More of EGV’s startup investment rounds to exceed EUR 1 million

Cristian Munteanu, founder & managing partner of Early Game Ventures, talked to Business Review about ongoing actions to raise a new fund, the investment strategy for the EUR 26 million EGV Fund I, and the potential impact of the Silicon Valley Bank failure on Romania’s startup ecosystem. Munteanu is optimistic about the growth potential of startups in Central and Eastern Europe (CEE) and sees it as the most promising region for early-stage firms that want to scale up in the coming years.

By Ovidiu Posirca

Is SVB's collapse posing any kind of risk to the European startup sector?

SVB played a leading role in the American startup ecosystem and, by extension, internationally. It was the go-to bank for tech companies, the main financial institution in the startup industry, and a substantial investor in venture capital funds as well. The collapse of SVB sent shockwaves worldwide, including in the European startup sector. European startups that were also active on the US market were severely affected, but state interventions were fortunately prompt, so the situation did not escalate.

What are the core differences between US-based and Romanian-based lenders in terms of business relationships with startups?

The difference is quite simple, unfortunately. It is simple in the sense that there are no startup lenders in Romania. Startups are young, largely still unproven companies, with almost no assets that can act as col- lateral. Such companies are considered too risky by traditional lenders such as banks. Additionally, most banks in Romania are retail-focused, specialising in granting consumption loans and real estate mortgages.

Historically, innovation financing has moved from banks to VC investors; this is why Romania needs more capital to be made available via VC funds.

Which industries are dominating your startup investment portfolio? Are there any emerging niches in which you aim to increase your presence?

At Early Game, we have a well-diversified portfolio of tech companies. We’ve invested in enterprise software, cybersecurity, education, consumer apps, AI, mobility, and travel, to list several of the industries in which we are active. We are still looking to deploy capital, and if I had to single out a few verticals of interest, I would mention agritech, AI, and deep tech.

How much has Early Game Ventures invested in startups to date? Do you have any plans to attract new funding?

EGV Fund I is EUR 26 million in size. We have been deploying capital from Fund I since January 2019 and will keep investing until the end of this year. In parallel, we are rais- ing EGV Fund II, which will be significantly larger and have a more generous geographic scope. But the investment strategy will be maintained; why change something that works well?

Will the layoffs in large US tech companies have an impact on the startup ecosystem? Will it have an impact on the overall investment sentiment when it comes to tech startups?

The tech industry, mainly the second-tier companies, will immediately absorb the employees that are laid off by big tech—although this will not be the case for remote engineers from CEE. These remote workers will return to their domestic markets to look for jobs. Some will be able to find a new job; others will start new companies or join startups. Overall, I am optimistic regarding the effects of this labour market restructuring.

In which segments does Romania's startup industry have ample room for growth?

The tech industry has a bright future in Romania. It’s already a significant contributor to the state budget, so it has plenty of room to grow in all verticals and industries, be it software engineering, tech support, outsourcing or personnel leasing.

What is the average investment ticket at Early Game Ventures?

Almost a year and a half ago, I carried out an analysis of our activity, and the result was that the average ticket we had invested was around EUR 550,000. Since then, our investment rounds have increased in size, and our most recent three or four investments were with macroeconomic cycles. Good startups don’t only show up when the weather is good; on the contrary, many unicorns have been born in the most troubled of times, during deep crises and economic downturns. all above EUR 1 million. I expect this trend to continue.

Is Romania's economy healthy enough to stimulate the creation of new startups this year?

New startup creation is inversely correlated

But is the market itself deep enough, in good times and bad? That is a good question. Once again, I am optimistic about the tech industry's future in Romania and, largely, in CEE. In my opinion, this is the most promising region in Europe in terms of prospects for economic growth in the coming years.