Our new series, Meet the Central and Eastern Europe Investors, takes a closer look at the growing venture capital landscape in the CEE region. It highlights key trends, challenges, and opportunities shaping the investment scene, offering insights into the region’s potential for innovation and growth.
We kick off the series with Inovo VC, a Polish venture capital fund that focuses on supporting ambitious founders in Central and Eastern Europe.
Through our discussion with Stefan Krstevski, an Inovo VC investor focused on the Balkan region, we explore emerging opportunities, the role of community-driven ecosystems, and what makes the Balkans an attractive destination for venture capital.
Can we start with a general description of your fund – partners/founders, size, tickets, geography?
Stefan Krstevski: We’re Inovo.vc, a venture capital firm based in Warsaw, focused on early-stage tech startups, particularly in Central and Eastern Europe (CEE), the Balkans, the Baltics + the diaspora. That is, for example, a Macedonian founder based in the US or anywhere around the globe.
We’re managing our third fund at €107M; our team is a mix of ex-founders, operators and investors. We invest up to €4M in our initial ticket, with follow-on investments of up to €17M. We typically invest in pre-seed and seed-stage companies but occasionally do Series A rounds.
What are the verticals that your fund is investing in?
We’re a generalist fund looking to back exceptional founders who aim to build global businesses capable of reaching $100M ARR within 5-8 years – true challengers of the status quo. While we’re open to most sectors, we have particular expertise in areas where our team has direct experience as founders or executives (marketplaces, AI, data infrastructure) or where we’ve made successful investments before (developer tools, healthcare).
What are some successful examples of CEE startups you’ve invested in?
Our goal is to help founders build companies that can scale globally and reach $1B in valuation. We’ve backed 50+ companies so far; a few examples:
- Booksy: A SaaS-enabled marketplace for beauty services;
- Infermedica: AI for healthcare diagnostics and triage;
- Preply: A global marketplace for language learning;
- Spacelift: A CI/CD platform for infrastructure-as-code;
- Tidio: A live chat and chatbot solution for micro-businesses;
They raised over ~$500M after our investments from top global funds, such as a16z, Insight, Google’s Gradient Ventures, etc.
What specific qualities do you look for in a founder or founding team?
First and foremost, we’re drawn to founders who dream big and have a clear vision of building companies that can reach $1B+ in valuation and execute fast. We’re not interested in safe bets – we want to work with entrepreneurs ready to build category-defining products/leaders. Some specific positive signs that we look for are:
- Risk takers who move fast forward
- Hustler mentality + hacker founder traits would be ideal
Do you see any trends in CEE where startups are focusing more in the last few years?
It often depends on the country or specific region, often based on R&D centres or bigger companies based in a particular country. For example, Poland has a robust AI/ML ecosystem (e.g., founders/top tech executives of OpenAI are Polish), and Serbia and Croatia have very strong developer tools; each country has a unique edge.
The most striking trend is the AI surge – in Q1 2024, AI startups captured 45% of all venture capital investments in CEE. This isn’t just a flash in the pan – over the past five years, AI companies have consistently attracted about 15% of total regional investment. Another key trend we’re noticing is the pivot towards deep tech. Our region’s engineering talent pool is really stepping up here.
What’s particularly interesting is how the funding landscape is evolving. Despite the global VC slowdown, AI investment in CEE has remained robust. Since 2021, we’ve seen €5B invested in CEE-based AI companies. Poland, Greece, and Croatia are leading this charge, accounting for over 75% of AI funding this year.
How has the geopolitical situation in the region (e.g., the war in Ukraine) influenced your investment strategy or risk assessment in CEE?
The key thing to understand is that we haven’t changed our risk appetite. The fundamentals that made CEE attractive – exceptional talent pools and strategic location – remain unchanged. If anything, the current situation has highlighted the region’s resilience and adaptability.
What’s particularly interesting is that the region has shown remarkable resilience despite these challenges. Take Ukraine – even during wartime, they produced two unicorns in 2022. The CEE region as a whole produced eight unicorns that year, including companies from Bulgaria, Croatia, Czechia, Estonia, and Lithuania.
The key thing to remember is that this is a temporary spasm in what remains a fundamentally strong growth story. The region’s fundamentals haven’t changed – we still have the technical talent and the infrastructure, and now we’re seeing even more opportunities in new sectors.
How has the global economic situation and the downsizing in the tech industry affected your fund or investment strategy?
This trend helped our ecosystem because we see many people from big tech companies deciding to start their own ventures. We’re particularly excited about people who were born in Central and Southeastern Europe, went to work at places like Google in the US, and are now coming back to their home region. They bring with them the best practices, deep knowledge of building top-tier enterprise software, experience in taking things from 0 to 1, and access to valuable networks.
We believe we’re in the middle of a technological revolution, so it’s fantastic to see more of these people building new things, whether as founders or joining as key employees.
What will be the biggest catalyst for growth in the CEE startup ecosystem over the next 5-10 years?
Honestly, I wish I knew. But let me break this down simply – based on the numbers, we see three major catalysts driving CEE’s growth in the coming years.
- First, AI is already transforming our ecosystem. In Q1 2024 alone, AI startups captured 45% of all VC investment in CEE. We’re seeing this trend accelerate, with over €5B invested in CEE-based AI companies since 2021.
- Second, we’re witnessing unprecedented levels of international investor interest. Global firms like a16z, Toyota, and Saudi Arabia’s Public Investment Fund are now actively investing in CEE startups. This isn’t just about money – it’s about bringing global expertise and networks to our region.
- Third, and perhaps most importantly, we’re seeing a maturation of our support infrastructure. Combining this with our strong technical talent pool and lower operating costs gives us a perfect storm for growth.
But look, we need to be realistic. The ecosystem still faces challenges. Our startups typically receive smaller funding rounds compared to Western Europe, and we’re still working on talent retention. However, we’re seeing positive signs – the total enterprise value of CEE startups has grown 2.4x since 2019, reaching €213B in 2023.
The key will be maintaining this momentum while addressing our ecosystem’s gaps. We need to focus on building stronger local support systems and regulatory frameworks that make CEE more attractive for both founders and investors.
What advice would you give to CEE founders seeking to secure funding in such a competitive global landscape?
TL;DR: Be a hustler with a big/risky vision, focus on unit economics, and have a clear AI/deep tech angle if possible.
When approaching VCs, you’ve got to be crystal clear about why you are the perfect person to build this, why you’re raising it now and what you’ll achieve with the funding. But here’s the thing – don’t just slap ‘.ai’ on your domain and expect a higher valuation. We can see through that!
One really important thing – do your homework on the funds you’re approaching. We often see founders pitching hardware companies to VCs who’ve never touched hardware. That’s just wasting everyone’s time. Check their portfolio and make sure there’s a fit.
Oh, and one last thing – never lie about having term sheets or deadlines. The VC community is incredibly small, and we all talk to each other. Trust is everything in this business.
What is the biggest red flag you have when talking to founders/startups?
As stated before, trust and honesty stand out as the most critical or #1 issue. When founders start dodging questions or embellishing their numbers, it immediately sets off alarm bells.
You see, we can work with most challenges – whether it’s an unproven business model or gaps in the team – but dishonesty is a deal-breaker. When founders aren’t transparent about their metrics or try to hide important information, it signals deeper issues that could seriously impact the investment relationship.
Let me give you a concrete example: if a founder claims they have “no competitors” or provides unrealistic assumptions, it shows they’re either not being truthful or haven’t done their homework. Both scenarios are problematic.
The thing is, we’re not just investing money – we’re building a long-term partnership. If we can’t trust the information we’re getting during initial conversations, how can we trust them with millions in investment? In our experience, successful founders are the ones who can acknowledge their challenges while being completely honest about their numbers and progress.
What’s the best way for interested founders to pitch to you?
The best way to connect with us is through a warm introduction from another respected/top founder in our network. When a founder I hold in high regard recommends another founder, it immediately adds significant credibility.
If you don’t have access to our network for a warm introduction, you can reach out directly via email at [email protected]. When writing to us, be direct and specific about your vision. We want to understand the problem you’re addressing and your path to monetisation. The market potential is particularly important to us. Instead of delving deep into product features, explain why customers will pay for your solution and how you envision scaling this into a $1B business. You can find numerous effective cold email templates for investors online to help structure your message.
We love honesty (as stated previously). If there are gaps in your team or challenges you’re facing, be upfront about them. We’d rather hear directly from you than discover issues later. This builds trust and shows maturity.
One thing that really impresses us is when the founders have clearly researched our fund and portfolio. Show us you understand our investment thesis and explain why we’re a good fit. And don’t just ask for money – think about what else we could offer through our network and expertise.
Remember, we’re potentially starting a long-term partnership here! We’ll be spending a lot of time together, so beyond the business case, we need to see if there’s a personal fit. Be yourself and let your passion for the business come through naturally.
