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, we 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.
We are grateful and honored to be trusted by founders with this sensitive data.
In terms of startups per capita, Estonia is already far ahead of Europe and Israel and the Baltic states together are almost at parity with Europe's best both in terms of startups and unicorns per capita.
Sources: State of European Tech 2021 & Dealroom.co, Delloitte.
The number of series A and growth rounds has continued to decrease in the first half of 2023; however, the number of pre-seed rounds has risen significantly showing continued angel and pre-seed fund willingness to back new teams. Seed rounds are also starting to rise again.
Total number of rounds by stage
While median pre-seed round valuations remained fairly stable with a slight decrease in the first half of 2023, median seed valuations 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.
Median pre-money valuation for pre-seed/seed rounds
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
Veriff was recently crowned the latest unicorn from the region, adding to the list of success the region has experienced to date, including both bootstrapped and venture-funded unicorns.
With series A and growth rounds being at a standstill - the total capital raised by startups at these stages has decreased significantly. The series A startups have raised €38.5M and growth startups €75.5M, both more than two times less than in H2 2022. At the same time, pre-seed stage startups have increased the total capital raised from €16.5 in H2 2022 to €22.7M in H1 2023. Total capital raised by seed stage startups remains almost the same - in H1 2023 they have raised €52.1M, just €2M less than in H2 2022.
Compared to H2 2022, the pre-seed round size (excluding accelerator investments under €55k) in H1 2023 has increased, and for the last 18 months has been hovering around €300k. Both the top quartile and the lower quartile have decreased somewhat, likely reflecting a more cautious attitude from investors in terms of capital deployed at the pre-seed stage.
The opposite can be observed with the seed rounds - with the top quartile increasing and the lower quartile decreasing - the data suggests that the size of seed rounds is increasing in variability. The median round size in H1 2023 has decreased, dropping back to €1.5M. The increase in size variability is a consequence of startups struggling to secure additional funding and the increasing prevalence of late seed or pre-A rounds.
The past 6 months have reversed the trend of steadily rising median pre-seed valuations after 36 months of steady rises, now decreased to €3.55M from the peak of €4M in H2 2022. At the same time the disparity in valuations has grown, reflecting the increasing difference between the most sought-after startup teams that can raise at higher valuations (top quartile now at €6.26M) and those that cannot command such pricing.
Similar to pre-seed rounds, the valuation disparity has grown for seed rounds as well, reverting to the previous broad range from H1 2022. The median valuation jumped to €11.75M in H1 2023. Fewer early seed rounds were closed, with more late seed rounds dominating the market. Teams that were able to present solid metrics were rewarded by the market with pre-A-level valuations.
Although at the moment we have data only on the first half of the year for 2023, a change in median monthly revenue metrics can already be observed. Compared to the previous years, data from H1 2023 indicates that the majority of startups raising pre-seed rounds do not have any existing revenues; however, the increase in the top quartile shows that some startups are able to achieve higher revenue metrics even at an early stage.
The data from H1 2023 indicates that the median monthly revenues at the time of raising for seed rounds have increased from €12.5k to €50k, which aligns with our observations that currently only startups with strong seed stage traction have been able to raise funding. Furthermore, these findings are indicative of seed moving to late seed.
Percent of rounds closed via equity investment (vs. convertible notes)
Valuation caps are stable
Number of rounds by jurisdiction (Pre-seed & seed)
749 funding rounds registered.
“Baltic startup” is defined as a company with a highly scalable product-oriented business model (or the potential to become one) that has at least one Baltic founder (or firmly established immigrant) and active operations in one of the Baltic States.
Valuation data based on confidential information shared with Change Ventures by founders for 438 pre-seed and seed funding rounds, or 58% of all the rounds at that stage during the 4 year period.