Startups in Eastern Europe Tap Public Money as Private Investors Bail – The New York Times

PRAGUE/WARSAW — When altFINS’ private backer pulled out of a financing deal in March due to the coronavirus pandemic, the Slovak blockchain startup had another option – publicly-funded venture firm Crowdberry.

After losing out on the original deal in November, Crowdberry managed to secure better terms the second time round, while altFINS got the money it needed.

“This was the path of least resistance and they (Crowdberry) were a very good strategic partner,” said altFINS founder Richard Fetyko, whose company is developing an online platform to trade digital assets.

The episode underlines how some publicly-backed venture firms are stepping up to keep seed money flowing to infant companies in former communist countries such as Poland, the Czech Republic, Slovakia and Hungary as private investors retreat from the region’s nascent startup scene.

“A number of emerging companies will have no other choice but to tap these funds because private money will be very cautious because of the pandemic,” Crowdberry partner Michal Nespor told Reuters.

Before the pandemic, many startups in central and eastern Europe (CEE) preferred private investors, who often offer better valuations and links to global investors in places like Silicon Valley for bigger funding rounds later on, company founders and venture firms say.

But with private seed money drying up, they are increasingly turning to publicly-funded options as they look to create the region’s next $1 billion

Author: Pitching Startup on Review