Difficult times and the outlook doesn’t look good
Due to the vast economic changes in the European venture capital market as a result of the COVID-19, we started to monitor the venture sentiment more closely and highlight important findings in an aggregate index on the European level – see European Venture Sentiment Index. In addition to our recently published EVSI Q3 Report we have a close eye on developments in neighbouring CEE countries. A recent report on the CEE Venture Market by “vestbee VC” for Q3 2020 shows that deal numbers slide, which is in line with our findings published earlier this month.
The report mentioned had noticed high volatility for both for the average startup valuations as well as the number and size of funding rounds and an overall trend (forecast) showing both numbers decline. The total amount of money raised in Q3 amounts to EUR 92 M. Starting with a strong July with a total funding amount of EUR 42 M followed by a larger break-in August to EUR 24 M and finishing with slight increase to EUR 30 M in September. The most active countries had been Estonia and Poland. Investments in the fields of healthcare, security, fintech as well as AI and energy as attracted the most investors.
The overall outlook for Q4 2020 is mixed as an increased activity of VC funds can be expected in the month simultaneously with a surge of COVID-19 Cases having potential government countermeasures as consequence bringing general economic uncertainty. A data comparison between the vestbee vc funding report and our EVSI Q3 Report shows that the outlook for Q4 is fairly similar. The fear of a second wave and a resulting lockdown are omnipresent.
Furthermore, boost for additional or new investments – like governmental support or recovery programs – are slowly running out. Investors have taken advantage of a drop in valuations and the need of fresh money. The outlook for Q4 remains on both reports very pessimistic, as a deeper economic double dip recession is expected. New investment is expected to become rare because of investors focusing on their existing portfolios.
As the CEE Region traditionally has a strong focus on IT and software solutions, the ecosystem has the potential to profit from the outcome of the Coronavirus crisis and see new hubs evolving. Vienna (Austria) was recently mentioned by TechCrunch to be the next big hub in Europe – as increased activity of international investors was monitored in addition to a vibrant local investment community which is growing without a doubt.
All in all – digitalisation remains a driver for the economy and we had seen slightly better developments in recent quarters, than originally expected as local governments throughout Europe put programs in place to support high-tech innovation in Europe.
Curious to learn, how to survive this crisis and what it takes to be on the side of the winners, contact our team – we are happy to develop a smart hack for you through this crisis, as any crisis (including COVID-19) opens a full range of chances.
Berthold Baurek-Karlic is Founder and CEO of Venionaire Capital, with many years of experience as a serial entrepreneur, corporate finance expert and early-stage investor. He supports the startup ecosystem in various roles such as President of the European Super Angels Club, Board of Austrian Private Equity and Venture Capital Association and General Secretary of Business Angel Institute.