Warsaw-based Inovo VC has raised its third fund with a target close of €100m to invest in central and eastern European startups.
It 's the biggest fund raised by the investor, previously known as Inovo Venture Partners, so far. It also makes Inovo the first VC in the country to ever raise a third fund, a sign that the young startup ecosystem in the region is maturing. Raising a third fund is often seen as a milestone for VC firms given how hard it can be to find success
“Our plan is to find several new very big tech companies that will grow out of this region,” Michał Rokosz, one of three partners at Inovo VC, tells Sifted.
“We’re looking for companies that can generate revenue in the hundreds of millions of dollars. The assumption is that these companies can go global, or at least European, from day one,” he adds, stressing that the firm prefers founders who are ready to relocate their business to the US.
The VC plans to use its new fund to provide rounds from pre-seed to Series B to a total of 20-30 companies, with first tickets ranging from €500k to €4m.
Over half of the capital has already been committed, from LPs including well-known figures from the Polish tech scene: Rafał Brzoska, CEO of logistics company InPost; Damian Zapłata, CEO of online shoe retailer eobuwie.pl; and the Wałach family, the founders of health company Walmark. Institutional investors are supposed to match the capital by the end of the year.
Focus on the wider region
While the VC’s first two funds were mostly focused on Poland, now the firm wants to scout for startups across the region. It plans to invest 60% of the capital in Poland, and the rest in other CEE countries.
“The needs and the problems of startups are similar across the whole CEE,” says Tomasz Swieboda, another partner at the VC. “We have competencies to do things in the same way with companies from the Czech Republic, Romania and Ukraine.”
“We believe that our unique edge is that we know and understand the regional context, that we know all the people, that we are from this place,” adds the third partner, Maciej Małysz. "And at the same time we bring know-how, we were in these companies that scaled up, that developed in the US and got financing there.”
Inovo's previous funds invested €45m in some of the region’s most well-known startups, including Booksy, a marketplace for beauty services, Packhelp, a custom-made packaging producer, Zowie, a self-learning AI chatbot automating customer service, and Archbee, a developer collaboration tool.
In total, the VC has over 30 companies in its portfolio — and six of them already have a valuation of over €100m. Two thirds of the portfolio have raised follow-on rounds with top-tier international VCs including a16z, Google’s Gradient Ventures, Insight Partners, Point Nine and Tiger Global Management.
Rokosz adds that their new fund is also good news for the whole regional startup ecosystem — it’s a sign that the market is maturing. “I assume more funds will do the same,” he says.
Polish VC investments have grown over 22x from 2018 to 2021, reaching a total value of €792m last year, according to reports from PFR Ventures, a Polish state-owned fund of funds. The total value of VC investments in Poland in the first half of this year reached €448m, with 93 transactions involving 111 funds.
“The market in other CEE countries is a bit younger but it’s following the same trend,” adds Rokosz. “These new funds show that there are returns on investment and that investors want to keep investing. It shows that VC in the region is working.”