In ‘European PropTechs in numbers per Countries & Regions’ which we released on 29^th June 2021, we outlined the number of PropTech companies in each European country, and saw the weight each geographic region has in PropTech. Hence, Eastern Europe’s (EE) result is higher than South Europe’s (SE) one. If we add up the missing information for Hungary and Poland, we will get to a number which is very close or surpasses the number of PropTech companies in the Nordics or the DACH. Obviously, it is a grievous mistake to underestamate EE in PropTech.

This is the question we ask ourselves when undertaking this short research.

Why do we pay such special focus on this issue?

Axeleo recently released their European mapping of PropTech. It’s astonishing to see how few PropTech companies are being mapped in EE. It’s the point to state that not only Axeleo has detected so few EE PropTechs. We have seen such meagre indicators provided by other WE organisations, too. One might think that a possible reason is a low-tech level in these countries. However, any well-educated guy knows that EE countries stand out for their highly-qualified (low-wage) IT developers. Obviously, this cannot be a sane reason. The key is that Axeleo’s mapping includes PropTech companies that have either approached the VC fund or the fund approached them. So, these are companies which search for external funding.

And here’s the reason why there are so few PropTechs mapped in EE. EE PropTechs are mostly bootstrapped. Therefore, no VC’s radar can get them into its scope, and information is missing.

For instance, 84 % of all Bulgarian PropTechs analysed in ‘BULGARIA: PropTech Mapping Report 2021’ are bootstrapped. However, the situation in other EE countries is not much different. WATCH the Report presentation here.

Here’s the right point to underline that the only organizations which know precisely the number and characteristics of national PropTechs are the national PropTech associations.

McKinsey[1] (2021) in their report ‘Europe’s innovation wunderkinds: The rising B2B start-up ecosystem’ state as follows, ‘Comparing different regions in Europe, we observe that the funding efficiency (revenue per total amount of funding) is indeed higher in regions of Eastern and Southern European countries, where funding is least abundant (Exhibit 2). By contrast, the largest European start-up ecosystems in Germany and France have the lowest revenue-per-funding ratios in Europe; nevertheless, they still generate about 1.5 times more revenue per dollar invested thatn B2B start-ups in the United States’.

Eastern EU capital efficiency of B2B startups is 5.6x higher than the one of US B2B startups. Actually, the highest in Europe.

[1] McKinsey Report exclude UK from EU countries. So, the UK ecosystem is not considered when comparing different European regions.

We also have to take into consideration that these results are valid for European B2B start-ups, not specifically for PropTech. Despite, though we lack such research for PropTech, our observations are in sync with McKinsey conclusions.

According to ‘European Venture Report 2020’ by PitchBook, ‘European VC deal value with CVC participation set a new annual record in 2020.

Corporates in flourishing industries such as e-commerce and remote-working tools have driven CVC investment…VC exit value in Europe showed incredible strength amid widespread volatility in 2020.’

The Figure below depicts the VC funding levels in Real Estate Tech in 2020 according to CB Insights. WATCH ‘BULGARIA: PropTech Mapping Report 2021’ presentation here.

Obviously, it is not a just lack of funding for PropTech in EE. It’s a lack of funding for tech in general.

The PitchBook states, ‘In 2020, all regions apart from Central & Eastern Europe beat their respective deal value figure from 2019. The UK & Ireland remained the highest deal value provider and reached a record EUR 14.3 billion in 2020, providing a third of the total in Europe.’ The situation is displayed in numbers in the Figure below.

It is surely much weird that there are the lowest deal number in CEE, particularly in view of the fact that EE has the highest capital efficiency in Europe, as seen above.

Furthermore, the CEE stands out with the largest number of VC exits in 2020. PitchBook observes, ‘Central & Eastern Europe also produced robust exit value, reaching a record EUR 4.1 billion, largely driven by Moscow-based e-commerce company Ozon’s (NASDAQ: OZON) IPO at a EUR 3.7 billion pre-money valuation. In the last five years, outsized exits of this nature have become more common in Europe, and they illustrate how significantly a small sample of VC-backed companies can skew liquidity figures each year.’

CEE region follows closely the DACH region which generated the most liquidity in the whole European ecosystem, closing on EUR 4.6 billion in 2020.

And just to complete the full picture on what’s the situation in the EE region, let us also see the VC funds by region in the next Figure.

It is evident with plain eye that the EE again does not enjoy much external capital in 2020. As PitchBook notes, ‘Despite Brexit, the UK & Ireland raised the most capital for venture funds with EUR 5.1 billion, narrowly topping the DACH region, which raised EUR 5.0 billion in 2020, marking a new record for the region.’

To summarise it in short,

1. The capital efficiency of B2B start-ups in Eastern Europe is the highest in Europe, and is 5.6 times higher than the one in the USA, according to McKinsey (2021)
2.  At the same time the deal value in CEE region hits the bottom in 2020, according to PitchBook (2021)
3. In 2020, the CEE generated the most liquidity in the whole VC ecosystem, following closely the DACH region which ranks first.
4. At the same time the CEE region has raised the least venture capital in 2020 as compared to all other European regions.

Hence, we consider that the (C)EE region is highly underestimated in view of external funding options. It performs outstandingly despite the fact it operates in adverse circumstances that even don’t come close to the ones all other EU regions enjoy. We are proud to have healthy tech companies which are bootstrapped and grow because they have the trust of their customers.

And we consider it is high time the mindset to the (C)EE region to shift.

SEE European PropTechs in Numbers per Countries & Regions here

The reason to undertake making these maps is very simple: when we tried to figure out how Eastern Europe is being positioned on international level in PropTech, we found no information in one place which explicitly and clearly displays the big picture, particularly the number of PropTech companies in different geographical regions; which are the most dominant continents in PropTech (based on nr of generated tech solutions); how different European regions differ when compared to each other, and most importantly what the position of Eastern Europe is.