. West Balkan subregion’s take-off is happening as we speak though and ecosystems are registering high activity, with the likes of Serbia on track to catch up with the neighbors.
Tellingly, it’s early-stage investors that rush to bridge the difference between the frontrunners and challengers in SEE. VC funding in the region tripled over the past 5 years. Institutional investors in EIF and EIB have been very active in the region after the success of ‘pilot’ efforts in Bulgaria. While the global economic climate has cooled, and most of world’s tier-one funds playing the waiting game, SEE has the talent and financials to grow at pace, though probably slower in the next 2 years.
The Startups & Venture Capital in South Eastern Europe 2022 report premiered November 8, 2022 in partnership with Bulgarian Private Equity & Venture Capital Association — BVCA, EIF, EIB, Dealroom.co
