Istanbul-based VC firm 500 Emerging Europe has raised more than €50m for its second fund, which is targeting a close of €70m, to invest in startups from central and eastern Europe (CEE) — from the Baltics to Turkey. 

The VC, previously known as 500 Istanbul, has decided to change its name to reflect its shift of focus to the broader CEE region. 

It’s yet another example of an international VC raising capital with the explicit aim to invest in CEE startups, despite the tense geopolitical situation and grim economic outlook. This week American VC ffVC announced a $50m fund to back Ukrainian entrepreneurs, while Spanish firm Demium is also doubling down on the region. 

500 Emerging Europe will invest in very early-stage projects, writing cheques of up to €1m for 5-10% ownership stakes. It is also planning to open an office in one of the CEE countries in the upcoming months. 

Population paradox

Until now, the firm has mostly focused on Turkish startups, but it also has a history of investing in the wider CEE region, backing companies such as 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 investments still targeted at Turkey and the other half on CEE countries, especially Poland, Romania and the Baltics. 

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

“Emerging Europe has the potential to create more unicorns than France, Germany, 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 thinks the geopolitical challenges in the region actually strengthens the case for investing there.

“Everything that’s happening geopolitically in the region not only breeds more entrepreneurship, but it 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 development tool infrastructure investments, out of which five are machine learning operations companies. So it’s not that we have a big machine learning operations thesis, it’s more that great entrepreneurs during this time see that big trend coming,” he says. 

Looking at talent, not geography

Despite this new geographical focus, and the new name, Hulli says that the thesis for the new fund is not “emerging Europe” but actually “emerging talent”.

“The core thesis of the fund is an emerging talent thesis. This is different from emerging market investing,” he says. “If you look into the other funds, like in Africa, southeast Asia or Latin America, people want to invest into that region, because they believe in that region. It’s not the case with the central European funds. They believe in the talent in that region, but they want that talent to build global companies,” he says, stressing that the firm is equally interested in locally based startups as those founded by the countries’ diaspora. 

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

Zosia Wanat is Sifted’s central and eastern Europe reporter, based in Warsaw. She tweets from @zosiawanat

Correction: An earlier version of this article said this is 500 Emerging Europe’s third fund