Vestbee, one of the leading European platforms for startups, VC funds, accelerators, and corporates, has just published VC Funding In CEE Report – 2Q 2023. According to this quarterly overview, VC trends in the CEE region have been closely mirroring the global downturn as the total value of disclosed funding rounds settled at €560M. While this reflects a slight decrease compared to the previous quarter’s €600 million, the disparity becomes striking when compared to the same period last year – in 2Q of 2022, the region boasted over €2 billion in startup funding.
Global Downturn and Cautious Investors
The second quarter of 2023 marked a significant downturn in venture capital investments worldwide, with an 18% drop compared to Q1 and a substantial 49% YoY decrease. Europe also noted a cooling of investor sentiment. Despite the availability of dry powder, VCs exercised caution, funneling a total of $13.5 billion into 1861 transactions in the continent.
According to Vestbee’s analysis, the CEE region was similarly affected. Across 250 transactions, VCs invested €560 million. Notably, the number of transactions in the quarter remained similar to the previous year, but funding plummeted by over 70%. Several factors contributed to this decline, including increased macroeconomic uncertainty, reduced foreign investor participation, and limited availability of public funds. Furthermore, the continuous absence of mega-rounds added to the challenge, with only one secured by Estonian unicorn ID.me.
‘The second quarter of 2023 has proven to be a challenging period for Central and Eastern European startups. This can be attributed to various factors, including changing market dynamics, concerns about future fundraising opportunities, and an uncertain macro environment. Particularly in CEE, reduced participation from foreign investors and decreased activity of public funds have contributed to this challenging landscape. Despite occasional high-valuation funding rounds making headlines, there is a clear trend of market and startup valuations cooling down. This reflects a shift in investor sentiment, with many adopting a more cautious and measured approach to investment decisions.’ underlines Ewa Chronowska, CEO of Vestbee and General Partner of Next Road Ventures. ‘As we move forward into the remaining quarters of 2023, it’s reasonable to expect this trend of caution to continue. While the overall VC investment landscape may be facing headwinds, there are verticals that offer potential for growth in the future, like AI, energy or climate tech.’ adds Ewa Chronowska.
Regional Leaders and Thriving Sectors
As reported by Vestbee, in terms of the investment volume Poland, Estonia, and Czechia were in the lead, recording 116, 29, and 20 closed investments, respectively. Companies such as ID.me, FounderBeam, FLOWX, Sunly, and IP Fabric were amongst the ones that saw the largest injection of financing. What is more, investors showed keen interest in sectors such as Cybersecurity, AI, Energy, Enterprise Software, SaaS, and Analytics, which aligned with the global spotlight on AI and deep learning technologies. Among the most active VC funds in the quarter were Eleven Ventures, ZAKA VC, FIRSTPICK, Lighthouse Ventures, Gapminder VC and Presto Ventures, to name a few.
Delve Deeper with Vestbee’s Full Report
For a comprehensive overview of VC funding, emerging trends, and an in-depth monthly analysis of the second quarter of 2023, access Vestbee’s full report. Follow Vestbee for regular updates on monthly, quarterly, and annual insights into regional VC transactions.