It is safe to say that the emerging Europe region now occupies a unique position in the European investment landscape. Previously of little interest to large international players and an area mostly reserved for angel investors who made their fortunes in the early days of capitalism, today the region boasts fast-growing economies and increasing influence, making it an unmissable investment opportunity.
While European markets remain volatile as investors grapple with concerns over new Covid-19 restrictions and tighter central bank policy, CEE/SEE countries have weathered the economic and social uncertainty relatively well. The region is developing as a popular and lucrative venture capital market, and has been demonstrating steady deal figures.
Emerging Europe venture capital activity registered 308 deals in 2021, the highest annual deal count ever and a record increase year-on-year of 74%. The surge in deal flow accounted for an even more impressive one in the aggregate value of VC deals, which reached EUR 7.7bn—more than double year-on-year and beating 2019’s number, EMIS data show. As the shift to remote work diminished the importance of physical presence in traditional VC hubs, and investor confidence recovered from the early days of the pandemic, start-ups have also benefited from sustained demand for remote digital products and services. The influx of foreign investors into the region's gradually maturing start-up ecosystem has also led to an unprecedented number of unicorns and decacorns, and the launch of at least 13 funds focused on supporting local founders at various fundraising stages.
Not unlike previous years, 2021 emerging Europe VC deal activity was concentrated in a few countries. Russia was the leading destination by volume with 74 deals, followed by Turkey (53), Poland (29), Estonia (25), the Czech Republic (22), Romania (21), and Bulgaria (20). Turkey was the top VC investment destination in terms of total value invested at EUR 2.5bn, followed by the Czech Republic at EUR 1.5bn.
The Telecoms & IT sector was unsurprisingly the most active by VC deal count with 186 deals, or 60% of all activity. Manufacturing came in at a very distant second with just 27 deals, followed closely by Finance & Insurance with 19 transactions. When it comes to sector value, Telecoms & IT was again first with deals worth EUR 2.7bn, ahead by a whisker of Wholesale & Retail, which bagged EUR 2.66bn across much fewer but bigger deals on average.
Unsurprisingly, a few big-ticket investments in emerging Europe had a significant influence on 2021’s results, though not to the extent seen in the previous year. There was more variety this time, with the ten largest VC deals accounting for 60% of the total value raised, and targeting companies in Turkey, the Czech Republic, Estonia, and Russia. In contrast, the ten highest-valued VC transactions of 2020 accounted for massive 81% of the total value and targeted primarily two countries: Turkey and Russia.
The single largest deal of 2021 was the eye-popping USD 1.5bn (EUR 1.28bn) funding round of Turkish e-commerce platform Trendyol. The company’s fundraiser valued it at USD 16.5bn and was co-led by General Atlantic, SoftBank, Princeville Capital, and two sovereign wealth funds. In addition to helping Trendyol become Turkey’s first decacorn, the deal marked SoftBank’s first venture deal in Turkey.
Another e-commerce platform was targeted in the region’s second largest transaction of 2021: the acquisition of Central and Eastern Europe's largest e-commerce business, the Czechia-based Mall Group. Together with delivery company WE | DO, Mall Group was valued at an enterprise value of EUR 925m by the buyer, Polish peer Allegro, which is itself owned by HarbourVest Partners. Local investment companies Rockaway Capital, EC Investments, and PPF Group were on the sell-side.
Estonian ride-hailing and food delivery start-up Bolt closed a EUR 600m funding round in August, making it the third-largest VC deal in the region in 2021. New investors Sequoia Capital, Tekne Capital, and Ghisallo, and existing investors G Squared, D1 Capital, and Naya Capital, brought the valuation of the local Uber challenger to EUR 4bn.
An honorable mention goes to Getir, Turkey’s ultrafast grocery delivery start-up, which raised the equivalent of EUR 815mn in its rapid-fired Series B, Series C and Series D funding rounds in January, March, and June, respectively. The latest deal valued Getir at USD 7.5bn and is expected to help the company expand into the United States. Getir’s US plans speak volumes about regional founders’ ambitions to go international, which previously was a significant challenge to the local would-be unicorns. Similarly, Czech Republic’s e-grocer Rohlik reached unicorn status through its Series B and Series C fundraisings of a combined EUR 290m, fueling its international expansion. Another example (though originating from the public stock market) of a local start-up making it big abroad is the IPO of New York-based robotic process automation (RPA) unicorn with Romanian roots UiPath. The company listed on the NYSE in April with a valuation of USD 31bn, a telltale sign that locally founded companies can be just as competitive across the Atlantic. The listing is not included in our report’s IPO data as UiPath is perceived as a predominantly foreign company now. Its local roots, however, and the progress it has made to become a global RPA force over the past ten years, are undisputed.
All in all, 2021’s numbers show an unprecedented level of maturing, deal-making discipline and sophistication. We believe that these latest successes, coupled with the region’s strong technical talent, could lead to a golden-era cycle and increased internationalisation where founders who have already made a successful exit will advance to support the next generation of young entrepreneurs.