Baltic Startup Funding Report by Change Ventures and Firstpick

15 September 2023

The Baltic Startup Funding Report by Change Ventures and FIRSTPICK is a semi-annual publication of detailed data about funding rounds for startups in the Baltics, including companies with HQs elsewhere but with a dominant base in Estonia, Latvia, or Lithuania.

To assemble this report, the FIRSTPICK and Change Ventures teams have tracked all the venture funding round news in the region and reached out to founders to gather, in confidence, valuation and other investment terms for pre-seed and seed rounds. As a result, they have transaction data for more than 60% (290) of the pre-seed and seed rounds closed during the past 36 months, so now founders and investors can understand where they stand relative to market transactions.

Summary of the key findings:
  •  The Baltic states punch way above their weight, generating startups per million inhabitants across the Baltics on par with the UK and the Nordics, in Estonia exceeding all of Europe and even the “startup nation”, Israel. In terms of unicorns per million inhabitants, the Baltic states are also catching up fast.
  •  Total capital deployed in the Baltic states continues to drop as the global market for Series A and growth funding has slowed to almost a standstill. The venture capital industry is still digesting the overhang from the excesses of past years and, despite all the talk of dry powder, additional growth capital is very difficult to raise. However, pre-seed and seed capital continues to be deployed steadily.
  •  Further, the number of pre-seed rounds has risen from 40 in H2 2022 to 58 during H1 2023, showing continued angel and pre-seed fund willingness to back new teams. Seed rounds are also starting to rise versus the prior 12 months of stagnation or decline. It is likely that our report also undercounts the actual total of rounds as we are likely not to know about some but not all the bridge and extension rounds that take place across the industry.
  •  Round sizes across pre-seed and seed are relatively steady, hovering around €300k for pre-seed and €1.75M for seed during the past 18 months. 
  • Median valuations for pre-seed rounds have held relatively steady during the past 18 months, but the disparity between upper and lower quartiles grew significantly during the past half year, showing investors willing to pay top dollar for few startups. Seed valuation disparity also grew massively and the median valuation jumped to almost €12M as fewer early seed rounds were closed and the market rewarded solid metrics of later seed stage teams with pre-A valuations.
  • The use of convertible notes for pre-seed rounds jumped to 71% versus only 40% in 2022. Otherwise, round mechanics seem to have been unaffected by the market turmoil. 
  • In terms of revenue required to raise a round, limited data indicates that further bifurcation is happening in the market. At pre-seed, the median monthly revenues at the time of raising are zero, while for seed rounds it has jumped to €50k (albeit with limited data). This aligns with our observation that only startups with strong seed stage traction have been able to raise funding.

 Read the full report HERE:

Photo credit: Blake Verdoorn / Unsplash; Change Ventures

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