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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 investment terms for pre-seed and seed rounds. As a result, we have transaction data for 60% 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.
Veriff was recently crowned the latest unicorn from the region, adding to the list of success the region has experienced to date, including both bootstrapped and venture-funded unicorns.
The number of pre-seed rounds dropped in H2 2021, back to the level of a year earlier. With pre-seed round sizes rising significantly, hence a smaller number of larger rounds closing, it seems that investors are increasing their selectivity in the region for the very earliest stage startups. Seed and Series A rounds continue to increase and growth rounds are stable, all of which suggests a maturation of the market.
Capital raised for the pre-seed stage has dropped a little, when compared to H1 2021, which likely reflects some of the most attractive startups starting fundraising directly at seed stage. Seed, series A and growth stage companies have attracted more capital than ever, nearing €1B and showing a clear maturation of the ecosystem across the region, as top tier investors such as Index Ventures, Creandum, Accel Partners and others backed startups from the Baltics with large funding rounds.
Pre-seed round sizes continue a two year steady rise to a median of €400k, with the upper quartile reaching a record €535k. This reflects the growing angel investor capital generated by unicorn exits and growth stage funding round secondaries, along with increasing angel and pre-seed fund interest in the region. The round size growth also reflects the smaller number of rounds and increasing concentration of capital in the most attractive companies.
Median seed rounds are steady at just below €1.5M. However, the variance in seed round size is increasing, with the top quartile rounds being almost twice the size of the median, reaching €2.4M.
As is the case in other regions, the limited pre-seed investment pool is driving a continued increase in valuations, with the median pre-seed valuation reaching €2.5M in H2 2021 and the upper quartile hitting a record of €4M. Less rounds closed and more concentration of capital in the most attractive companies.
For the purpose of comparing valuations, we have excluded accelerator-financed rounds, which tend to include in-kind services and smaller rounds.
Unchanged seed round sizes coupled with rising valuations, with median at €10M pre-money now, means that founders are giving away less dilution at seed. Both lower and upper quartiles have reached record heights during these six months, with lower quartile reaching €7.5M and upper quartile reaching €12.6M. Note that the upper quartile is also pushed up by pre-A rounds at valuations between seed and Series A.
The lower quartile for pre-seed rounds remained at €0 for the third half a year in a row. This suggests that there is a stable and significant number of pre-seed startups in the Baltic market, which attract capital without any revenues generated. The median has dropped to record-low of €1,250, together with the upper quartile dropping to the lowest point ever of €9,000.
Revenues have bounced back in importance as a driver for attracting capital for seed rounds in H2 2021, which signals a return to the norm. H2 2021 witnessed a tripled increase in median revenues for seed startups, reaching €30,00, when compared to H1 2021. Both lower and upper quartiles for seed revenue metrics are slowly returning to the pre-pandemic levels.
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 of H2 2021.
A steady half of pre-seed rounds are transacted via convertible notes. For seed, the move to equity swung back in the last 6 months as more convertible notes were used.
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 is steady at the pre-pandemic level of 20%.
In the Baltic States we continue to see a bifurcated market where the Estonian ecosystem is more mature than those in Latvia and Lithuania. However, the second half of 2021 saw a similar number of Lithuanian pre-seed rounds compared to Estonia and and a record 13 seed rounds closed, nearing Estonia's 18 and showing clear signs of following in Estonia's footsteps.
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. This phenomenon is increasingly being replicated, though, as angel investors from Vinted, Printify and other Latvian and Lithuanian success stories invest more aggressively.
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 - H2 2021)
582 funding rounds registered
“Baltic startup” is 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 299 pre-seed and seed funding rounds, or 60% of all the rounds at that stage 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 Senior 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.
