Budapest Letters #3
👋 Welcome back! I hope last week was fun and games for all of you. Before we jump into this week’s edition of Budapest Letters, as last time, I would like to extend a very warm welcome to our new subscribers, great to have you with us! One more thing before we get going, if you like what you read, subscribe (if you had not done it) and share. Cheers.
📢 TL;DR
This week we will touch on the following stories: ✍️ EU Commission offered two proposals to boost EU-wide competitiveness from European entreprenuers and community representatives ✍️ DappRadar, ProperGate and Vinted received some serious dough ✍️ According to a new report, women-founded startups raised just 1% of investment in CEE in 2020, a number that should clearly raise eyebrows.
🔥 Story of the Week
Often times high ranking EU officials and career bureaucrats are criticized for not living up (especially workwise) to their fat paychecks and benefits. While I feel that in some cases this generalization might be accurate, in the case of Mariya Gabriel (🇧🇬), the current EU Commissioner for Innovation, Research, Education, Culture and Youth, that does not seem to be the case. She is constantly in the news, meeting stakeholders, proposing ideas and launching new programs in relation to innovation and startups. Of course, this might be all talk without result in the long run. But for now, what is visible, is that two interesting initiative landed on Ms. Gabriel’s desk in the past month and she is pursuing them both.
One, from the CEOs of leading European unicorn startups (33 of them, to be precise), urges the EU to act on 8 key proposals, among them the creation of an €100 billion technology sovereignty fund and a pact for all EU startups to become carbon neutral by 2030. Here is the full list, check it, worth the read.
The other one, from startup community representatives across the EU, also urges the Commission to deliver on topics that – according them – are a necessity to ensure that Europe remains (or becomes – pick one as you see fit) competitive vis-á-vis the rest of the world. The two lists share some obvious similarities, but for me, this latter one is much more tangible. For example, suggestions on introducing a so-called Startup Green Card, harmonizing Corporate Law and boosting cross-broader investments by simplifying regulation sounds great.
🧐 Personal take: I really think both proposals are worthy of attention and that Ms. Gabriel means well, would like to act and probably should on these initiatives. However, looking through the track record of the EU in terms of supporting startups, innovation and competitiveness, one cannot be overly optimistic. Especially, if we add to this that the EU published its last big policy proposal in this realm in 2008 („Innovation Union”); sure, the EU Commission launched the European Innovation Council (with €10 billion funding) in the meantime and some other standalone programs that are good. But the overall picture, is blurry.
On the one hand, because the Horizon program, that funds EU-level innovation until 2027, is a done deal. So I do not really see where additional sums could come from in order to deliver on the request of European unicorn CEOs. On the other hand, apart from Erasmus, the education exchange program between EU member states, there are no successful initiatives that delivered on the numerous promises from the past that entrepreneurship will be supported from a legislative and market climate perspective. Talk happened. Sure. But nothin’ else.
Show Me Da 💶
👏 DappRadar, a startup from 🇱🇹 that operates a platform which lets users track decentralized applications („dapps”), received €4.1M in its Series A. The company’s success is largely tied to the recent popularity of NFTs (non fungable tokens) and to crypto investments becoming more widespread. Among its new found investors – fun fact – is NordicNinja, a deep-tech venture capital fund focusing on the Baltics & Nordics with very strong Japanese roots (i.e. most of its funding is coming from large Japanese corporations, like Panasonic and Honda).
👏 ProperGate, from the great city of Warsaw (🇵🇱), recently landed €1M in seeding funding to expand its team and growth. The startup aims to digitalize construction site logistics via a software it created. And a very special shout out goes to them, surely, since their CTO is a women, Anna Walkowska.
👏 Vinted, another 🇱🇹 success story but one that is already in unicorn status, raised an additional €250M at a pre-money valuation of €3.5 billion (!!!). The investment will be used for further developing its products and expansion.
🧠 Food
Last month I came across a though provoking report from European Women in VC, a community of senior women investors (both VCs and Business Angels) from CEE and Ukraine. I do not want to list all the key findings of this analyses here so I will just say it is great and sad at the same time. Great, because it shows a clear, objective and data-driven picture of where the VC industry and startup funding stands vis-á-vis women. But it is also bad because numbers look heartbreaking.
For example, in 2020, women-founded startups raised just 1% of investment in Central and Eastern Europe. 5% went to mixed-gender founding teams, while all-men teams raised 94%. Sorry, what? I mean we are not talking 1970s here.
And here is another: investors sign bigger cheques for men. Average round sizes at Seed and Series A are smaller for all-women teams in CEE than for mixed and all-men teams. Yup, friends, this is really bad. Looks and feels, all over.
Or this, just to put it out there: funders and decision makers are predominantly men. Of funds active in CEE, 85% of VC investment roles are held by men, rising to 93% at Partner level. Sheeesh.
Of course, it is no secret that the financial services sector in general is male-dominated and packed with lame ass machismo (globally) but this, looks awful. Sure, we need to celebrate entrepreneurship, especially in CEE, where democracy and freedom is only present since the ‘90s. But we seriously need to elevate our game at the same time to accomodate women. Without them there can be no real progress. Not only because a diverse set of opinions, skills, approaches are good for creativity. This should be a no brainer. But also because of hard cash.
According to the cited the report, women-founded startups generate more revenue per € invested. Women-led businesses outperform in capital productivity by 96%. Dope.
So there are lots of things to do and change, we might as well start working.
🧐 Personal take: Coming from a fam with strong women, plus raising a daughter, makes me care for this issue a lot. It hits home. Even more so as I work in banking. The experiences and statistics outlined in this report are not new to me; or to re-phrase, rather their existence is nothing new. But their depth. Ouch. And before you think, “probably it is better in the US”, well, not really.
According to an analysis by Axios, a news site, only 12.4% of decision-makers at U.S. venture capital firms were women in 2020. Yes, you read it right, the CEE venture scene, which is still in its infancy compared to its US counterpart, is more gender balanced. However, to be fair, the US does perform a bit better in funding women-lead startups. According to Crunchbase, startups with all-female founding teams drew an all-time-high 3.4% of all venture capital dollars in the U.S. in 2019; a number that declined to 2.4% in 2020 as result of the COVID pandemic.
All the above ads to up to an urgency to act and accelerate positive change. We need more women in finance and we need more women as entrepreneurs. And we also need lots of men to support, respect and trust women in business. Thankfully, progress is visible. Let us not be too pessimistic. But the road is long and bumpy.
We need to acknowledge that. In this, crunching numbers and facing raw facts, what the report from European Women in VC does superbly, helps a lot. What will also help is to man up, dear male investors. VCs love to talk about taking risks and challenging ones self continuously. The only thing they forget, it seems, is to apply this mindset to themselves. Male VCs invest in pre-dominantly male-lead startups. Male VCs tend invest in business models and industries that they have already invested in. Male VC fund managers – mostly – only ask male LPs when fundraising. This does not seem to be a trailblazing attitude, me thinks.
Let us hope that in the near future we will able to change this. At least in CEE 😉
PS: If you care for the above issue, like I do, do check out the following organizations, VCs and personalities that are doing a lot to change attitudes by leading the way with positive example: Francesca Warner (Ada Ventures) 8 female startup investors from Eastern Europe (via Sifted), RolemodelRebels, European Women in VC, Women|Business|Angels and Female Founders.