Why CEE became so attractive to investors: 3 reasons
2022 was a challenging year. Despite all the obstacles, the fact that more than two dozen new venture capital funds were announced in Central and Eastern Europe definitely indicates the investment attractiveness of the region. Vital Laptenok, General Partner of Flyer One Ventures, an international venture capital fund with offices in Kyiv, London, and Warsaw, names and explains three reasons why the CEE became arose a great interest of global investors.
Global investors are turning their eyes to European founders, especially from Central and Eastern Europe. In 2022, European VCs raised over €16 billion in fresh capital, and CEE showed the fastest growth rate compared to other parts of Europe.
Many new VC funds have been announced in the region recently, including Contrarian Ventures in Lithuania, Inovo in Poland (€100 million each), and Trind Ventures in Estonia (€55 million).
Flyer One Ventures had invested in CEE startups before it became mainstream. For four years, we have funded 50+ early-stage startups and had one exit. Here’s my explanation of what many call a boom.
Reason 1. CEE grows unprecedentedly fast
It is easier to grow in Europe, as the region has a lower base investment. In 2021, startup valuations in the U.S. and Western Europe became too high, so VC funds started looking at less popular markets.
Since 2017, the CEE region has grown by 7.6 times. The combined enterprise value of the CEE startups has quadrupled and now stands at €190 billion. Croatia, Lithuania, and Ukraine have grown the most.
- Croatia — 16.6x, to €10 billion.
- Lithuania — 15.7x, to €4.7 billion.
- Ukraine — 9.3x, to €23.3 billion.
Reason 2. Unicorns boom
Over the last five years, companies valued at $1 billion or more have appeared in Europe more often than in the US. According to Venture Capital Journal, America has created net new unicorns at a rate of 50% year-over-year, while in Europe, it’s been 100% each year.
CEE is not an exception: Since December 2020, the number of unicorns has doubled there. Ukrainian AirSlate and Unstoppable Domains are among them.
Reason 3. Impressive talents
Among the countries that produce the best developers in the world, there are four CEE states: Moldova (1st place), Romania (3rd), Ukraine (4th), and Poland (7th).
Take Ukraine: It has more than 130,000 engineers — more than any other European country, including Germany and France. And every year, about 16,000 new developers graduate there, the highest number in CEE.
Considering that the experience and skills of a founder play a tremendous role in the success of a startup, talented and highly educated CEE startup creators are sure to impress investors.