In the current challenging landscape of startup fundraising, understanding the evolving expectations and strategies is crucial for both founders and investors. This was the focus of Endeavor Romania‘s event that took place today. The meeting was attended by Valeri Petrov, Partner at the Bulgarian VC fund Eleven VC, and Peter Latos, Head of Strategy & Transactions at EY Romania, together with an audience of Romanian startup founders.
The discussion covered heated topics such as what VCs are looking for nowadays, why CEE lacks more exits, and how founders should plan the fundraising process.
Due diligence is a two-way process
When choosing an investor, founders should pay attention to investigating who’s behind the capital, advised Valeri Petrov. By talking to the fund’s portfolio companies, especially those that have exited, founders can gain a comprehensive understanding of the investor-founder relationship. This reciprocal diligence helps ensure alignment and mutual expectations, fostering a healthier, more productive partnership.
Closing a round can take 8 months
Another challenging aspect is the increased difficulty and time required to secure funding nowadays.
“If some 2-3 years ago a round could have been raised in 4 months, now it takes on average 8 months,” Petrov noted. Also, the metrics have changed. “Previously, a Series A was raised at €1M ARR; now it’s more likely to be around €3M,” he added.
This combination of factors has likely compelled startups to be more cautious about their runway and fundraising process.
This tightening of criteria is partially driven by the pressures on VC funds themselves. For a VC to successfully raise subsequent rounds, they must demonstrate returns to their LPs. Without showing tangible results, these funds may struggle to secure further investment. Eleven Ventures, currently investing from their third fund and preparing for a fourth, exemplifies the ongoing effort to meet these heightened expectations.
However, there is also good news, at least for Romania and Bulgaria. Based on a recent analysis by EY, Peter Latos shared insider information on the CEE region, highlighting that Romania ranks second only to Poland in terms of investment attractiveness, particularly in general M&A deal volume.
The fact that both Romania and Bulgaria still have allocated funds for PE and VC investments from the EU’s fund might ease the funding scene as we progress through this year. Romania boasts €400M available managed by the European Investment Fund (EIF) Romania, represented by Camelia Dragoi. Bulgaria has €272M managed by the Bulgarian Fund of Funds.
A pinch of self-confidence can only help
Shifting focus from finances to mindset, the discussion on self-confidence among founders left the audience with some food for thought. Asked about a common thread he sees in Eleven’s successful portfolio companies, Petrov mentioned that founders from the region who have succeeded often exhibit an extra dose of self-assurance and confidence. Coupled with meticulous preparation and strategic planning, these qualities significantly influence fundraising and growth outcomes.
