Pandemic has created new opportunities for Baltic startups

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baltic startups are positively affected by the pandemic, reasearch shows

If you need someone to get your spirits up about the new year, we suggest you chat up with some Baltic startups or investors. From our Baltic Startup Scene report insights, they seem to have a rather optimistic outlook for not just this year, but the next three. And even though investors are more cautious, they hold a positive, if not even excited mindset for the future.

Pandemic expectations vs reality

Investors were expecting, and maybe even hoping, to see lower valuations when Covid-19 hit. But that has not actually happened. Some of the Baltic startups have proved their strength in battling the pandemic so well in terms of sales and business traction, that now they can use it as a good argument for even a higher valuation. Also, the availability of a lot of “dry powder” on the investor side creates competition and more favorable conditions for the startups’ fundraising. 

There were both local and foreign investors answering the survey. All of them appreciated the solid national legislation and the strong startup ecosystem in the Baltic region. Other positive aspects that have stood out to them about Baltic startup founders are straightforwardness, humbleness, high engineering competency, and ambitiousness. 

As for the funding – after several years of consistent funding growth for all Baltic countries, 2019 saw a reduction of total funding across the board. That being said, H1 of 2020 is outperforming H1 of 2019, indicating a resurgence of startup funding growth, despite the onset of a global pandemic.

Pandemic has created new opportunities for Baltic startups

To get an even better overview, we also discussed the report insights with some active investors: Yrjö Ojasaar from Change Ventures, Dilek Dayinlarli from ScaleX Ventures, and our own Portfolio principal Marijus Andrjiauskas. We asked what they thought the future would bring to the Baltic Startup Scene, both long-term and short. 

Locally active investors see an positive impact from the pandemic

Yrjö Ojasaar implies that the pandemic has leveled the playing field for Baltic startups. Now that everything and everyone is forced to stay online, no founder has to struggle and spend their scarce resources on flying out to and wooing potential investors with fancy dinners or extravagant surprises. Partnerships are now formed on more objective grounds. 

“We’re all equal in the eyes of Zoom. Baltic startups are now even with others. And it looks like they’ve learned how to do long-distance sales. That’s something that has been lacking in this region before.”

Yrjö Ojasaar, Investment Partner in Change Ventures

Similar acknowledgement on mindset and situation change was observed also by startup founders. 

“In terms of communication, the whole world is now closer than ever. Even though you might physically be further away from your closest investors, it’s easy to invite many of them into one single conference call. Even over multiple time zones.”

Mikus Opelts, CEO at Giraffe360

Marijus, Portfolio Principal at SWG, says that the future is happening now. Even if we have some tougher months coming at us first. The ecosystem is still moving forward and the pandemic has created completely new opportunities. The ones who were bold enough to jump on those opportunities are now seeing great payoffs. 

External investors are also eyeing Baltic startups

“Many investors are looking for deals in the US, where valuations are through the roof. But if you have good English and an international mindset, you’re already a good company and have a bright future ahead of you. The money will find you.”

Dilek Dayinlarli, Founder of ScaleX Ventures

Just like others, Dilek Dayinlarli, Founder of ScaleX Ventures, feels positively hopeful about Baltic investing opportunities. Technology startups are flying through the roof on the stock exchange. She hopes that the same will also happen with early seed startups. But not just that – she’s coming from Silicon Valley, which is expensive and where the valuations are incredibly high. Looking at the Baltics, she says that a lot of external investors are also searching for global opportunities. They’re on the lookout for loyal startups with reasonable valuations and high engineering skills to help them create success stories by bringing ScaleX’s global network and global growth playbooks. The majority of the Baltic startups already tick off all those boxes.

“Baltics are unique as we have the Soviet heritage and yet we’re also very Nordic in our approach to things. Yet we don’t have the financial cushion which would allow us to sit back and relax. That puts our startup ecosystem in a good place – it’s small but mighty. Being small gives us an incredible foundation to move and adapt faster.”

Zane Bojare, Head of Marketing & Communications in SWG

About Baltic Startup Scene report

In 2020 we released our third and largest-ever release Baltic Startup Scene report. More than 1000+ people have downloaded a copy since its release a month ago! Since the beginning, we’ve done it with our long-term partner EIT Digital, to ensure that it includes the most in-depth insights and emerging trends. This time we had support from multiple other ecosystem and content partners as well, such as Accenture Latvia, The UK Department for International Trade, Crunchbase, Change Ventures, Startup Estonia, Investment and Development Agency of Latvia (LIAA), and Startup Lithuania, as well as 70 experts and contributors!

Watch the whole panel discussion on YouTube.