London-based Untitled Ventures has raised a new, €100m fund focused on deeptech startups founded by eastern European entrepreneurs who have or are looking to relocate their business to western Europe and the USA.
In particular, the fund is targeting startups from politically unstable countries like Ukraine and Belarus.
“The most talented programmers are right now from Belarus [and] they all want to leave,” Oskar Stachowiak, one of Untitled Ventures’ managing partners, tells Sifted.
Deeptech, deep talent
This is Untitled’s second fund. The first, which was just €5m, was invested into 26 startups with Stachowiak estimating a seven to eight times cash return on their initial investments. They hope to replicate that now with a much larger amount.
This time around priority is being given to business-to-business AI-powered startups with proven traction emerging from areas like the Baltics and the Commonwealth of Independent States (CIS), which includes Russia and Belarus, as well as those looking to disrupt agritech, medtech, robotics and data management industries.
“We are looking for unique teams to help them to move and start selling their tech solutions abroad,” Konstantin Siniushin, Untitled Ventures’ other managing partners, tells Sifted. “We have accumulated a lot of experience in effective seed investments in similar projects during operating our first fund and have now created a special new fund to scale up previously tested hypotheses in Europe.”
Location, location, location
The focus on eastern European entrepreneurs who have or want to relocate west is an intriguing one, given the growing sense that startups no longer need to be based in Silicon Valley or cities like London to thrive.
Stachowiak agrees that it is no longer necessary for startups in countries like Poland to move to cities like New York, London or Berlin to become global players. “No one cares that actually you were from Poland or Romania, but with the region we’re more focused on, the political issue is there,” he adds.
For those operating out of more unstable countries further east there are major business challenges to consider.
Stachowiak says that for startups operating in areas like cybersecurity there are important trust issues with being based in a country like Belarus or Ukraine. “Imagine selling cybersecurity and you're saying you are a Ukrainian company? You actually have to rebrand yourself,” he says.
There are also plenty of logistical challenges that could strongly impact a startup operating from this region, even if it has a more straightforward SaaS offering.
“Say a multinational hires these people and then something goes wrong [politically] and now the systems are frozen — you can’t pay the invoice because their banks are under sanctions. There’s a very practical reason why these companies, especially now, need to leave,” he says.
Stachowiak tells Sifted that one reason Untitled is looking at the Baltic States and countries like Poland is the rise in startups and entrepreneurs who have moved there in recent years from further east, with Belarusian entrepreneurs coming to the Baltic States and Ukrainian companies moving to Poland or the Czech Republic. “That frontline of the EU is very attractive for all of these candidates to come in,” he says.
Even so, these startups often have difficulties receiving funding from local investors, he says, because they can have a lot of baggage in terms of their previous investors, lack of bank accounts and so on.
“Our mandate is more flexible where we say we do the heavy lifting in terms of cleaning up the cap table and the corporate governance and so therefore we get rewarded with a different valuation when we enter."
The team behind Untitled has decades’ worth of combined experience operating in the region, with offices in London, Moscow and Riga, and claim to offer a bridge when it comes to pre-seed and seed round investing.
“No matter how much founders love their homeland, it is impossible to make decent money operating only in a domestic market and it is difficult to raise investments from European and US funds as they can't evaluate projects from Eastern Europe as well as venture teams from Eastern Europe can,” Siniushin argues.
He adds that Untitled has a track record, gained through its first fund, of helping structure businesses in countries like Luxembourg, Germany, Britain and Portugal, and also physically relocating startup teams so that they are perceived as fully resident in Europe and globally.
Looking ahead, the team already have three startups that they’re going through the due diligence process for and plan to bring three companies from their existing portfolio into this fund.
They've also partnered with EMERGE, a tech conference based out of Belarus.
“We believe in economic efficiency and at the same time we fulfil a social mission of bringing technological projects with a large scientific component from the economically unstable countries of the former USSR,” Siniushin says.