Business Directory

START-UP FUNDING IN THE BALTICS IN 2015

Šarūnas Skyrius and Dovilė Meliauskaitė, M&A International Baltics, highlight the Baltics’ growing position on the European start-up map.

The Baltic start-up scene has come a long way in the last decade. More deals are happening and deals are getting bigger, start-ups and founders are getting more professional, and there finally appears to be a robust and growing ecosystem of angels, incubators, accelerators and local venture capital funds for different stages of the start-up life cycle.

Over €115 million was raised by Baltic tech start-ups in 2014 beating all previous records, and 2015 already saw the amount raised exceed €50 million in the first quarter. Several large high profile funding rounds have been reported in 2014-2015, and one large exit completed the picture. Of the former Vinted, Transferwise and Yplan should be mentioned; of the latter, Grabcad has silenced the sceptics of Estonia’s state owned VC initiative, netting a rumoured 7-10x return to investors. All these events combined (and summarised in Table 1) have cemented the Baltics’ position on the European start-up map, and have given hope and confidence to entrepreneurs and their early-stage backers.table 1 baltic article

So how is life different for a young ICT entrepreneur in 2015, compared to 2005? The difference perhaps is most difficult to see in the earliest stages – initial product prototyping and development are still done in those proverbial garages, funded by money saved by subsisting on ramen noodles. However, as other founders join and as the business idea grows in visibility and perceived viability, funding possibilities hitherto unavailable are now in relative abundance.

The European Commission’s Jeremie programme and the European Investment Fund (EIF) have been great catalysts for this transformation through EIF’s cornerstone investments in a large number of private equity and venture capital funds. Successful exits in the past have also created strong angel networks – Estonia’s EstBAN should be mentioned – but even more importantly, there is now the possibility to point to a specific local funding source that would fund a fledgling start-up through to its first A and B rounds with large international venture capital investors. Ramen euros may now be followed up by a host of experienced accelerators, notably StartupHighway and Startup.lt in Lithuania and Startup Wiseguys and Gamefounders in Estonia, leading eventually to institutionalised venture capital investors such as BaltCap, Practica Capital, Imprimatur, MTVP, ASI/Karma, Rubylight and others. With the recent admission to trading on FirstNorth (NASDAQ’s Nordic-Baltic answer to London’s AIM market) of the first Lithuanian company, K2 LT, it can be said that there exists a viable option of raising equity capital through public equity markets.

All this creates a benign circle of confidence that, in turn, encourages bright engineers and entrepreneurs to strike out in search of that coveted “billion dollar valuation” and ultimately persuades investors to part with their money in search of that 10x exit multiple.

CONTACT:
Šarūnas Skyrius and Dovilė Meliauskaitė, M&A International Baltics.
www.maibaltics.com
M&A International Baltics provides merger, divestiture, acquisition and capital raising advice through offices in the three Baltic capitals. Our team has worked together since 1999, completing over 150 transactions with a combined value exceeding EUR 3.5 billion. It is a member firm of M&A International Inc. – the global leader in mid-market M&A advisory. M&A International Inc. offers the unparalleled resources of over 600 professionals in 46 M&A advisory and investment banking firms operating in 40 countries. It has advised on over 1,400 M&A transactions totalling more than US$75 billion in transaction value since 2010.