Complimenting the Lithuania-specific data released today, Tallinn-based Change Ventures has released the February 2023 update of their semi-annual Baltic Startup Funding Report. The firm compiles data by tracking all venture funding round news in the region and after reaching out to founders in confidence gathers and tabulates valuation and other investment terms for pre-seed and seed rounds.
As a result, they’ve assembled transaction data for almost 60% of the pre-seed and seed rounds closed during the past 36 months in the Baltic region, making it arguably one of the most comprehensive in the region.
Let's dig in.
Growing but slowing
Echoing a broader global slowdown (or is that a return to normalcy?), Baltic startups saw a significant drop in funding in H2 2022. Less capital was deployed across all stages, with growth funding slowing the most.
The number of funding rounds also saw a 30 percent dip from H1 and H2 in 2022, with capital being deployed dropping from €1.3 billion to €300 million.
Having said that, while the market downturn notably affected the Baltics, the number of growth and Series A funding rounds were still above pre-2021 levels, indicating the longer-term health of the ecosystem.
In terms of pre-seed and seed rounds, the numbers dropped off the cliff in 2022. The data supports the rise in global risk aversion, as well as an increasing selectiveness by investors.
However, according to Change Ventures, they took into account that bridge and extension rounds skyrocketed and that many of them remained undisclosed, so the actual number of pre-seed and seed rounds is undercounted as they are aware of many, but not all, of them.
Valued More, Valued Less
The report also found that while pre-seed valuations continued to rise in H2 2022, however, this number is skewed due to the fact that the number of startups closing pre-seed rounds fell by almost half in H2 2022 vs H1 2021.
When looking at seed valuations, we come to a noticeable drop, which falls in line with a broader market correction. Median seed valuations saw a peak in H2 2021 at €10 million, dipping to just over €8 million only a year later.
The pinnacle of the highest-valued startups was in H1 2022 as the top quartile passed €16 million, which nears the US’s median value of $20 million, however, this number sank to just over €10 million in H2 2022.
The report dives into a range of additional topics, including a notable analysis of the relationship between valuation and revenue traction, the percentage of equity investments vs. convertible notes, country-by-country breakdowns (hint: Estonia is still leading the pack), and much, much more.