Tag Archive for: venture capital investment

Revving up the startup race: venture capital funds slam the brakes on deals, funding only the most promising!

In the fast-paced world of startups, the engines seem to be losing steam as Venture Capital Funds tighten their grip on the accelerator. Based on the latest data (end of October 2023) from Pitchbook, the funding landscape is experiencing a notable shift – which was initiated in the second half of 2022 – with a reduction in the number of completed deals.

VC funds slam the brake on deals

VC firms are becoming increasingly discerning, carefully selecting only the most promising and deserving startups to support. This change reflects a growing emphasis on quality over quantity, as funds concentrate their resources on backing the truly exceptional companies that have the potential to make a lasting impact in the market.

Nr. of CEE tech deals until 31 October

The current fiscal year has witnessed a notable downturn in the completion of venture capital deals, marking a considerable departure from the upward trajectory observed since 2016. This extraordinary reduction in the volume of completed transactions, when evaluated in the context of the past decade, highlights a momentous shift in the market dynamics. Nevertheless, it is crucial to contextualize this development, as comparable trends have emerged across both Western European and American markets.

Nr. of WE tech deals until 31 October

Nr. of US tech deals until 31 October

While the magnitude of the decline may appear alarming, a broader perspective reveals a more nuanced picture of the prevailing landscape. However, one thing remains certain: the startup race is revving up in 2023 and only the most promising contenders will secure the fuel they need to accelerate towards success.

Growth trends – number of tech deals over the past years

Over the past years, the Central and Eastern European (CEE) region has exhibited a consistent and robust growth trend. As evidenced by the accompanying table, this growth trajectory has been remarkable and sustained, extending until the first half of 2022, with positive year-on-year growth figures recorded from the second half of 2017 until H2 of 2022. It is worth highlighting that the CEE region’s growth rate has demonstrated resilience amidst the challenges presented by the COVID-19 pandemic in 2020, setting it apart from the tech venture capital markets in Western Europe and the USA, which experienced a slight decline during this period. Moreover, it is noteworthy that even prior to the pandemic, the tech venture capital markets in Western Europe and the USA exhibited a slower rate of increase when compared to the thriving CEE venture capital market.

Nr. of CEE tech deals

Nr. of WE tech deals

Nr. of US tech deals

The COVID-19 pandemic, however, proved to be a notable turning point in the trajectory of recent trends, particularly within the CEE venture capital market. Following a period of significant growth, the pace of expansion began to be moderate, contrasting with the Western European and US markets which experienced a remarkable resurgence, with the US market achieving an impressive 31% growth rate within a year. Subsequently, all three markets experienced a considerable slowdown, culminating in a decline six months later. Notably, in 2023, the CEE market experienced the most pronounced downturn following its previous period of robust growth, with only a fraction of the deals being completed compared to the previous year.

The impact of downturn across all stages of VC cycle

The downturn has inevitably impacted all stages of the venture capital cycle. However, it is important to note that the severity of the impact varied across different stages. As depicted in the graph below, it becomes evident that venture capital firms are not really experiencing a shortage of funds. Rather, they have adopted a more discerning approach, exercised caution and carefully evaluating investment opportunities in startups. Consequently, the later stage, which typically requires a significant infusion of capital, experienced a relatively lesser decline compared to earlier stages.

Nr. of completed tech deals in CEE

Venture capital firms are adopting a more selective approach, prioritizing investments that exhibit strong growth potential, sustainable business models, and a clear path to profitability.

Implications on capital investments and average deal sizes

Following an analysis of the volume of successfully closed transactions, it is now imperative to address the implications of the venture capital market downturn on capital investment. The presented graphs indicate a gradual return to pre-COVID levels of capital investment in both Western Europe and the CEE region. Nevertheless, it is important to acknowledge that the extraordinary growth observed in 2021 and 2022 is unlikely to be replicated. As such, the market is now undergoing a process of normalization, marking a transition from the extraordinary highs observed in the previous years.

CEE: Capital investment adjusted by inflation

WE: Capital investment adjusted by inflation

When considering investments across different stages, there are slight differences between Western Europe and the CEE region. In Western Europe, a unanimous peak was observed in 2021, followed by a gradual and subsequently rapid decline, except for the seed and later stages. Conversely, the CEE region exhibits a less predictable and stable pattern.

The provided tables reinforce the notion that VC firms are not experiencing a shortage of capital, albeit accompanied by a decline in the number of investments. This assertion is supported by the sustained value levels observed in early-stage investments in the CEE region, while angel and accelerator investments didn’t experience notable decreases either. It is worth noting that although later stage investments also declined, such figures can be disproportionately influenced by one or two outliers characterized by exceptionally high investment amounts. In contrast, preceding stages exhibit a more substantial sample size of deals, with fewer extreme values.

Average deal size adjusted by inflation

So, what key insights and strategic approaches should startups be aware of considering the current circumstances?

  1. Firstly, they should be prepared for an extended timeline in securing funding. Building and nurturing relationships, as well as leveraging networks, have become increasingly valuable assets in the fundraising process. Startups must prioritize cultivating strong connections with potential investors, industry experts, and strategic partners to enhance their credibility and access to funding opportunities.
  2. Furthermore, it is crucial for them to be proactive in managing their financial situation. If a startup finds itself in dire need of funding, they should be prepared for the possibility of a downround, wherein the valuation of the company may be lower than previous investment rounds. To mitigate this risk, startups should focus on preserving cash, extending their financial runway, and pursuing organic growth opportunities.
  3. In this competitive landscape, startups should also reassess their market strategy. It is essential to not only survive but also outperform competitors. By effectively positioning themselves in the market, startups can attract and retain customers, thereby gaining a competitive advantage and potentially expanding their market share.

In the race for startup success, the checkered flag is within reach. As the venture capital landscape shifts gears and funding becomes more selective, only the boldest and most innovative startups will steer their way to victory. So buckle up, rev your engines, and accelerate towards greatness!

 

Continest successfully raised EUR 6.5M VC funding round

Our Client Continest Technologies, developing and manufacturing innovative, foldable modular containers has received a total of HUF 2.4 billion (~ 6.5M EUR) in a syndicated investment round with the participation of DBH, Focus Ventures and Hiventures to support its growth ambitions.

The current investment round is aimed to further boost Continest’s international business development and expansion, as well as to support the establishment of a new manufacturing unit to increase production capabilities.

Continest debuted on the internationally recognized Sziget Festival in Budapest, Hungary in 2017 with their mobile infrastructure solutions and 2 years later, in 2019, the entire service facility of ski world championship in Sweden was built by their containers. Beyond the purpose of office and event utilization, they are also developing tailor-made solutions for defence and medical industries (mobile COVID-test laboratories). Due to its foldable nature, the sustainable Continest innovation makes the process of logistics 80% more cost-efficient.

To accelerate industry-specific product developments, enter new European markets and support growth ambitions, Continest successfully raised 4M EUR venture capital in 2019 from DBH. Continest Technologies, founded in 2019, achieved a turnover of more than HUF 820M already in 2020, which dynamically increased to HUF 1.6 bln in 2021. 

The global market developments of recent years and the increasing demand for sustainable development have led to global demand for temporary infrastructure solutions. That is why we see the next few years as being the decisive years for foldable modular container technology. Together with our new and existing capital investors, we have the opportunity to scale up and enter new markets with a very stable financing base, further contributing to domestic exports. The construction of our number two plant, which will be inaugurated in September this year, will open up the opportunity to produce in even larger volumes and to further develop our manufacturing technology said Dániel Tegzes, strategic director of Continest Technologies.

In 2021, the company inaugurated its first container factory in Székesfehérvár, Hungary, which is currently capable of producing 1,000 foldable containers per year and provides jobs for 53 employees. In the future, the Continest factory will use Industry 4.0 solutions, and the company’s state-of-the-art sheet metal plant and welding hall will be supported by robot technology for efficient production. The company is also planning a significant expansion of its workforce, with nearly 50 new jobs to be created by 2022. The second plant will also offer the possibility of in-house surface treatment of containers, and the annual production of containers will reach 3,000 units.

The company is currently working on developments such as the fully equipped kitchen container, cargo containers, which are also suitable for freight transport. Another ongoing project is the vertical farm container, which is being developed in partnership with Green Drops Farm and Baptist Relief Services to create a hydroponics-based crop production system without the need for topsoil.

In addition, Continest is continuously developing its containers for medical and defence use. In May 2022, the Hungarian Defence Export Agency signed the first cooperation agreement with the company, under which the military technology agency will assist Continest in international marketing and distribution.

“It was a long journey with full of challenges, but there was no doubt about the success with such a great team!”said the transaction advisory team leader of Continest’s, Lénárd Horgos, partner of Absolvo. “By nature, venture capital is not primarily focused on investing into hardware and manufacturing companies, but Continest is a particularly good case study on how to grow a manufacturing company with rock-solid commitment to a 1+ bn business in a few years’ time and make it an attractive target for venture capital to invest. The Continest success story reflects the exceptional combination of manifested, intensively growing global market potential, a truly innovative and well-customizable technology and a committed, ambitious and visionary management team which is already proven to move its company forward. It was a great honour for us that – after the first successful investment round in 2019 – our team was trusted again to support Continest in preparing, negotiating and closing its current investment round. We are delighted to take part in achieving the current milestone but Continest’s growth journey is not yet over; moreover, I feel confident that a new Hungarian success story is just being born!” – added Lénárd Horgos.

 

Source: official press release

Scaling internationally from CEE – first-hand experience from 500 Startups

MEETUP – If you want to build a successful startup / scaleup, raise capital to support your ambitious growth, you need to think globally, enter international markets and face a bunch of tough challenges leaving CEE. We will proudly host Enis Hulli from the most active global early stage VC firm 500 Startups and take his personal advice based on his deep experience in supporting CEE/SEE startups entering the global playground. When is the right time? What are the main risks and challenges on scaling beyond CEE, incl. founder mindset, sales, marketing, hiring, organization, culture, etc.?

The realistic timeframe of scaling vs. VC investment horizon

MEETUP – After fundraising, the growth expectations from VCs put a huge pressure on founders. They have to deliver profit, prepare for exit, close the fund; but what is the realistic timeframe of scaling, how does it fit into VC lifecycle, how do they handle the conflicts of time horizons?

Conversific successfully closed EUR 2M late seed VC funding round

Our Client, Conversific, a Hungarian ecommerce analytics tool developer, has just closed a late seed round of EUR 2M with Hungarian financial investors, Bonitas and Hiventures, after a successful seed funding round of EUR 0.5M in 2018 from Hiventures and the founder group Innonic. In the last transaction Conversific was advised by Absolvo Consulting.

The company offers ecommerce reports and benchmarks, data insights, as well as product and consumer analysis. It has 20k users from 180 countries, more than 90% of the sales is generated internationally, out of which 60% in the US, UK, Canada and Australia.

The recently raised capital will be used for an international market research, subsequent innovation and further product development as well as sales & marketing investments to support international expansion, the co-founder and CEO Norbert Bodog explained.

The management is regularly approached by investors with buy-out intentions; however, the owners would only consider a full exit once the company becomes more sizeable, Bodog pointed out.

Conversific has been generating revenues since its first year of operation, and the annual turnover has increased tenfold since the seed funding. According to their financial plan, Conversific will reach the EUR 3M ARR (annual recurring revenue) point by end 2023, he added.

Conversific ranks first among the analytics tool on Shopify, which position the company aims to protect with its variety of features, as well as its freemium and monthly subscription-based SaaS pricing model.

Conversific’s main target group are micro and small sized companies, with up to 10-50 employees or around EUR 1M to 10M annual turnover, Bodog said.

The COVID-19 pandemics has not affected the company in a negative way, as operations easily moved to a remote working environment, he said, adding that on the other hand, global ecommerce growth has accelerated due to the lockdowns, that has a significantly positive impact on Conversific too. 

Congratulations to the Conversific team, thank you for the effective co-operation and we are happy and proud of being part of your success story! We wish all the best and good luck in achieving your ambitious goals!

German VC ecosystem and preparation for a Series A round

MEETUP – In CEE with the heavily funded local VC funds, you can easily get seed investments with even less impressive results and “safe” ambitions. Raising a next round (esp. with an international investor) may be hard after such way of funding. How to prepare for a REAL Series A round, what steps to be taken to close a successful deal with international investors? Why is it more likely to get funding from local / CEE VCs than e.g. German ones? How they see the CEE startup ecosystem, how to build on our strengths and “reposition” ourselves?

Meetup with Speedinvest & MOC: Valuation, terms, VC activity in COVID times

MEETUP – Lockdowns, supply chain issues, projects on-hold, strategy redesign, cost restructuring etc. – the majority of business players and startups are affected around the world, regardless which side of the table they sit. If you are building a startup / scaleup and you plan to raise a new VC round, you might have a plenty of questions: so what’s now? how? where from? what terms? Join us and raise your questions on 28 May at Equity Thursday online meetup directly to Jacek Lubinski (Market One Capital) and Alex Zhigarev (Speedinvest)!

Logiscool accelerates international growth with a 3.5 million EUR investment

Logiscool, an international leader in coding education for children and teens, raised a 3.5 million EUR investment from Euroventures, one of the leading independent VC and PE firms in the CEE region. The current investment gives a significant boost to our Client Logiscool’s further international expansion and building its franchise network on the new markets.

Logiscool was exclusively advised by Absolvo’s growth financing team in the transaction process.

A Logiscool, a befektető Euroventures és a tranzakciós tanácsadó Absolvo csapata a tőkebevonási tranzakció zárását ünneplik

Logiscool launched its fun-based innovative coding school in Hungary in 2014, providing programming and digital courses and camps for children aged 6-18. Today it is present in 16 countries and over 100 locations, teaching more than 60,000 students. The rapid growth is the result of the introduction of the franchise model, which enables building the school network dynamically worldwide.

The success of the Logiscool method, which has ever-growing international popularity, has several components. Its modular curriculum is composed of more than 600 lessons allowing students to continuously improve their coding skills over several years. The company’s proprietary educational platform “grows” together with students’ age and knowledge level giving them the feeling of long term, successful achievement. The young and enthusiastic trainers make the courses friendly and inspiring to the students.

“We believe that acquiring the knowledge of the future can be enjoyable and fun. At Logiscool kids can learn the basics of logical thinking in a fun-based way, improve their problem-solving skills, understand complex processes and in later life they can use that knowledge in almost any workspace” – said dr. Anita Breuer, co-founder of Logiscool.

The company has previously received investment from NNG-founder and angel investor Péter Balogh. The investment helped in the development and the successful initial international launch: “Logiscool had already achieved what is rare for Hungarian brands: it is building a successful franchise network from Taiwan to Florida, and changes the life of ten thousands of children. Our big dream with the team is to teach one million children to code – that kind of ambition makes it really worthwhile to get up in the morning” – said Péter Balogh.

The current investment of 3.5 million EUR, led by Euroventures in co-investment with the experienced investor Márton Szőke (founder of Indextools which was acquired by Yahoo!, has had several successful exits with a past and present portfolio including among others AutoHop, Tresorit, Omixon and Bitrise) enables Logiscool to expand its HQ team in Budapest, to develop its educational offering and its local and international partnerships to  accelerate international expansion.

“This investment round is an important milestone in the life of Logiscool, it gives a significant boost to our further growth. It enables the development and expansion of the team, therefore we will be able to better support our partners and with our continuous developments we can gain and sustain our leading role worldwide. Our aim is to provide the best coding education to kids globally” – said Gyula Csitári, co-founder of Logiscool.

“We invested in Logiscool, because we see a rare combination of an excellent and devoted management with international experience, a rapidly growing global market and a technology-based, unique value proposition. It is a great opportunity and responsibility to be part of such a growth story” – said Péter Tánczos, director of Euroventures.

Source: official press release

A new investment brings Prefixbox’s e-commerce search to Poland

Our Client Prefixbox, an AI powered e-commerce search provider, gets a seed investment from Euroventures to bring their e-commerce search to Poland, too.

Prefixbox has just received 500k EUR investment from Euroventures, a notable CEE investment firm, as the first part of a larger capital raising project. The investment will be used for deep product development along with supporting the international expansion of the Hungarian startup throughout the CEE region, with Poland as the first stop.

This investment gives a lot of confidence to the company to further improve their product search for webshops. Their solutions can increase the revenue generated by search users with as much as 47% for webstores, as well as provide a better-quality customer experience. Product search plays a more and more important role for e-commerce managers, along with the rapid growth of the industry and Poland is not an exception to that.

This investment is a huge milestone in Prefixbox’s history. It gives us a boost to help us accelerate our growth, developing the team, and international expansion starting from Poland. We’ve had great traction with our existing Polish customers and are excited to open a new office to better support them and the market. Through developing our product and taking it to the world, we are striving to become the world’s best e-commerce search provider.”- said Istvan Simon, the founder and CEO of Prefixbox.

With this investment Prefixbox is planning to open a new office in the heart of Warsaw and build up a local sales and customer success team to be able to serve Polish customers’ needs and provide them with the best e-commerce search engines possible.

With existing customers from over 9 countries, Prefixbox’s clients in Hungary include – among others – Extreme Digital (edigital.hu), Rossmann (shop.rossmann.hu) and Praktiker (praktiker.hu), in Poland webstores such as Tania Ksiazka.pl, Militaria.pl or Cyfrowe.pl.

The startup was also recognized by Gartner in the 2019 “Market Guide for Digital Commerce Search”.

Prefixbox has been advised by the growth financing team of Absolvo in the transaction process.

Source: Prefixbox’s official press release

Tag Archive for: venture capital investment