Austrian venture capital firm 3VC has just closed its second fund, of €150m, to invest in Series A stage startups in central and eastern Europe and the DACH region. It's the largest Series A-focused fund in Austria.
Eva Arh, the firm's first employee in 2017, has now been promoted to partner alongside Sok-Kheng Taing — cofounder of software development platform Dynatrace, which listed on the New York Stock Exchange in 2019 — who led 3VC’S investment committee as an LP (similar to a limited partner advisory committee) in 3VC's first fund.
Sector and geographic focus
3VC focuses primarily on B2B and B2C software businesses, and describes its investment strategy as "quality over quantity", typically only making three or four investments a year.
It invests between $1m-10m in each startup (the average ticket size is $5m). 40% of the second fund is allocated for follow-on investments.
“We make sure to spend time with every single portfolio company, which would be much harder at the seed stage where 'spray and pray' works well (at least for the investors),” says Arh.
Arh is personally excited about digital health and B2B ”plays” including process automation, collaboration, security or democratisation of data analytics — as well as developments in Czech Republic, Poland and Estonia.
The fund is also focusing more on Web3 infrastructure, with Tatum, a blockchain development platform, being its first investment in the space.
Startups 3VC has backed
3VC previously raised $50m for its first fund in early 2018. It’s invested in 12 companies to date.
Three of its portfolio companies have hit unicorn status:
- Picsart, the all-in-one photo & video editing app with over 1bn downloads, valued at over $1bn
- DeepCode — a cloud native application security provider that enables developers to build software securely — that was acquired by cybersecurity unicorn Snyk in 2020 and is now valued at over $8bn. (3VC is a shareholder of Snyk through the company’s acquisition of DeepCode)
- Gamee — a company creating Web 3, NFT and blockchain-enabled metaverses — which was acquired by Animoca Brands in 2020 and is now valued at over $5bn. (3VC is a shareholder of Animoca Brands through the acquisition of Gamee.)
Its soonicorns (companies approaching a $1bn valuation) include Lokalise, Kaia Health, Storyblok and Avi Medical and Tatum.
Also of note: diversity and sustainability
The 3VC team, currently eight people, has 50/50 gender diversity both on the partner level, as well as in the investment team, significantly better than the representation at top VC funds in Europe.
The firm also says it wants its companies to embrace a more measured approach to growth. “In an economic downturn, we can actively engage with each company, we don't have to mark them green, yellow and red — and then forget about the red,” says Arh. In Fund I, for instance, portfolio company Gamee had a challenging time after being blocked on the app store twice, so 3VC facilitated a takeover by Animoca Brands.
3VC has a clear specialty in the DACH and CEE regions that have, until recently at least, grabbed less attention than the ecosystems of London, Paris or Berlin but have huge potential. This could make it better placed to pick the winners of the regions (where many startup scenes are still at a very early stage) than western Europe-focused funds.
The fact that it makes fewer investments per year than other firms in theory means it has more time to dedicate to each of its startups (Arh says one team member manages four to six companies) — which many founders will appreciate. 3VC has also set a good precedent by having 50/50 gender diversity on partner level and in its wider investment team.