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CEE’s Largest Institutional Fund: Gearing up to Back Sector Focused VCs

CEE’s Largest Institutional Fund: Gearing up to Back Sector Focused VCs, TheRecursive.com
Image credit: PFR Ventures
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Despite the year-long delay in receiving the latest batch of EU money which arrived in February 2024, the Polish fund of funds PFR Ventures remained active, using its own capital. The most recent VC funds that collected their checks were Smok VC, Inovo VC, Market One Capital and Radix Ventures.

Backed by the European Funds for a Modern Economy (FENG) program, PFR Ventures is ready to invest ~PLN 2B (€463M) in 40 VC funds by the end of 2025. These investments, averaging €10M each, strategically drive economic growth within Poland.

To understand more about how this fund of funds works and their perspective on Polish startups, The Recursive interviewed Rozalia Urbanek, the firm’s Investment Director. She will delve deeper into this topic at the upcoming 0100 CEE Conference in Prague.

 

Investing in the Unknown

 

Established in 2016, PFR Ventures is the largest institutional investor in Central Eastern Europe.

“We started to think about a strategy of how to inject the money coming from the European Commision into the Polish ecosystem. It took us several months to implement the plan and we signed the first investments in 2018,”

Urbanek recalls.

To date, PFR Ventures has backed +70 funds. To have their commitment, GPs need to tick more boxes, including but not limited to attracting private capital, legal aspects, strategy and a concrete roadmap for providing support to portfolio companies.

“It is important whether the fund is able to provide money, but also will be able to advice on business strategy, finance and will provide access to its network. This is why we are looking for teams that can provide so-called smart money” Urbanek explains.

 

The Exit Game

 

Since 2019, VC investments in Poland totaled ~€28B, as reported in PFR Ventures’s 2023 Market Outlook. Notably, the country is one of the CEE countries with the highest number of unicorns such as Eleven Labs, Allegro, InPost Group, CD Projekt, Pracuj Group, Techland, DocPlanner.

Read more:  Mapping Poland's Vibrant Startup Landscape: Trends, Challenges, and Success Stories

Yet, Urbanek acknowledges room for improvement in the operation of VC funds, particularly in delivering exit strategies.

““In 2018 – 2022 we invested in around 40 funds. I would say that 10% have already proven success stories. They were able to present first returns in terms of exit and expand their investment strategy. Some of them have already managed to raise their next funds.”

To bolster the return percentage, for this investment period, PFR Ventures plans to encourage the VCs in transitioning from the master-of-all to sector-specific, for example greentech, deeptech, AI or life science. Additionally, the organization is fostering the mindset of co-investing with international partners and exchanging know-how and best practices. .

“The successful funds from PFR Venture’s first batch of investments were able to attract other institutional funds like European Investment Fund or private capital. I hope we will see others follow this path,” the investment director comments.

 

Focusing on Poland’s Growth

 

While the primary focus remains on supporting Polish funds, PFR Ventures remains receptive to international applications, with a condition.

“If we invest in international funds, we want them to engage in the Polish ecosystem as our main mission is to stimulate local startups,”

Urbanek explains.

As the startup ecosystem continues to evolve in the CEE region, strategic investors are an important piece of the puzzle. To discuss the latest trends and future strategies, LPs and GPs from across the globe will meet in Prague on May 14-16 at 0100 CEE Conference.

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https://therecursive.com/author/elenaghinita/

Elena is a Startup Community Editor at The Recursive. In other words, she keeps close to the startup ecosystem in CEE and makes their stories heard. She creates educational and informational content about innovation, funding and startup growth.