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For Austria’s venture capital and start-up ecosystem, 2021 has proved to be a landmark year: the emergence of the country’s first tech unicorns — companies valued at more than $1bn — and many other sizeable fundraisings point to money and talent flowing into the country.
Since 2018, Austria has experienced a boom in venture capital backing for start-ups. In 2020, new businesses in the country took investments totalling €234m, according to Florian Kandler, editor-in-chief of Startup Report Austria — almost three times the amount invested in 2016. This year’s numbers are likely to surpass this significantly.
On August 17, Vienna-based cryptocurrency trading platform Bitpanda announced that it had raised $263m in Series C funding, at a valuation of $4.1bn — more than triple its value in March.
It was the third sizeable fundraising announced in Vienna in less than a month. Refurbed, the leading marketplace for refurbished electronics in the German-speaking region, announced $54m in Series B funding in early August, while logistics and warehousing platform Storebox raised €52m in July. In March, online education platform GoStudent raised €205m, at a valuation of €1.4bn.
“We have been waiting for our first unicorns to come out, and this year we’ve had two, with Bitpanda and GoStudent,” says Oliver Holle, co-founder and managing partner at Vienna-based venture capital fund Speedinvest, which focuses on the seed stage of funding.
For Holle, it is an indication of how quickly Austria’s start-up scene is growing, with much of it based in Vienna.
“With these two, I think we have now arrived, and we have a handful of significant scale-ups that really create a fertile ground for everything to follow,” he says. “We have five to 10 in Vienna that all have a couple of hundred people in their organisations.”
But Austria’s start-up ecosystem still lags behind many of its European peers.
Most of the money flowing into Austrian start-ups right now, especially for later-stage companies, comes from outside the country — highlighting the appeal of the country’s start-ups but also the lack of local funding options.
According to Nina Wöss, chair of the Austrian Private Equity and Venture Capital Organisation (AVCO), 90 per cent of VC money invested in Austria over the past six months came from international investors and funds. Austria-based venture capital and private equity funds combined managed only around €600m in assets.
This was not always the case. Wöss says that, around 15 years ago, there was quite an active venture capital and private equity scene in Austria, but the 2008 financial crisis knocked out most of the funds. “At one point, there were no venture funds left that were active and trusted by the community,” she says.
Today, around eight are actively deploying money — a number that Wöss describes as still “far too little”.
In some ways, the pandemic has helped to make initial contact between start-ups and venture capital funds easier, since most communication is now online, says Speedinvest’s Holle. However, he points out that most of the money has been going to proven founders in more established start-up ecosystems, “which makes it more difficult for fringe ecosystems like Vienna”.
Even so, Holle envisages the start of a positive funding cycle in the country, with earlier founders beginning to invest in other, newer start-ups. “The Bitpanda founders are investing,” he notes. “The guys from [German neobank] N26 are coming back to invest. That’s all positive.”
While Speedinvest has been around for more than a decade, 3VC is part of a newer wave of venture capital funds that have set up in Austria in the past few years.
“We started investing in January 2018, focused on the Series A stage because we saw there is Speedinvest doing seed deals but there is basically nothing for follow-on rounds,” explains Eva Arh, a principal at 3VC. “Puzzle pieces are coming together and I see a lot more interest from funds from other countries looking at the Austrian ecosystem,” she adds.
3VC, which raised $50m for its first fund, is working on a second fund, which will be at least twice that size.
Arh also views Austria as a gateway to central and eastern Europe: “I think here we are well positioned to invest in those countries.”
For start-ups operating out of Vienna, the outlook is very different from only a few years ago.
“When we started the company, four years ago, there was basically no start-up scene,” says Peter Windischhofer, co-founder and chief executive of Refurbed.
“There were a couple of bigger companies who maybe had a Series A round of a couple of million dollars. This year, there have been multiple rounds of $50m or more, including ours. Of course, it’s not at the level of Berlin or London, but it’s going in the right direction,” he says.
Still, according to Windischhofer, funding after seed rounds is still hard to source in Austria without looking to international investors.
“There’s a lack of capital across every stage, but everything beyond seed is extremely tricky to get capital from Austria,” he says.
Nevertheless, that is unlikely to hinder the growth of the ecosystem, he argues.
“Of course, it would be beneficial to have these [later stage] funds in Austria, but it’s not necessarily required,” he says. “Even if you look at Germany, which is obviously a much bigger ecosystem, you also don’t have these big growth funds that will fund a Series C or so on.”
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