In H1 2024, the number of venture capital (VC) funding rounds in the Baltic region continued to decline, dropping from 82 rounds in H2 2023 to 72 deals.
Total capital deployed also fell, decreasing from EUR 541.8 million in H2 2023 to EUR 349.1 million.
These findings come from new data released by Firstpick and Change Ventures, two early-stage VC funds, and mirror global VC funding patterns, with total investment declining sharply from record highs in 2021-2022, plummeting from about ~US$300 billion secured in H1 2021 to US$126.6 billion in H1 2024, data from CB Insights.
The Baltic Startup Funding Report H1 2024 update highlights that this regional decline was mainly driven by the drop in the number of pre-seed funding rounds, the drying up of angel funding, and fewer growth funding rounds.
In H1 2024, 32 pre-seed rounds were closed in the Baltics, down from 41 deals in H2 2023. However, despite the smaller number of rounds, the total capital raised at the pre-seed stage increased, with EUR 18.5 million secured in H1 2024 compared to EUR 16.23 million in the previous half-year.
The median size of pre-seed rounds almost doubled, rising from EUR 305,000 to EUR 482,000 in H1 2024. This increase was partly driven by the large rounds taking place in the artificial intelligence (AI) space, following global patterns.
According to KPMG, AI was the dominant investment theme in global VC activity during H1 2024, with startups such as CoreWeave, xAI, Mistral AI, and DeepL raising substantial funds due to the high costs involved in developing and delivering advanced AI models.
Growth-stage funding, meanwhile, experienced a decline in the Baltics, with six rounds recorded in H1 2024 and totaling EUR 233.08 million. The figures represent a significant decline from nine rounds and EUR 425.65 million in H2 2023.
Estonia leads the Baltic region
In H1 2024, Estonia continued to lead the Baltic region in VC activity, closing 34 rounds out of the 72 total rounds or nearly half of all the deals. For Series A and growth rounds, Estonia recorded nine deals, putting the country on track to surpass last year’s 13 growth deals.
Data from Startup Estonia reveal that EUR 238.9 million was invested in Estonia’s startups in H1 2024, with a particular focus on the fintech, energy, security and food sectors. Notable fintech deals in Estonia this year include Tuum’s EUR 25 million Series B, Mifundo’s EUR 2.5 million round, and Softloans’ EUR 1 million pre-seed.
2024 has also been marked with successful acquisitions in the Estonian fintech sector. In April, Arf, a settlement banking platform from Estonia, merged with Huma Finance, and in July, German digital tax filing platform Taxfix acquired Estonia’s TaxScouts.
Lithuania also showed notable VC activity in H1 2024, securing 24 rounds or a third of all Baltic VC rounds. Notable fintech rounds this year include Finbee Verslui’s EUR 35 million VC round, Bourgeois Bohème (BoBo)’s EUR 6.5 million seed round, and FreeBnk’s US$3 million funding.
A hub for unicorn minting
The Baltic Startup Funding Report H1 2024 notes that while VC funding has declined substantially over the past year or so, the region remains competitive in tech innovation, producing funded startups per million capita (180) at levels comparable to the UK (191) and Nordic countries (~200). Estonia, in particular, ranks just behind Israel in terms of funded startups per million inhabitants (421), far outpacing the European average.
The Baltic region also boasts two unicorns per million people, surpassing countries such as Finland (0.9), the UK (1.6), and Germany (0.7) in this metric. Estonia currently has one of the world’s highest number of billion-dollar startups per capita at 5.4, a close second to the “startup nation” Israel at 10. Notable billion-dollar companies from Estonia include Wise, Bolt and Skype.
Featured image credit: edited from freepik
