500 Emerging Europe raises €70 million fund for CEE startups

500 Emerging Europe raises €70 million fund for CEE startups

Istanbul-based venture capital firm 500 Emerging Europe has raised more than €50 million for its second fund, which is targeting a €70 million closing, to invest in Central and Eastern European startups ( EEC), from the Baltic countries to Turkey.

The VC, formerly known as 500 Istanbul, has decided to change its name to reflect its shift in focus to the wider CEE region.

It is yet another example of an international venture capital raising capital with the explicit goal of investing in CEE startups, despite the tense geopolitical situation and bleak economic outlook. This week American VC ffVC announced a $50 million fund to support Ukrainian entrepreneurs, while the Spanish firm Demium is also doubling the region.

500 Emerging Europe will invest in very early stage projects, issuing checks of up to €1 million for 5-10% ownership stakes. It also plans to open an office in one of the CEE countries in the coming months.

population paradox

Until now, the company has primarily focused on Turkish startups, but it also has a history of investing in the wider CEE region, backing the likes of Polish edtech Village Network and Hungarian software training platform Avatao.

With the new fund, 500 Emerging Europe wants to strengthen its position in the region, with half of the investments still going to Turkey and the other half to the CEE countries, especially Poland, Romania and the Baltic countries.

Enis Hulli, the company’s general partner, says the guiding idea behind the new fund was something he calls “the population paradox,” the phenomenon where countries with smaller populations produce more unicorns. He thinks this is because startups can’t rely on their small local markets, but have to sell immediately globally. There are many such markets in CEE.

“Emerging Europe has the potential to create more unicorns than France, Germany and the UK combined, easily, just because those companies are going to be global from day one,” he says. It also helps, he says, that among seed investors in the region, 500 Emerging Europe has an unparalleled connection to Silicon Valley through its parent company, 500 Global, which is based there.

Hulli also believes that the geopolitical challenges in the region actually strengthen the case for investing there.

“Everything that is happening geopolitically in the region not only generates more entrepreneurial spirit, but also pushes entrepreneurs to be even more global and hedge their local risks,” he says.

The fund will invest in startups from any sector, but Hulli says the best founders in the region tend to follow global trends, such as gaming or machine learning.

“We have eight investments in development tools infrastructure, of which five are machine learning operations companies. So it’s not that we have a great machine learning operations thesis, it’s more that the great entrepreneurs of this time see that great trend coming,” he says.

Looking at talent, not geography

Despite this new geographic focus and new name, Hulli says the new fund’s thesis is not “Emerging Europe” but “Emerging Talent”.

“The core thesis of the fund is an emerging talent thesis. This is different from investing in emerging markets,” she says. “If you look at the other funds, like in Africa, Southeast Asia or Latin America, people want to invest in that region because they believe in that region. This is not the case with Central European funds. They believe in talent from that region, but they want that talent to build global companies,” he says, noting that the firm is just as interested in local startups as those founded by the countries diaspora.

“We are not trying to find the best talent in this region. We are trying to find the best talent from this region globally.”

Zosia Wanat is the Central and Eastern Europe reporter for Sifted, based in Warsaw. She tweets from @zosiawanat

Correction: A previous version of this article said that this is the third fund of 500 Emerging Europe

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