Amid the pandemic, some Western investors take a closer look at Eastern European tech companies

Crunchbase and East-West Digital News are teaming up to cover key tech and venture trends from Russia, Ukraine and Belarus. This column by EWDN chief editor Adrien Henni highlights the most notable industry facts and trends in the first quarter of this year.

The COVID-19 shockwave

As in many parts of the world, Covid-19 has had an immediate impact on tech markets across Eastern Europe. While Alexey Burdyko, a prominent Belarusian tech entrepreneur, died from the virus, a variety of startups from this region have fallen into deep coma.

Travelata, an online reseller of package tours from Russia, was salvaged by the EBRD as part of a 1 billion coronavirus funding program designed to support portfolio companies. MeetnGreetMe, a Belarusian startup that aimed to put together travelers and local inhabitants, is trying to pivot to online activities.

Alexey Solovyov, a prominent Moscow investor, expects the most damaged market segments – from travel, to ticketing, to co-working – to consolidate, “offering exits but probably weak returns to investors.” 

According to him, the Russian VC market may fall by at least a third (from nearly $900 million in 2019) as a consequence of the pandemic combined with the recent fall of the ruble.

Some investors have seen in the crisis an opportunity to impose lower valuations. In their majority, however, VCs tend to adopt a wait-and-see position for any new investment. “Relevant data to take an investment decision or negotiate valuations have suddenly disappeared,” says Solovyov.

David Waroquier of Luxembourg-based Mangrove Capital Partners says he is still attentive to opportunities from Eastern Europe, having made a series of investments in the region over the past 15 years. But his firm will now tend to concentrate on supporting portfolio companies in this region like elsewhere. 

Some VCs are more bullish. Dutch investor Bas Godska, one of the most prolific Western investors in Eastern Europe, says he is about to privately close his fourth pre-seed deal since the covid-crisis began – four rounds, in total adding up to several hundreds of thousands of US dollars; with three of the investments concerning Russian- and Ukrainian-founded startups.

“In some cases, covid-19 paradoxically accelerated the process because founders wanted to secure the deal,” he notes.

One of Godska’s new portfolio companies,, is a job platform for tech talents. While keeping offices in Russia, the company has registered in Delaware. In the pandemic context, Godska does not expect this kind of business to take off immediately but believes the 6nomads team “can find their way even in the hardest times.”

Western investors back in the game?

In late March, the US venture firm Princeville Capital made the news with a $50 million contribution to a $150 million round of funding for Russian e-commerce major Ozon. This was the first notable US investment in Russian tech since geopolitical tensions broke out in 2014. 

Other deals confirmed that startups from the region kept some international appeal:

Elementaree secured $5 million in funding

Amid the recent surge in demand for grocery products, Russian food delivery company Elementaree secured $5 million in equity funding from local and French investors. It is now selling discounted “quarantine food packs,” offering its customers to spend epidemic times “without panic.”

Market insiders expect two major new transactions involving Western investors in the next few weeks. A new unicorn may emerge from one of these deals, in the range of dozens of millions of US dollars, providing an early Western investor in the startup with “crazy returns.”

Meanwhile, a VC firm considers launching a new tech fund covering Eastern Europe, on the footsteps of Acrobator Ventures which started activities one year ago

Development finance institutions are also in the game. In February 2020, Germany’s DEG contributed €30 million to a new Da Vinci Capital fund focusing on Ukraine, Belarus, Kazakhstan and potentially Russia. One year before, the Cologne-based institution backed Emerging Europe Growth Fund III, a $200 million private equity fund, the largest one raised in Ukraine in a decade.

Another Western institution considers launching a venture support mechanism to support new technologies in the region.

Whether these moves will be enough to stimulate the Eastern European innovation ecosystems, where venture capital has traditionally been scarce, remains an open question.

Domestic deals and bankruptcies

Very few notable domestic deals have been reported since the beginning of the year in Russia:

Meanwhile, national telecom operator reinvigorated startup fund IIDF with a $32 million capital injection.

Even before the coronavirus shockwave, several bankruptcies tarnished the picture. Several online delivery startups shut down in December 2019 and January 2020. Mobile banking service Rocketbank stopped activities after eight years of an eventful life. Ulmart, the former Russian e-commerce leader, went bankrupt after three years of dire shareholder disputes.

Two notable deals took place in Ukraine:

  • In January, online tutoring platform Preply raised $10 million from a pool of Western European investors
  • In February, online grocery ordering service secured €5 million from CIG, the investment firm of a controversial Ukrainian businessman.

Another important deal ($8.25 million round led by the EBRD) involved meal ordering service Ukrainian-founded startup Allset. However, this company can hardly be considered as still being Ukrainian since it moved to California several years ago and now serves only the US market.

In Belarus, no major domestic deals were reported in the first quarter.

Adrien Henni is the chief editor at East-West Digital News (EWDN.COM, UADN.NET), an international news and consulting agency dedicated to tech innovation in Eastern Europe. With nearly 20 years of experience in the high-tech and venture businesses, he advises a variety of startups, investors and other organizations. He is a regular contributor to industry publications and speaks at conferences in Western and Eastern Europe, Asia, and America. Contact Adrien at

  • Originally published April 17, 2020