The new Baltic Startup Funding Report by FIRSTPICK and Change Ventures compares the Baltic states with European leaders in startup funding. The report overviews the highs and lows of the startup funding peculiarities in H1 of 2024, offering valuable insights into the evolving landscape.
The global startup funding landscape continues to recalibrate in the wake of the 2021/2022 boom, and the Baltic region is navigating these changes with mixed results. The latest data reveals a decline in both the number of funding rounds and total capital deployed in the first half of 2024, continuing a downward trend from the previous year.
Decline in Funding Rounds and Capital Deployment. The number of funding rounds in the Baltics fell for the second consecutive six-month period, with a pronounced drop in pre-seed funding rounds. Total capital deployed across the region declined as well, largely due to a reduction in growth rounds compared to the latter half of 2023. The scarcity of Series A capital led to a flat number of seed rounds, though these were predominantly bridge rounds, signaling a cautious approach from investors.
Shift in Pre-Seed Funding Dynamics. While overall funding activity slowed, pre-seed capital is increasingly being concentrated on the most promising opportunities. The median pre-seed round size nearly doubled from H2 2023 to H1 2024, reaching approximately €500k, with significant increases in both upper and lower quartiles. Valuations have jumped correspondingly, driven in large part by AI startups attracting favorable terms at early stages.
Seed Stage Faces Pressure. Seed round activity remained flat, but the median round size declined from about €2 million to €1.5 million, with valuations continuing to fall for the second consecutive period. The median seed round valuation has nearly halved over the past year, dropping from approximately €12 million to below €7 million. With the majority of seed rounds now being bridge rounds, investors are focusing their resources on startups with the best chance of progressing to Series A. Notably, only 10 Series A rounds closed in the last 12 months, compared to 25 during the same period two years ago.
Evolving Expectations for Startups. Data from H1 2024 also highlights a significant shift in the expectations for early-stage startups. Pre-revenue startups have become the norm at the pre-seed stage, with the majority of rounds closing without any revenues. Conversely, the bar for seed stage startups has risen, with higher minimum revenue expectations. However, as the impact of late seed/pre-A stage startups raising bridge rounds diminishes, there has been a decrease in both the median and variance of monthly revenues at the time of closing a seed round.
Conclusion and Future Outlook. The first half of 2024 reflects ongoing challenges in the global startup ecosystem, with the Baltic region experiencing its share of pressures. However, the resilience of Baltic startups is evident in the concentration of pre-seed capital towards high-potential opportunities and the continued focus on quality over quantity in funding rounds. As the region adapts to these shifts, the coming years will likely see increased competition and further advances in later-stage funding.
About the Baltic Startup Funding Report. The Baltic Startup Funding Report by Change Ventures and FIRSTPICK is a semi-annual publication that provides detailed data on funding rounds for startups in the Baltic region, covering Estonia, Latvia, and Lithuania. The report is based on confidential data from over 526 pre-seed and seed rounds closed in the last 5.5 years, representing more than 60% of all rounds at this stage.
For more detailed insights and data from the H1 2024 report, including information on specific funding rounds and verticals, please refer to the full Baltic Startup Funding Report.