Baltics Final.Pdf

1 INTRODUCTION Since we started, one of the key aims of the team at Tech.eu has been to track all of the funding rounds and exits in Europe, providing the most This report focuses on the ecosystems and funding raised by the comprehensive and accurate records and analysis of the European technology Baltic states of Latvia, Lithuania, and Estonia, between 2014 – Q3 scene. 2017. We do this by meticulously monitoring hundreds of sources, across multiple In this report we take an in-depth look at the funding in the Baltics over the languages and regions. analysed period, highlight some of the most important investors and startups from each country, and give background on the growing ecosystems of these However, many Baltic rounds were off our radar. They hadn’t been reported on European countries, who are at the forefront of building some of the most by the press, even less by the English press. Much of the data came from startup friendly governments and ecosystems in Europe despite their small founders or investors. This highlights the need for Baltic states to have a more size. These countries have made great progress by investing in ICT comprehensive reporting system for deals, so that we can be sure to have infrastructure and implementing laws that encourage entrepreneurship. accurate data. There were less than 10 exits per country in the analysed period, so instead of We want to thank organisations from each country’s ecosystem, such as the doing an analysis, we highlighted a few of the major exits. Latvian Startup Association and Estonia’s Garage84, whose crowdsourced spreadsheets helped us to complete our data set. Also, thanks to Infogr.am, a We’ve worked to make this report as comprehensive and valuable as possible. Latvian startup we found while doing this analysis, which we used to create Please refer to the end of this report for methodology and disclaimers. For any many of our charts. questions or comments regarding the report we invite you to email [email protected]. Some of the biggest scale-ups emerging from these countries have moved the majority of their operations abroad, such as Skype, Latvia’s Bitfury, and This report was written by: Lithuania’s YPlan, and have been excluded from the analysis. The removal of these successful scale-ups certainly affected the total funding figures for each • Mary Loritz, data analyst at Tech.eu country. We also excluded TransferWise’s huge $280 million round in Q4 2017, • Robin Wauters, founding editor of Tech.eu because our analysis only includes data through Q3 2017. 2 INDEX Introduction 2 Top rounds in Latvia by year 26-27 Interview with Kadi-Ingrid Lilles 50-51 Index 3 Top investors in Latvia 28 Interview with Ragnaar Sass 52-53 Key takeaways 4 Notable Latvian startups 29-30 Estonian funding analysis 54 Key trends 5 Notable Latvian exits 31 Average and median deal size in 55 Estonia Baltic funding analysis 6 The Lithuanian startup ecosystem 32-34 Top industries in Estonia 56 Funding by quarter and year 7 Interview with Arvydas Bloyze 35-36 Top rounds by year 57-58 Funding in the Baltics and other European 8 Interview with Ilja Laurs 37-38 Top investors in Estonia 59 countries Tech investment in the Baltics and Europe per 9-14 Lithuanian funding analysis 39 Notable Estonian startups 60-62 capita Average and median round size in the Baltics 15 Average and median deal size in Lithuania 40 Notable Estonian exits 63-64 The Latvian startup ecosystem 19 Top industries in Lithuania 41 Conclusions 65 Interview with Jeckaterina Novicka 20 Top rounds in Lithuania by year 42-43 Methodology and disclaimers 66-67 Interview with Olga Barreto Goncalves 22 Top investors in Lithuania 44 Latvian funding analysis 23 Notable startups in Lithuania 45-46 Average and median deal size: Latvia 24 Notable exits in Lithuania 47 Top industries in Latvia 25 The Estonian startup ecosystem 48-49 3 THE BALTICS: KEY TAKEAWAYS, 2014 – Q3 2017 4 KEY TRENDS Developing strong infrastructures to become startup havens but many keep their back offices and the majority of their staff in their home countries, and pay taxes in the Baltics. The founders are also able to contribute The Baltics – Latvia, Lithuania, and Estonia, are countries that have seen a back to the local ecosystem by sharing their experiences in other markets. lot of success in the past 10 years. Each country’s government has made efforts to invest in ICT infrastructure, fast internet, funding for accelerators, IT education beginning in primary school, and laws to Low overall investment volume, high funding levels per capita encourage entrepreneurship. Each country now has its own Startup Visa programme to attract foreigners to start their business in the Baltics. Though investment volume seems low in the Baltics compared to larger European countries, when taking into account their small populations, they No big VCs mean low funding rounds have much higher investment volume per capita than their counterparts. Estonia ranks above Germany, France, and the Netherlands in per capita The Baltics are so small – with populations ranging from 1.3 to 3 million funding. Latvia ranks above Spain, and Lithuania ranks above Italy and Eastern people – that they can’t support big VCs that would help startups to scale. European countries. That means that most startups with funding from Baltic investors receive early stage or seed funding from accelerators and angel investors, and the The Skype effect majority of rounds in the Baltics are worth €200,000 or less. Larger rounds are usually backed by foreign investors. Estonia dominates the region in terms of total funding and number of deals. The country has raised 3x that of Latvia or Lithuania, with €283 million in the Scale-ups tend to move abroad analysed period. This success can be attributed in part to Estonia’s early adoption of e-Governance initiatives, which, among other things, allow When startups do scale – raising €5 million or more, usually from a foreign Estonians to start a business in just 15 minutes. But the success of Skype was investor – they tend to move their headquarters abroad to cities like key in kickstarting the startup ecosystem, encouraging many to follow its path. London, San Francisco, and New York. However, this isn’t necessarily a bad Many former employees and founders of Skype have gone on to launch other thing. According to Jeckaterina Novicka from the Latvian Startup startups (they even have their own organisation, “Skype Mafia”), and it has had Association, scale-ups change headquarters so they can be near other an effect on the other Baltic states in inspiring entrepreneurship and major companies as well as VCs to make new contacts and partnerships, investments in technology. 5 BALTIC FUNDING ANALYSIS Latvia, Lithuania, and Estonia 2014 – Q3 2017 6 ANALYSIS Funding in the Baltics by quarter and year, 2014 – Q3 2017 • For Europe as a whole, tech funding has been steadily increasing since 2014 – tripling from Q1 2014 to Q3 2017. Yet the Baltic states of Latvia, Lithuania, and Estonia show no such steady growth trends, as quarters tend to fluctuate over the analysed period. In most quarters, between €20 and €50 million has been raised. There is no clear correlation between number of deals and amount raised, suggesting that most rounds are small, with occasional exceptions. • The average amount raised per quarter across all three Baltic states is €32 million. • Baltic states had an outstanding year in 2015, raising €189 million. This was due to large rounds for TransferWise (€53 million), Vinted (€25 million) and Adcash (€20 million). Over €100 million was raised in 2014 and 2016, but only €64 million has been raised in so far in 2017. This excludes TransferWise’s $280 million round in Q4 2017. If this round had been included, total funding for 2017 would be brought to over €300 million, making it by far the best year in the analysed period. • The number of deals per year stayed steady throughout 2014-2016, but dropped off in 2017, with only one quarter left to raise 60 rounds and keep it on par with other years. 7 ANALYSIS Total funding in different European countries, 2014 – Q3 2017 • Investment volume in Baltic nations is clearly lower than the majority of its European counterparts, with Baltic states collecting a total of €465 million over the analysed period, compared to €15 billion for the UK, €10.2 billion for Germany, and €7.4 billion for France. • Estonia has the highest overall investment volume of the Baltic states, raising €283 million in the analysed period, followed by Latvia with €93 million, and Lithuania with €89 million. • Yet, is this a fair comparison? Does this necessarily correspond to lower activity? The UK is home to 65 million people, Germany 81 million, and France 67 million. Meanwhile, Estonia is home to a only 1.3 million people, Lithuania 3 million, and Latvia 2 million. • Deal sizes tend to be smaller in the • If we take into account the small Baltics than more populous nations, as populations of Baltic nations, we can see • Correspondingly, the Baltics also had fewer these countries are too small to attract that their investment activity actually deals than their counterparts - Estonia with big VCs, and most deals are early stage or exceeds that of many other European 169, Latvia with 146, and Lithuania with just angel rounds. nations. 8 70. ANALYSIS Tech investment per capita in Europe and the Baltics, 2014 – Q3 2017 • When taking population into account and looking at tech investment on a per capita basis, a much different picture appears.

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