However, the seed and early-stage rounds still receive less funding than in previous years, further reinforcing the notion that the venture markets haven't yet regained their full momentum back.  Investors continue to be cautious, favoring later-stage rounds in key sectors such as AI, Energy, Fintech, Cybersecurity, and SaaS, Vestbee notes.

Global and European Trends

Globally, total VC investments of Q3 2023 reached USD 73 billion, marginally improving on the quarter-to-quarter basis, but still declining by 15% in comparison to last year. Having a broader look, in all three quarters of 2023, startups secured USD 221 bln, which is 41% less than the $381 billion recorded in 2022. In Europe, however, the sentiment is slightly more positive, with a 28% increase in VC spending compared to the previous quarter. The European landscape was particularly characterized by a sustained focus on AI, which continued to be a primary investment sector. It captured USD 1.8 bln—11% of the continent's total funding and nearly one-fifth of the global AI funding pool. Moreover, emerging global trends indicate a growing preference among investors for late-stage rounds, which have seen a 10% year-over-year increase, corresponding with a decline in early-stage rounds.

CEE Funding Overview

As Vestbee reports, in Q3 2023 VC spending in the CEE region reached a plateau, with EUR 560 mln invested across 255 rounds—an outcome mirroring global and European trends. Notably, the downturn trajectory seen earlier in 2023 has stabilized, as the numbers are almost the same as in Q2 2023. Time will tell whether this reflects a more sustainable optimistic approach amongst investors, however, it must be said that they still remain cautious and rather risk-averse. Despite the stabilizing trend, the numbers from this quarter fall short of EUR 1.3 bln invested in Q3 2022, which amounts to almost 56% more. 

It’s worth adding that the funding environment in the CEE region is deeply affected by the availability of public funds and as several public fund programs are reaching their end,  uncertainty looms large over the last quarter of 2023. It is further accentuated by the broader macroeconomic conditions as well as a continuous decline in funding reserved for early-stage startups. A reduction of mega-rounds also points to a strategic shift among investors, as they are rather choosing risk diversification over high-risk, high-valuation deals. 

"In the landscape of Central and Eastern Europe throughout Q3 2023, things largely maintained their course—no substantial downturns, yet no notable surges. Within the CEE, there's a prevailing sense of playing the waiting game, anticipating a catalyst to rekindle excitement among investors. The road ahead presents opportunities, so let's stay alert and observe what the upcoming quarters hold for the CEE," underlines Ewa Chronowska, CEO of Vestbee and general partner of Next Road Ventures.

"The absence of significant mega-rounds in the CEE and the decreased involvement of foreign investors suggests a potential shift in investor preferences and attitudes. Investors seem to be favoring a strategy of diversifying risks, steering clear of the high-risk and high-valuation environment associated with mega-rounds," adds Ewa Chronowska.  

Regional Leaders and Thriving Sectors

In terms of investment volume, Poland, Estonia, and Czechia emerged as leaders, recording 95, 35, and 24 closed investments, respectively. The Lithuanian PV Case secured the largest funding round, EUR 89 mln in Series B, followed closely by SkeletonTechnologies, Preply, Druid, and Hi. CEE investors showed a keen interest in sectors such as Energy, AI, Fintech, Cybersecurity, SaaS, Analytics, and Biotech, aligning with global industry trends. Among the most active VC funds in the third quarter were Vitosha Venture Partners, Spinnaker Alfa, Baltic Sandbox Ventures, Credo Ventures, Hiventures, a16z, Aper Ventures, bValue Fund, and Change Ventures.

More information about the VC scene is available in Vestbee's full report.