The majority of Romanian VC funds continued to make investments in 2020 even during the Covid-19 crisis, while a third of private equity funds and business angels made no investments.
Confidence in the long-term growth prospects of the VC and PE industry has remained very positive and the acceleration of digitization resulting from the crisis is seen as a substantial opportunity, according to the European Investment Fund (EIF) market research outcomes discussed during the 4th edition of ‘Venture in CEE’, an online investor event organized by How to Web with EIF support.
The event focused on Europe’s growth potential to fight the negative impact of the pandemic in conversation with established regional players in the venture industry.
According to EIF’s VC, Private Equity Mid-Market and Business Angels Surveys, fundraising sentiment improved substantially last quarter compared to March 2020. While sentiment regarding the number of investment proposals received, and new investments made, deteriorated substantially in October, expectations for the next 12 months improved substantially, especially among VC and PE MM respondents.
The COVID-19 crisis had less of an impact on the investment strategy of VC respondents than it did on private equity funds and business angels. Only 8% of VC respondents made no investments between March and October 2020, while almost a third of PE MM and BA respondents made no investments during the same period. Almost two-thirds of VC respondents invested in both new deals and follow-ons in portfolio companies. Approximately 4 in 10 VC and PE MM fund managers state that their portfolio companies have developed below expectations since March 2020.
The positive dynamics of the local market are very easy to spot if we take a look at some of the local investments, such as the latest round raised by Fintech OS or the acquisition of Green Horse Games. Additionally to these examples, we see local VC funds attracting more funds, as it was the case of the Catalyst Romania II, which has just announced a second closing at almost EUR 40m, with EIF (through JEREMIE) as cornerstone investor.
“Local venture capital funds ensured the continuity of the most successful pre-seed and seed investments, both in 2020 and at the beginning of 2021, and have allowed some emerging Romanian startups to develop internationally, attracting the attention and investments of some reputable global funds.” comments Bogdan Iordache, founder & chairman of How to Web.
VC and private equity mid-market fund managers are optimistic about the current state of business opportunities and expectations for the next period. The acceleration of digitization creates a need for policy measures to ensure that companies that are implementing new opportunities will have sufficient access to finance. VC, PE MM, and BA Survey respondents consider regional and national PE/VC government programs to be relevant, but their implementation speed could be improved.
“The EIF will continue to play a catalyst role for the local and European VC and PE ecosystem in helping companies grow through access to financing, resources and markets. The instruments we manage have helped companies like UiPath and Fintech OS take off.
While these companies currently get the highest profile, dozens more are growing with the type of EIF financial support that provides us with the ability to get much needed resources at the grass roots of the new economy”, stated Pablo Millan, Mandate Manager Equity with the EIF.
Close to 80 companies in Romania have benefitted from investments from the 6 private VC and private equity funds the EIF help establish through resources allocated from the Competitiveness and Regional Operational structural fund Programmes.