Join our mailing list to get updates about Change Ventures, our portfolio and our Baltic Startup Funding Report
Oops! Something went wrong while submitting the form.
Change Ventures Baltic Startup Funding Report is a semi-annual publication of detailed data about funding rounds for startups in the Baltics, including companies with HQs elsewhere but with a dominant base in Estonia, Latvia or Lithuania.
Part of Change Ventures mission in the Baltic region is to bring more transparency to the investment landscape. To assemble this report, we have tracked all the venture funding rounds in the region and reached out to founders to gather, in confidence, valuation data for pre-seed and seed rounds. As a result, we have transaction data for 58% of the pre-seed and seed rounds closed during the past 24 months, so now founders and investors can understand where they stand relative to market transactions. In addition, many founders have shared other data about round mechanics.
We are grateful and honored to be trusted by founders with this sensitive data. Thanks also to Startup Wise Guys, Overkill Ventures and BuildIT for helping to ensure we have the complete list of investment rounds.
During the early pandemic in H1 2020 it is clear that startups that were able to raise extensions and bridge rounds did so (pre-seed rounds rose), while in H2 2020 only the best teams were able to raise pre-seed rounds. H2 2020 saw a record number of seed and A rounds with Estonia especially active, including quite a number of teams that skipped pre-seed rounds altogether.
Capital raised grew across all funding staged in H2 2020, hitting over €330M. Even pre-seed capital raised grew, though the number of pre-seed rounds dropped significantly during H2 2020 as round size grew. Seed, Series A and growth capital raised grew by 55-70% across all those stages, demonstrating the growing maturity of the startup ecosystem in the region.
After a dip in H1 2020, round sizes have grown again significantly in H2 2020. Clearly during the first half of the year, no doubt influenced by the early panic of the pandemic, startups raised much smaller pre-seed rounds, many as extensions or bridge rounds. By the second half of the year it was clear that this was an exception, as round sizes bounced back and exceeded previous records.
Startups that were able to raise took advantage of the aggressive venture capital market to grow their runway. Pre-seed rounds especially are back at or above H2 2019 levels.
The typical pre-seed round pre-money valuation now exceeds €2M with the bottom quartile rising by 50% as pre-seed investors became much more selective and funded many less rounds during 2H 2020. The best pre-seed startups command rounds priced at €3M or more. For the purpose of comparing valuations, we have excluded accelerator-financed rounds, which tend to include in-kind services and smaller rounds.
The record number of seed rounds closed during 2H 2020 saw rising valuations again with the median exceeding €8M. The difference between upper and lower quartiles remains similar, at about €4M. In combination with the rising number of rounds, we believe that this is a solid indication of the maturation of the ecosystem.
Revenues have receded as a driver of fundraising for pre-seed rounds as the lower quartile hit zero and the median dropped again to below €4,000 in monthly revenues. Given the significant reduction in pre-seed rounds closed, this indicates that those startups who were able to close rounds more often raised factors other than revenue traction.
For seed startups the first quartile and median revenues at the point of raising a round also dropped, pointing to revenue traction also being of diminished importance. The top quartile grew though, indicating the growing ability of the most successful startups to generate meaningful revenues already at the seed stage.
Change Ventures has also gathered details of the legal investment form and round mechanics for many of the region’s pre-seed and seed rounds closed during the 2 years through end 2H 2020.
While convertible notes are still common at pre-seed, it looks like investors secured direct equity rights more often in the latter half of 2020, perhaps reflecting re-capitalisations and restructuring more often. Equity deals are still the majority of seed rounds.
While a small proportion of notes were uncapped until the H1 2020, during H2 2020 all of the deals Change Ventures reported had caps.
Valuation caps keep rising along with the equity round valuations, while the mean discount rate dropped a little to 14% during 2H 2020.
Majority of startups are raising capital through their entities registered and headquartered in the Baltics.
While the vast majority of Baltic startups are headquartered locally at the point of their pre-seed round, about 40% flip by the time they raise their seed round, while that grows to about 70% at the point of raising Series A funding. It is important to note, however, that during the past year the number of companies remaining headquartered in the region after the Series A seems to be growing and trailblazers like Bolt are showing that this is possible.
In the Baltic States we continue to see a bifurcated market where the Estonian ecosystem is more mature than those in Latvia and Lithuania. During the second half of 2020 the Estonian lead in seed rounds extended as 22 of the 28 seed rounds were Estonian. The growth in top quartile seed round sizes and valuations is primarily driven by larger Estonian pre-seed and seed rounds. The exploding business angel ecosystem in Estonia has a lot to do with the much larger pre-seed rounds but also to the continued growth in seed rounds as some Estonian “super-angels” now lead seed deals themselves directly.
In terms of number of pre-seed funding rounds closed, Estonia and Lithuania are in the same range, with Latvia lagging behind, though not by much. At the seed stage the differences become stark, with Estonia seeing many more seed rounds and strong growth in the number of rounds, dominating the region in 2H 2020.
Change Ventures will be continuing to gather confidential data about the funding rounds taking place in the Baltic States, releasing a report every half year. We appreciate founders' trust placed in us to keep valuation and other data confidential.
For deeper dive in the Baltic Startup ecosystem and more insights on top deals, startups to watch etc, we advise you to also sign up for Baltic Startup Scene Report 2019/2020 (launching in mid-December) developed by Startup Wise Guys and EIT Digital.
Change Ventures Baltic Startup Funding data set (1H2019 - end 2H 2020)
382 funding rounds registered
“Baltic startup” defined as a company with a highly scalable product-oriented business model (or the potential to become one) that has at least one Baltic founder (or firmly established immigrant) and active operations in one of the Baltic States.
Valuation data based on confidential information shared with Change Ventures by founders for 199 pre-seed and seed funding rounds, or 58% of all the rounds at that stage during the 24 month period.
Massive thanks for the hard work in pulling together the data for the first report goes to Linda Vildava, our awesome summer intern in 2020, and Gabrielė Poteliūnaitė, our Associate, for the update. Without them this report would not exist.
Baltic founders, want this report to get better next time? Then please share your detailed round data with us. We promise to keep it confidential.
