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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 round news in the region and reached out to founders to gather, in confidence, valuation and other 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 36 months, so now founders and investors can understand where they stand relative to market transactions.
We are grateful and honoured to be trusted by founders with this sensitive data.
Pre-seed rounds are recovering from the pandemic slow-down, and we are witnessing an increase in the number of rounds when compared to H2 2020. Seed and A rounds remain stable and strong.
Overall, there has been an increase in the total number of funding rounds, which suggests that the market is recovering and maturing very quickly. Growth rounds have more than doubled, when compared to H2 2020, which suggests that there is a lot of growth money coming into the market.
Capital raised doubled on the pre-seed stage, and tripled for the growth stage. The seed and series A stages remained strong, with overall capital raised over all stages hitting a record of €649M, which is a 50% increase from what we have witnessed in H2 2020. These findings demonstrate a rapidly maturing startup ecosystem in the region.
After a dip in H1 2020, pre-seed round sizes have grown significantly throughout H2 2020 and H1 2021. Round sizes have not only bounced back to the pre-pandemic level, but they have exceeded all the previous years. This seems to signal a very healthily recovering pre-seed market, which continues to grow and exceed expectations. However, seed round sizes have dropped, which could be explained by an increase in competition and the fact that founders are raising seed rounds earlier with less traction.
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 €2.25M with the bottom quartile rising further from the record heights of H2 2020, as pre-seed investors are becoming increasingly selective and fund many fewer rounds during 1H 2021. The best pre-seed startups command rounds priced at €3.5M 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 number of seed rounds closed during 1H 2021 saw rising valuations again with the median exceeding €8.5M. The difference between upper and lower quartiles increased dramatically, with lower quartile dropping to 2.4M and upper quartile reaching 10.5M. The lower quartile’s valuation seems to be tied to the zero revenues metric of the lower quartile startups.
Revenues have receded as a driver of fundraising for both pre-seed and seed rounds. For pre-seed rounds the lower quartile hit zero once again and the median dropped to record-low of €1,500 in monthly revenues. H1 2021 is the first period when seed rounds have also hit zero for the lower quartile of their monthly revenues. Moreover, the median monthly revenues for seed rounds have dropped three times and hit a record-low of €11,000.
This data indicates that those startups who were able to close rounds more often raised on factors other than revenue traction.
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 3 years through end 1H 2021.
While convertible notes are still common at pre-seed, it looks like investors secured direct equity rights more often in the H1 2021, perhaps reflecting recapitalisation 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 and H1 2021 all of the deals Change Ventures reported had caps.
Valuation caps keep rising along with the equity round valuations, and the mean discount rate has bounced back to the pre-pandemic level of 20%.
An increasing number of startups are raising capital through their entities registered and headquartered in the Baltics.
It is important to note, that during the past half a year, we witnessed a record number of companies remaining headquartered in the region after the Series A, which seems to be a steadily growing trade in the Baltic region.
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 first half of 2021 the Estonian lead in seed rounds extended as 20 of the 28 seed rounds were Estonian. In terms of the number of pre-seed funding rounds closed, Estonia again tops the list by closing 31 deals, Lithuania 17 and Latvia 9.
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.
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.
Change Ventures Baltic Startup Funding data set (H1 2019 - H1 2021)
482 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 258 pre-seed and seed funding rounds, or 60% of all the rounds at those stages during the 36 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.
