The launch of the Slovak blockchain is a good example of the pandemic development of venture capital in Central and Eastern Europe (CEE) in a new Reuters report on 31 July.
In the former East Bloc, where project funding reached almost $ 1.6 billion in 2019, uncertainty during the COVID-19 crisis has had a major impact on the start-up sector, especially when it comes to early-stage agreements.
Alftins, a Slovak start-up that develops an online platform for trading digital assets, recently received funding from the publicly funded Crowdberry. The latter had previously skipped a copy of the agreement last autumn, but could reportedly achieve better terms this time.
Alfetten's founder Richard Vetiko told Reuters that securing funding from Crudbury was “least resistance” at a time when publicly funded investment capital appears to be stepping in to help the industry weather the epidemic.
“A number of startups will have no choice but to take advantage of these funds because private foundations will be very wary of the epidemic,” said Michal Nesbur, a partner at Crudbury.
Market participants “still waiting to see what happens”
A significant part of the capital behind public venture capital funds such as Crowdberry in the CEE region comes from the European Investment Fund. Chief of Staff Michel Cossina said:
In times of crisis, limited partners can reduce the appetite for this asset class, and in some cases, they may collapse or try to renegotiate short-term debt. In this sense, public capital in the region is good for start-ups, because with open sources, the money stays there.
The report notes that before the epidemic, private foundations and their promises of ties to Silicon Valley were a more attractive route for start-ups in Central and Eastern Europe. But state-funded alternatives, such as the Czech company Nation 1, claim they can now provide “protection and benefits”, according to general partner Martin Podoki.
“We do not expect the death of any venture capitalist here,” Bodoki said.
The report also highlights the role of the Polish state-owned company PFR Ventures and the Hungarian state investor Hiventures.
The latter was already the most active investor in European companies last year, and has now increased funding for start-ups during the epidemic, according to EO Bence Katona.
Catona said market participants are not taking any risks now and said: “I see that they are waiting to see what happens in the next three months.”
In contrast, he noted, Hiventures “made several investments during this period. It was a stressful time for us. ”
In a recent Cointelegraph article, Celsius Network CEO Alex Machinski analyzed the current state of venture capitalists. He explained that industry-leading crypto-financing models, especially proposals driven by societal principles, can provide unique benefits for new projects compared to their capital competitors.