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PayPal acquires Japan’s Paidy for $2.7B to crack the buy now, pay later market in Asia
PayPal Holdings, the U.S. fintech company, announced an acquisition of Paidy, a Japanese buy now, pay later (BNPL) service platform, for approximately $2.7 billion (300 billion yen), mostly in cash, to enhance its business in Japan.
The transaction completion, including the regulatory approval, is expected in the fourth quarter of 2021.
After the acquisition, the Japan-based company will continue to operate its existing business and maintain the brand while the leaders, Paidy’s president and CEO Riku Sugie and founder and executive chairman Russell Cummer, keep their positions.
Japan is the third largest e-commerce market in the world, and so this is a significant move by PayPal to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards.
PayPal has long played nice with payment cards — users can upload details of their cards to PayPal and use it as a kind of digital wallet to manage how they pay for things online through it — but it got its start actually as a payment platform in itself, where people could pay into and out of PayPal accounts. Paidy is, in that sense, a strengthening of PayPal’s first-party rails, providing a way to “own” that flow of money on its own infrastructure, not involving the card networks.
Paidy is basically a two-sided payments service, acting as a middleman between consumers and merchants in Japan. Using machine learning it determines the creditworthiness of a consumer related to a particular purchase, and then it underwrites those transactions in seconds, guaranteeing payments to merchants. Consumers then make deferred payment to Paidy for those goods.
Paidy’s platform, which offers a monthly payment installment service branded “3-Pay”, enables shoppers to make purchases online and then pay for them each month in a consolidated bill at a convenience store or via bank transfer.
“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said Peter Kenevan, vice president, head of Japan at PayPal.
Paidy has more than 6 million registered users, and the plan is to integrate PayPal and other digital and QR wallets with Paidy Link to connect further online and offline merchants.
In April 2021, the Japan-based company launched Paidy Link, allowing users to link digital wallets with their Paidy account. PayPal was the first digital wallet partner to integrate with Paidy Link.
“PayPal was a founding partner for Paidy Link and we look forward to looking together to create even more value,” Sugie said in a statement.
“Japan has been a vibrant environment for our growth to date and we’re honored to have our team’s hard work and potential recognized by a global leader. Together with PayPal, we will be able to further achieve our mission of taking the hassle out of shopping,” Cummer said.
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New IBM Power E1080 server promises dramatic increases in energy efficiency, power
We know that large data centers running powerful servers use vast amounts of electricity. Anything that can reduce consumption would be a welcome change, especially in a time of climate upheaval. That’s where the new IBM Power E1080 server, which is powered by the latest Power10 processors, comes into play.
IBM claims it can consolidate the work of 126 competitive servers down to just two E1080s, saving 80% in energy costs, by the company’s estimation. What’s more, the company says, “The new server has set a new world record in a SAP benchmark that measures performance for key SAP applications, needing only half the resources used by x86 competitive servers to beat them by 40%.”
Patrick Moorhead, founder and principal analyst at Moor Insight & Strategy, who closely follows the chip industry, says that the company’s bold claims about what these systems can achieve make sense from a hardware design perspective. “The company’s claims on SAP, Oracle and OpenShift workloads pass initial muster with me as it simply requires less sockets and physical processors to achieve the same performance. These figures were compared to Intel’s Cascade Lake that will be replaced with Sapphire Rapids (in the future),” he said.
Steve Sibley, vice president and business line executive in the Power Systems Group at IBM, says that the new server (and the Power10 chip running it) have been designed for customers looking for a combination of speed, power, efficiency and security. “If you look at what we deliver here with scale and performance, it gives customers even more agility to respond quickly to scale to their highest demands,” he said.
To give customers options, they can buy E1080 servers outright and install them in a company data center. They can buy server access as a service from the IBM cloud (and possibly competitor clouds) or they can rent the servers and install them in their data centers and pay by the minute to help mitigate the cost.
“Our systems are a little bit more expensive on what I call a base cost of acquisition standpoint, but we allow customers to actually purchase [E1080 servers] on an as-a-service basis with a by-the-minute level of granularity of what they’re paying for,” he said.
What’s more, this server, which is the first to be released based on the Power10 chip, is designed to run Red Hat software under the hood, giving the company another outlet for its 2018 $34 billion acquisition.
“Bringing Red Hat’s platform to this platform is a key way to modernize applications, both from just a RHEL (Red Hat Enterprise Linux) operating system environment, as well as OpenShift (the company’s container platform). The other place that has been key with our Red Hat acquisition and our capitalizing on it is that we’re leveraging their Ansible projects and products to drive management and automation on our platform, as well,” Sibley explained.
Since Arvind Krishna took over as CEO at IBM in April 2020, he has been trying to shift the focus of the company to hybrid computing, where some computing exists in the cloud and some on prem, which is the state many companies will find themselves in for many years to come. IBM hopes to leverage Red Hat as a management plane for a hybrid environment, while offering a variety of hardware and software tools and services.
While Red Hat continues to operate as a standalone entity inside IBM, and wants to remain a neutral company for customers, Big Blue is still trying to find ways to take advantage of its offerings whenever possible and using it to run its own systems, and the E1080 provides a key avenue for doing that.
The company says that it is taking orders for the new servers starting immediately and expects to begin shipping systems at the end of the month.
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Indonesia-focused Intudo Ventures closes $115M third fund
Intudo Ventures, the “Indonesia-only” investment firm, announced today it has closed its third fund, totaling $115 million. Called Intudo Ventures Fund III, it was raised in less than three months and oversubscribed.
Fund III’s limited partners include Black Kite Investments, the family office of Singaporean businessman Koh Bon Hwee; Wasson Enterprises, the family office of former Walgreens Boots Alliance chief executive officer Greg Wasson; and PIDC, the investment arm of Taiwan-based retail conglomerate Uni-President Enterprises Corp. Other LPs include more than 30 Indonesian families and their conglomerates; over 20 leading global funds and managing partners; and more than 10 founders of tech unicorns.
Intudo founding partners Patrick Yip and Eddy Chan launched the firm in June 2017 as the first Indonesia-only venture capital firm, with a debut fund of $10 million. At first, many people were dubious that a country-specific fund focused on early-stage Indonesian companies would take off, especially since Yip and Chan wanted to build a small portfolio and work closely with startups.
Then in 2019, Intudo closed its $50 million second fund with LPs including Founders Fund, which Chan said helped validate its mission. Portfolio companies from its first two funds include Pintu, TaniHub Group and Gredu.
At the beginning, “when we said we were going to raise $10 million, we got laughed out of the room by many managers, but four years into it, we’re running roughly $200 million dollars,” he told TechCrunch. “It shows that for the right markets, hyperlocal is the way to go.”
For its third fund, Intudo intends to invest in about 12 to 14 startups, in sectors like agriculture, B2B and enterprise, education, finance and insurance, healthcare and logistics. Initial check sizes will range from $1 million to $10 million. Leading early-stage and Series A rounds will continue to be Intudo’s core focus, but it also plans to invest in Series B and C rounds for companies from its first two funds.
Unlike many funds that have a handful of anchor investors, all of Intudo’s limited partners are capped at 10% of the total fund size so it can maintain its independent investment thesis and ensure all LPs are treated equally.
“I think 10% is a nice number, where it signals to the founder that we are doing what’s best for their company and not for one special interest group,” said Chan.
The firm will look for companies with competitive moats, like strong intellectual property or deep tech. It also looks for companies that operate in heavily-regulated sectors that are difficult for competitors to enter.
Chan pointed to crypto-exchange Pintu as a good example of Intudo’s investment thesis.
“Everyone was like, you invested in this because it’s trendy, but you have to understand that we met the founder when Bitcoin had dropped down to $6,000. When we gave him the term sheet, six months later in March 2019, Bitcoin was at $3,000,” he said. “The moral of the story is we knew the founder was legit and we were able to pick up all the best talent because you can’t go to a lot of major unicorns to work on crypto.”
Many of Intudo’s portfolio founders are pulkam kampung, or Indonesians who have studied and worked overseas, but returned to launch companies, and it runs a program called Pulkam S.E.A. Turtle Fellowship to mentor aspiring founders. One-third of the deals from Intudo’s first two funds were sourced from universities and the tech community in the United States.
Intudo works closely with founders after signing checks. For example, all of its companies have made a commercial deal sourced through the firm’s network before receiving an investment. Its country-specific approach is also an advantage during the pandemic, because Intudo can continue to hold in-person meetings with founders on an almost weekly basis.
“The founder community has obviously gone through a tough time this year and last year due to COVID,” said Yip. “A lot of these founders needed to make course adjustments and corrections to their business plans. I think our role as an in-market, involved investor has been even more enhanced. A lot of the companies that have gone under, they did not have an in-country partner from the get-go.”
He added, “I think our involved approach and having a concentrated portfolio is something that is appreciated by the founder community as well, so that’s definitely something we intend to rinse and repeat going into Fund III.”
07
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E-commerce aggregator Rainforest raises $20M just months after its last funding
Four months after its last funding announcement, Singapore-based e-commerce aggregator Rainforest has closed a $20 million pre-Series A round led by Monk’s Hill Ventures. Other participants included January Capital, Crossbeam Venture Partners, Amasia and Lo & Behold Group, along with returning investors Nordstar and Insignia Venture Partners.
Rainforest announced in May that it had raised $6.55 million in equity and a $30 million debt facility to fund acquisitions. The company says its latest raise means it now has more than $50 million to spend on acquiring e-commerce brands.
Founded by former Carousell and Fave executives, Rainforest buys mostly Asia-based Amazon brands and wants to become the e-commerce version of consumer goods conglomerate Newell Brands.
Co-founder and chief executive officer J.J. Chai told TechCrunch in an email that Rainforest raised funding again because it’s doubled its portfolio since the last round and also has “a number of sizable acquisitions in the pipeline.” The company originally intended to raise about $8 million to $12 million to add to its seed round, but increased that amount to $20 million because of investor interest, he added. In addition to brand acquisitions, the funding will also be used on hiring and building its tech infrastructure.
Chai said Rainforest raised only equity this time because it hasn’t finished using the debt facility it got from Accial earlier this year.
Since launching in January 2021, Rainforest has acquired six brands, including one from China for $3.6 million, marking its first foray into the country, and plans to triple its brand portfolio by the end of this year. After buying brands, Rainforest scales them up through inventory management, cost optimization and expansions into new marketplaces and distribution channel. The company claims its portfolio brands have seen over 50% improvement in annual growth rates after their acquisitions.
Rainforest also announced it has hired Yev Ivanko, previously co-founder and CEO at NimbleSeller, as its vice president of acquisitions, and Christine Ng, who has worked in marketing and branding at Sephora, ShopStyle, Luxola and Shopbop, as its new vice president of brands.
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UK’s Marshmallow raises $85M on a $1.25B valuation for its more inclusive, big-data take on car insurance
Marshmallow — a U.K.-based car insurance provider that has made a name for itself in the market by providing a new approach to car insurance aimed at using a wider set of data points and clever algorithms to net a more diverse set of customers and provide more competitive rates — is announcing a milestone today in its life as a startup, as well as in the bigger U.K. tech world.
The London company — co-founded by identical twins Oliver and Alexander Kent-Braham and David Goaté — has raised $85 million in a new round of funding. The Series B valuation is significant on two counts: it catapults Marshmallow to a “unicorn” valuation above $1 billion — specifically, $1.25 billion; and Marshmallow itself becomes one of a very small group of U.K. startups founded by Black people — Oliver and Alexander — to reach that figure.
(To be clear, Marshmallow describes itself as “the first UK unicorn to be founded by individuals that are Black or have Black heritage”, although I can think of at least one that preceded it: WorldRemit, which last month rebranded to Zepz, and is currently valued at $5 billion; co-founder and chairman Ismail Ahmed has been described as the most influential Black Briton.)
Regardless of whether Marshmallow is the first or one of the first, given the dearth of diversity in the U.K. technology industry, in particular in the upper ranks of it, it’s a notable detail worth pointing out, even as I hope that one day it will be less of a rarity.
Meanwhile, Marshmallow’s novel, big-data approach and successful traction in the market speak for themselves. When we covered the company’s most recent funding round before this — a $30 million raise in November 2020 — the startup was valued at $310 million. Now less than a year later, Marshmallow’s valuation has nearly quadrupled, and it has passed 100,000 policies sold in its home country, growing 100% over the last six months.
The plan now, Oliver told me in an interview, will be to deepen its relationships with customers, in part by providing more engagement to make them better drivers, but also potentially selling more services to them, too.
In this, the startup will be tapping into a new approach that other insurtech startups are taking as they rethink traditional insurance models, much like YuLife is positioning its life insurance products within a bigger wellness and personal improvement business. Currently, the average age of Marshmallow’s customers is 20 to 40, Oliver said — and there are thoughts of potentially new products aimed at even younger users. That means there is long-term value in improving loyalty and keeping those customers for many years to come.
Alongside that, Marshmallow will also use the funding to inch closer to its plan to expand to markets outside of the U.K. — a strategy that has been in the works for a while. Marshmallow talked up international expansion in its last round but has yet to announce which markets it will seek to tackle first.
Insurance — and in particular insurance startups — are often thought of together with fintech startups, not least because the two industries have a lot in common: they both operate in areas of assessing and mitigating risk and fraud; they are in many cases discretionary investments on the part of the customers; and they are both highly regulated and require watertight data protection for their users.
Perhaps because so much of the hard work is the same for both, it’s not uncommon to see services built to serve both sectors (FintechOS and Shift Technology being two examples), for fintech companies to dabble in insurance services, and so on.
But in reality, insurance — and specifically car insurance — has seen a massive impact from COVID-19 unique to that industry. Separate reports from EY and the Association of British Insurers noted that 2020 actually saw a lift for many car insurance companies: lockdowns meant that fewer people were driving, and therefore fewer were getting into accidents and making fewer claims.
2021, however, has been a different story: new pricing rules being put into place will likely see a number of providers tip into the red for the year. And the Chartered Insurance Institute points out that it will also be worth watching to see how the low use of cars in one year will impact use going forward: some car owners, especially in urban areas where keeping a car is expensive, will inevitably start to question whether they need to own and insure a car at all.
All of this, ironically, actually plays into the hand of a company like Marshmallow, which is providing a more flexible approach to customers who might otherwise be rejected by more traditional companies, or might be priced out of offerings from them. Interestingly, while neobanks have definitely spurred more traditional institutions to try to update their products to compete, the same hasn’t really happened in insurance — not yet, at least.
“We started with the idea of the power of data and using a wider range of resources [than incumbents], and using that in our pricing led us to be able to offer better rates to more people,” Oliver said, but that hasn’t led to Marshmallow seeing sharper competition from older incumbents. “They are big companies and stuck in their ways. These companies have been around for decades, some for centuries. Change is not happening quickly.”
That leaves a big opportunity for companies like Marshmallow and other newer players like Lemonade, Hippo and Jerry (not an insurance startup per se but also dabbling in the space), and a big opening for investors to back new ideas in an industry estimated to be worth $5 trillion.
“The traction the team has achieved demonstrates the demand for a new kind of insurance provider, one that focuses more on consumer experience and uses the latest technology and data to give fair prices,” said Eileen Burbidge, a partner at Passion Capital, in a statement. “We’ve been proud to support the team’s ambitions since the start, and now look forward to its next chapter in Europe as it continues its mission to change the industry for the better.”
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Meet retail’s new sustainability strategy: Personalization
We have been raised to believe in recycling, but it has mostly been a sham — only 9% of all plastic waste produced in 2018 was recycled. The beauty industry produces over 120 billion units of packaging every year, little of which is recycled. Globally, an estimated 92 million tons of textile waste ends up in landfills.
Reducing waste is key to meeting environmental milestones, and some retail firms have narrowed in on a unique approach to minimize what their customers throw away: personalization. Accurate personalization can guide consumers to the right products, reducing waste while increasing conversion and loyalty.
Reducing waste is key to meeting environmental milestones, and some retail firms have narrowed in on a unique approach to minimize what their customers throw away: personalization.
For big brands and retailers, personalization is expected to be the top category for tech investment this year. Moreover, personalization holds high appeal, with 80% of survey respondents indicating they are more likely to do business with a company if it offers personalized experiences and 90% indicating that they find personalization appealing, according to a survey by Epsilon.
Startups that deliver sustainable personalization solutions that also improve business for retailers and brands fall into three categories:
- AR virtual try-on with shade matching.
- Advanced virtual fitting rooms with VR/AR for fashion.
- Smart packaging with IoT and distributed ledger technology.
AR virtual try-on with shade matching
Faces are easy to map, since it’s not difficult to virtually place a lipstick color on a face, but using AR and AI to recommend skin-tone-matching makeup products has been challenging for many AR virtual try-on companies. “I’ve been searching for an intuitive foundation-shade-finder tool since launching Cult Beauty in 2008, and nothing has lived up to the experience of having a professional match you in daylight until I discovered MIME,” says Alexia Inge, founder of Cult Beauty. “There are so many variables like light, skin tones, prevalent undertones, device, screen, OS, formula density, formula oxidation, as well as preferences for coverage levels, finish, brand and skin type,” she says.
MIME founder and CEO Christopher Merkle said, “Virtual try-on has exploded in the past few years, but for color cosmetics, the technology doesn’t help solve the primary customer pain point: shade matching. From day one, I decided to focus our company’s R&D efforts exclusively on color accuracy. I want to make sure that when the consumer receives their foundation or concealer in the mail, it’s the perfect shade once applied to their skin.”
MIME’s Shade Finder AI allows consumers to take a photo of themselves, answer a few questions, then get matched with a makeup color that pairs with their skin tone. MIME helps retailers and brands increase their online and in-store purchase conversion by up to five times. More than 22% of beauty returns are due to poor customer color purchases, but Merkle says MIME can get returns as low as 0.1%.
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AI as a service to solve your business problems? Guess again
SaaS, PaaS – and now AIaaS: Entrepreneurial, forward-thinking companies will attempt to provide customers of all types with artificial intelligence-powered plug-and-play solutions for myriad business problems.
Industries of all types are embracing off-the-shelf AI solutions. According to industry experts, global AI software revenue — most of it online artificial intelligence as a service software (AIaaS) — is set to grow by an astounding annual rate of 34.9%, with the market reaching over $100 billion by 2025. It sounds like a great idea, but there is a caveat — “one-size-fits-all” syndrome.
Companies seeking to use AI as a differentiating technology in order to gain business advantages — and not merely doing it because that’s what everyone else is doing — require planning and strategy, and that almost always means a customized solution.
In the words of Sepp Hochreiter (inventor of LSTM, one of the world’s most famous and successful AI algorithms), “the ideal combination for the best time to market and lowest risk for your AI projects is to slowly build a team and use external proven experts as well. No one can hire the best talent quickly, and even worse, you cannot even judge the quality during hiring but will only find out years later.”
That’s a far cry from what most online off-the-shelf AI services offer today. The artificial intelligence technology offered by AIaaS comes in two flavors — and the predominant one is a very basic AI system that claims to provide a “one-size-fits-all” solution for all businesses. Modules offered by AI service providers are meant to be applied, as-is, to anything from organizing a stockroom to optimizing a customer database to preventing anomalies in production of a multitude of products.
There are several companies that claim to provide AIaaS for automated industrial production. Most of the successful data presented by these providers is based on individual case studies, with problems involving limited data sets and limited, generic objectives. But generic AI solutions are going to produce generic results.
For example, the process to train algorithms to detect wear and tear would be different for factories that produce different products; after all, a shoe is not a smartphone is not a bicycle. Thus, for “real” AI work — where intelligent modules actually managed and changed production in response to environmental and other factors — the companies developed customized solutions for their clients.
Many customers who were “burned” by bad experience with AIaaS will be more hesitant to try it again, feeling it is a waste of time. And use cases that did require heavier AI processing did not yield the results expected — or promised. Some have even accused the cloud companies of deliberately misleading customers — giving them the impression that off-the-shelf AI is a viable solution, when they know very well that it isn’t. And if a technology doesn’t work enough times, chances are that those who could potentially benefit from real AI solutions will give up before they even start.
The objective is to standardize a solution that performs well almost immediately and does not require extensive know-how. AIaaS’ success so far has been in enabling researchers to run complex experiments without requiring the services of an entire IT team to figure out how to manage the necessary infrastructure.
In the future, AIaaS will hopefully enable individuals who are not AI experts to utilize the system to get the desired results. That said, online automated AI services even at their current levels can greatly benefit industrial production — if it is done right.
AI properly done could provide great benefits for industry. Instead of giving up on AI, companies should do a deep dive on the AI services they are thinking of utilizing. Does the solution provide for customization? What kind of support does the service provide? How is the algorithm trained to handle data specific to your use case? These are the questions that companies need to ask when shopping around for AI services. Providers that can furnish substantial answers — and back up their claims with real data on success rates — are the ones companies should work with.
Like all new developments that enhance business activity, AI applications require a high level of expertise. The engineers who work for the big cloud companies indeed have that expertise — which means that they could be providing much more value for customers by helping them develop customized solutions. Whether that can be done “as a service” needs to be examined — but the system in place right now is not the answer.
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5 factors that can make or break a startup’s growth journey
The “health” of a startup’s growth can be a strong predictor of how large and valuable it can become. Our generation’s most valuable startups have all sustained a high rate of user/revenue growth over an extended period of time. As such, founders, employees and investors are all trying to figure out if their startup can achieve sustainable growth to create a large and enduring business over time.
Simply looking at top-line growth tells you relatively little. Two startups that are currently growing users or revenue 300% every year can each have different long-term prospects. It’s almost like looking at two people of the same age, height and weight, and projecting the same quality of life and longevity for both — there are many more factors that can help you make better predictions. Startups are similar, and it’s important to dig deeper into the health of a startup’s early growth and work to build the right foundation from an early stage.
Paid marketing can be a useful tool in your toolkit to accelerate an already humming flywheel. Just don’t let it be the only one.
Prior to becoming a VC at Defy, I founded two companies and was Eventbrite’s VP of growth for over six years from startup through IPO. Working across all stages from founding through to public company and advising many other startups along the way, I’ve landed on five critical factors for healthy and sustained growth that can be the difference between a startup failing, getting to a modest exit or building a valuable and enduring billion-dollar company.
Healthy engagement and retention are key
At its core, any successful product or service delivers more value to the user/customer than it costs to use (money or time). To see if your product is delivering true value, ask if it is achieving strong user engagement and customer retention. My friend and growth guru Casey Winters captures this well: “Product-market fit is retention that allows for sustained growth.”
Consumer startups can evaluate this via through cohort-based retention analysis of how frequently customers use the service, and how long they are retained for. SaaS businesses should be talking with customers often to gauge their happiness while also looking at logo retention as well as gross and net revenue retention — ideally, the business should show early signs of being a net-negative churn business, wherein revenue from existing customers actually grows over time, even after accounting for churned customers.
Many people incorrectly think “startup growth = customer acquisition.” In reality, retention is the most fundamental aspect underlying sustainable growth.
Customer obsession creates “pull” from the market
Customer obsession, plus organic pull from the market, are indicators of early product-market fit and signals of future growth potential.
Here are a couple ways to measure this:
See if a healthy percentage of the business is growing without paid spend, generally through word of mouth or some other form of virality. If your business is seeing more than 50% organic growth at a fast rate (200% to 300%+ year over year), you’re solving people’s needs well enough that they’re now sharing with others and creating a positive viral effect.
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Extra Crunch roundup: Options pool rules, voice tech hurdles, keeping employees engaged
“In today’s cash-rich environment, options are more valuable than cash,” says Allen Miller, a principal at Oak HC/FT. “In turn, managing your option pool may be the most effective action you can take to ensure you can recruit and retain talent.”
In an article squarely aimed at early-stage founders, Miller shares best practices for protecting your option pool, lists the mistakes many founders make and offers multiple tips for course-correcting “if you made mistakes early on.”
As we’re just returning from the Labor Day holiday, today’s newsletter is quite brief. We have much more planned for this week, so thanks very much for reading.
Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist
Full Extra Crunch articles are only available to members.
Use discount code ECFriday to save 20% off a one- or two-year subscription.
To commercialize, voice tech must first solve its ‘cocktail party problem’
Image Credits: Karnet / Getty Images
Voice and speech recognition is expected to be a $26.8 billion global market by 2025, but there’s still a long way to go before voice can be fully commercialized.
Developers are deploying natural language processing and conversational AI to overcome current limitations, but “solving these problems requires voice tech to meet the human standard for voice and match the complexities of the human auditory system.”
How engaged are your employees?
Image Credits: katleho Seisa (opens in a new window) / Getty Images
According to a recent survey, more than 70% of workers are actively hunting for a new job or are giving the matter serious consideration.
In a startup environment, employee development takes a back seat to priorities like scaling growth. As a result, few managers have any experience or interest in helping employees acquire new skills or advance their careers.
Don’t wait to be blindsided: Put an action plan in place to assess employee engagement. Remember, seven out of the next 10 people you see on a video call might be polishing their resumes.
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Locals share why Vilnius, Lithuania is becoming an international startup hub
There are plenty of reasons why Vilnius, Lithuania’s capital city, has an increasingly visible startup sector. The country’s startup-friendly regulatory environment, a beautiful medieval town center, over 20 business hubs and accelerators and strong rankings in intellectual property production are most obvious at a high level. But what are the locals excited about on the ground?
Our survey respondents said the city was strong across a broad range of tech industries, particularly those with practical applications: cybersecurity, energy and sustainability, fintech, health care and medtech, edtech and silver tech among others.
Respondents said the effect of the pandemic on working practices would mean that many expats would be moving back to the city, which is affordable, and more foreign companies are relocating there due to favorable government policies, although “rental prices are going through the roof.”
In addition, the oppressive regime in nearby Belarus has provided an influx of significant tech companies, such as Wargaming, as well as the associated talent.
In five years, respondents said the city and country will continue to generate and attract great tech startups, but also tech talent and entrepreneurs. However, one said: “The ecosystem still lacks local funding for the late Series A and beyond rounds.”
We surveyed:
• Gerda Sakalauskaitė, managing director, The Lithuanian Private Equity and Venture Capital Association
• Lukas Inokaitis, business development, NFQ Technologies
• Andrius Milinavicius, founder, Baltic Sandbox
• Gytenis Galkis, partner, 70V
• Gabriele Poteliunaite, associate, Change Ventures
• Rokas Tamošiūnas, partner, Open Circle Capital
• Donatas Keras, founding partner, Practica Capital
• Tomas Martunas, founding partner, Iron Wolf Capital
• Alex Gibb, partner, Katalista Ventures
• Jone Vaituleviciute, partner, Startup Wise Guys
• Lukas Kaminskis, CEO, Turing College
Gerda Sakalauskaitė, managing director, The Lithuanian Private Equity and Venture Capital Association
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
The Vilnius startup ecosystem is mainly dominated by startups developing business management systems (B2B, SaaS) and financial technologies. Vilnius is becoming a solid hot spot of fintech companies in Europe having more than 200 fintech companies established here. Other growing industries would be deep tech, life sciences, mobility, and the game industry.
Which are the most interesting startups in your city?
Vinted (first Lithuanian unicorn, secondhand fashion online marketplace which raised €128 million in an equity funding round, valuing the company at over €1 billion in 2019).
Other notable startups: NordVPN, CGTrader, TransferGo, Trafi, Kilo Health, CityBee, Brolis Semiconductors, PIXEVIA, Oxipit.
Rising stars that also should be looked at: PVcase, Droplet Genomics, ZITICITY.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
I think local tech investors are taking more risks and becoming global scene players. Investors had their 10 years of market experience and now they are ready to invest into ideas and businesses that would change the global scene or even tackle issues as complex as they come — environmental, biotechnology or deep tech industries. Moreover, the local investor community is quite dynamic. We seek to have our investor landscape as diverse as possible, so we are working toward gender equality in VC and other important diversity causes to accomplish that.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
I think COVID-19 created more opportunities for Vilnius than risks in this regard. The coronavirus crisis, in general, hasn’t affected the Vilnius startup ecosystem in the same way as the rest of Europe. In addition, Vilnius has made headlines worldwide with its creative solutions to tackle the pandemic challenges. For instance, Vilnius became one large open air cafe. This shows Vilnius being a quirky, hip and interesting city to live in, so we are expecting more expats to lay their eyes on Vilnius. Especially expats from our Eastern neighbors who are negatively affected by an ongoing political crisis (Belarus).
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Founders:
Justas Janauskas, Milda Mitkutė, Mantas Mikuckas (Vinted)
Henrikas Urbonas, Simona Andrijauskaitė (Interactio)
Dalia Lašaite (CGTrader)
Tomas Okmanas, Eimantas Sabaliauskas (Tesonet)
Tadas Burgaila (Kilo Health)
Daumantas Dvilinskas (TransferGo; Forbes 30 under 30)
Martynas Gudonavičius (Trafi)
VC investors:
Rokas Peciulaitis (Contrarian Ventures)
Donatas Keras (Practica Capital), Arvydas Bložė (Practica Capital)
Jone Vaituleviciute, Dmitrij Susunov (Startup Wise Guys)
Kasparas Jurgelionis (Iron Wolf Capital)
Gytenis Galkis (70Ventures)
Viktorija Vaitkevičienė (Coinvest)
Legal experts:
Rūta Armone (Ellex)
Akvilė Bosaite (COBALT Legal)
Eva Suduiko (COBALT Legal)
Mantas Petkevičius (Sorainen)
Laimonas Skibarka (Sorainen)
Linas Sabaliauskas (TRINITI JUREX)
Andrius Ivanauskas (GLIMSTEDT)
Where do you see your city’s tech scene in five years?
Vilnius will definitely gain momentum as the tech startup city of the region. The number of startup people they employ will grow exponentially. We will have one or two extra unicorns born here. And of course quite more foreign talent coming to Vilnius to work in startups!
Lukas Inokaitis, business development, NFQ Technologies
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Mobility, fintech, energy, cybersecurity, healthcare. Weak in AI, data science.
Which are the most interesting startups in your city?
Vinted, Tesonet, Kilo Health, Pored Banda, Hostinger.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Local and with small funds, mostly subsidized by government and EU. Need large private ones and more angel investors.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
The city [has been] growing for a decade each year. No reason to slow down as more international talent is moving to Vilnius from other EU and Asian countries.
Where do you see your city’s tech scene in five years?
One-two unicorns every year and leading EU in fintech, mobility and energy.
Andrius Milinavicius, founder, Baltic Sandbox
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Sustainability, silver tech, women in tech.
Which are the most interesting startups in your city?
Tesonet (NordVPN), Vinted, Traffi, Kilo Health.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Deep tech, SaaS, sustainability.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Everyone stays. Vilnius is a very green and vibrant ecosystem, with multiple co-working [locations] and easy access to forests, parks and nearby lakes.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Many of them, starting from Contrarian Ventures — Rokas Peciulaitis, Practica Capital — Arvydas Bloze, continuing to Tesonet co-founder — Tomas Okmanas, Eimantas Sabaliauskas, followed with Kilo Health — Tadas Burgaila and more.
Where do you see your city’s tech scene in five years?
4x at least. Very rapid growth
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Gytenis Galkis, partner, 70V
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
1. Lithuania is now fourth in the global fintech ranking after the U,S,, the U,K, and Singapore.
2. Lithuania’s life sciences sector is gaining prominence.
3. Life sciences companies in Lithuania are among the most profitable in the country, with 90% of their output exported worldwide, yet the market remains unsaturated. Lithuania is 16th in the Global Innovation in Biotechnology ranking according to Scientific American WORLDVIEW international biotechnology ranking 2019.
According to McKinsey study on B2B startups, Lithuania’s B2B startups generate more value per funding than the U.S. and other European counterparts, resulting in the highest capital efficiency in the region!
Which are the most interesting startups in your city?
Larger ones would be: Vinted, Tesonet, Kilo Health, Bored Panda, Brolis Semiconductors, Cujo. Interactio recently has raised a $31 million Series A round — the largest ever Series A for a company headquartered in the Baltics. Upcoming stars: Whatagraph, Ondato, ZITICITY, Eneba, Robolabs, CAST AI, Foros, Billo, Biomatter Designs, #walk15, Boommio.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The tech investment ecosystem has been evolving very rapidly during the past five years. The early-stage companies are able to get funding from the Lithuanian Business Angel Network (LitBAN), which unites over 150 active private investors. Coinvest Capital invests along angel investors and provides them lucrative leverage. This is how the Lithuanian government supports the angel ecosystem. Then there are two active accelerators — 70V (Revenue Accelerator) and Startup Wise Guys providing funding in the pre-seed/seed stages. Other local funds — Practica Capital, Iron Wolf Capital, Verslo Angelu Fondas and Open Circle Capital provide seed and Series A funding. The ecosystem still lacks local funding for the late series A and beyond rounds. Most of it is covered by foreign funds. The local ecosystem is too small to have a specific focus. However, I’d say that a lot of focus goes to B2B/enterprise software.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Since 2012 Vilnius’ population has been steadily growing 0.3% every year. I believe that during COVID and events related to Belarus have even further boosted the growth of Vilnius, especially in terms of the tech ecosystem. There had been major moves from Minsk to Vilnius. For example, Wargaming has moved a significant amount of their employees with families to Vilnius and even bought 76 luxury flats in downtown Vilnius. Other Belarusian companies are following. Furthermore, Vilnius is one of the greenest capitals in Europe with a unique medieval old town, which makes it one of the coziest places to live. It is estimated that Lithuania still lacks over 10,000 tech talents, which could be a great opportunity for savvy explorers to join the rapidly growing tech scene!
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Vilnius is a small town and it is well connected, there are a lot of people that made this ecosystem flourish. Just to name a few: Jean-Baptiste Daguenè, Donatas Keras, Mantas Mikuckas, Tomas Okmanas, Rita Sakus, Vladas Lašas, Viktorija Vaitkevičienė, Tomas Martunas, Dmitrij Sosunov, Evaldas Remeikis, Evaldas Petraitis, and many more that I should mention.
Where do you see your city’s tech scene in five years?
I strongly believe that Vilnius will further expand on its unique angle of tech entrepreneurship. I strongly estimate further growth in fintech, life sciences and B2B ecosystem. In my vision, I believe exports driven by Lithuanian startups will at least double within the next five years while bringing a few new unicorns.
Gabriele Poteliunaite, associate, Change Ventures
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Well, probably most people will give the same answer, but Vilnius is huge on fintech. However, I would also go on to highlight other prospering sectors, such as edtech, AI-driven companies, medtech, energy tech — you name it … There are numerous sectors that we are quite strong in. As a generalist investor, we are mostly excited about driven and passionate founders. This brings me to another point that I would say the weakest link of the ecosystem is lack of entrepreneurial training and lack of educational initiatives inspiring youngsters (and not only) to go on to found their own companies and take risks. Risk aversiveness is the key weakness here. We are still lacking huge success stories, but this is slowly changing (Vinted, Tesonet).
Which are the most interesting startups in your city?
Interactio, Vinted, Memby and so many others — could go on listing them for days.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
As it is a very tight-knit community, local tech investors are very collaborative and helpful with each other and entrepreneurs. However, I would say the main areas local investors still need to improve on is internationalizing and diversifying their investment teams (it’s 2021 already) and discouraging founders to be aggressive in their expansion to foreign markets and thinking globally very early on. Most investors are generalists, focusing on all three Baltic countries and doing mostly seed investments in software (some hardware) B2B companies.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
STAY and MOVE IN — no question there! I think COVID-19 pandemic has been a great stimulus for most expats — including myself, to move back to Vilnius and join forces in building this flourishing ecosystem. As far as I can tell, most people will stay, (rental prices are going through the roof) and more foreign companies are relocating here due to very favorable policies.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Ugh, so many great people to highlight … which is obviously a sign that Vilnius has simply an overwhelming number of absolute stars! (Not a biased opinion obviously.)
Where do you see your city’s tech scene in five years?
I would venture to say something as daring as Vilnius becoming the global leader in generating and attracting not only world-class tech startups, but also tech talent and outstanding entrepreneurs. I might be getting a tad too excited, but I see so much authenticity in this region — and if we manage to cherish it, we may go really far!
Rokas Tamošiūnas, partner, Open Circle Capital
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Strong: Marketplaces, fintech, life sciences, tech diversity (prop, fin, gov, mobility, AI). Weak: Internationalization, sales, marketing.
Which are the most interesting startups in your city?
Vinted, Tesonet, Traffi, Omnisend, Billo, Whatagraph.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
We have some generalists (Practica Capital), deep tech (Open Circle Capital and Iron Wolf Capital), green/energy (Contrarian Ventures) and accelerators (70ventures and Startup Wise Guys).
Investors are still early pre-seed/seed but are gradually maturing up. ICT (especially AI) still dominates, but other areas, such as photonics (lasers), new space and others.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Gradually everyone moved to full remove in the tech community. Now people are back in offices (and mostly enjoying it), but I think most companies will do a mixed model from now on. Remote working did a lot of good in recognizing virtual teams and especially teams that have members based in different countries.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Top are startup founders like J. Janauskas from Vinted, T. Okman from Tesonet, R. Lauris from Omnisend.
Where do you see your city’s tech scene in five years?
We are going on a patch of diversity — dozens of microecosystems of different tech. I think we will have a very colorful scene in a few years.
Donatas Keras, founding partner, Practica Capital
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
As our young tech ecosystem matures, we can see an increasing number of startups from different industry sectors that are founded and headquartered in Vilnius are becoming global leaders in their categories. If we look more closely at specific industries, I would highlight:
Marketplaces (Vinted, CGTrader, Ovoko); cybersecurity (NordVPN); fintech (TransferGo, Ondato, Revolut EU headquarters); gaming (Nordcurrent, Game Insight, Wargaming); mobility (Trafi, ZITICITY); biotechnology (Biomatter Designs, Droplet Genomics); space (NanoAvionics); health tech (Kilo Health, Oxipit).
The strengths of our tech ecosystem are the fast growth of startups, global first mindset, seek for innovation and the resilience of the founders. And these are some of the things that excite me as an investor. Of course, with such fast growth, we can already see increasing competition for local talent. That can be considered as a weakness, which should be addressed right now at the state level.
Which are the most interesting startups in your city?
The most notable startups are – Vinted (The first Lithuanian unicorn), NordVPN, CGTrader, Interactio, TransferGo, Trafi, Kilo Health, CarVertical, Omnisend and many more. But I would also like to mention some of the rising stars that we should not overlook: Ondato, Ovoko, Biomatter Designs, Droplet Genomics, ZITICITY.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
The investment scene shows the same signs of maturing as the whole ecosystem. And that is noticeable at all investment stages. It seems that now we are starting to “pick the fruits” of 10 years of hard work — companies becoming much more fundable, and investors tend to take risks and are more ready to do so. Business angels are becoming more active than ever, with 100+ deals made per year. And if a few years back the majority were experienced entrepreneurs of the so-called “old economy,” now an increasing number of tech entrepreneurs are picking up and investing in new startups at the very early stage. Business accelerators and pre-seed funds also playing an important role in the development of the ecosystem. They are mostly backed by the government and became very active in the last 3-4 years. Most notable: 70ventures, Startup Wise Guys, Baltic Sandbox.
Venture capital has around 10+ years of history in Vilnius and Lithuania. First, it was stimulated by EIF and the state money, now it’s picking up strongly and plays a crucial role in startups development at an early stage.
Most notable VCs:
Practica Capital is one of the most experienced and most active VCs in Vilnius and the whole region. With 10+ years of history, it grew together with the ecosystem, startups and the founders right from the start. The most notable deals are — Interactio, TransferGo, CGTrader, Trafi, Eneba, PVcase. The team has a high level of know-how and proven record in fintech, mobility, SaaS, marketplaces.
Open Circle Capital and Iron Wolf Capital are first-time funds, both active and doing a good job.
Contrarian Ventures is a small but active “green” tech-focused VC making a noticeable mark in the development of the ecosystem too.
Regional and international colleagues are also present at the events and co-investing quite actively with local investors (Karma Ventures, Trind VC, Change Ventures, Tera VC, ZGI and global powerhouses such as Intel, Accel, Creandum, Insight Venture Partners, Inreach).
Most of the VCs are generalists and looking into a broad spectrum of startups active in different sectors, with a few exceptions. Of course, some of the investors have a better-proven record in some categories than others.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Lithuania is a small country, and Vilnius being the capital city, is still the center of attraction of everything in the country, and talent is not an exception. With further development and growth of the tech ecosystem, even more talent will be drawn to Vilnius. It is a great city to live in, work and build global tech companies.
Where do you see your city’s tech scene in five years?
We will have more than five unicorns born/raised here, and Vilnius will become one of the European “hot spots” for tech investing. The tech ecosystem will grow at least three times. Vilnius will become a center of attraction for talent from all the region, CIS and other parts of Europe.
Tomas Martunas, founding partner, Iron Wolf Capital
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Lithuania, and especially Vilnius, has established a very strong position in fintech being the No. 4 in Global Fintech Ranking. Vilnius has created a favorable environment for fintech startups to be established and developed, and managed to attract one of the largest fintech players, Revolut. Vilnius is also especially advanced in the laser industry. While lasers constitute only a small part of Lithuania’s export, their quality is making the country famous around the world. It is very exciting as the demand for lasers is forecasted to only increase. We believe that Lithuania’s laser industry has a very positive outlook and thus, we invested in laser manufacturer Litilit. Vilnius also boasts many strong SaaS startups with, for example, Interactio, which recently raised $30 million after seeing 12x growth between 2019 and 2020. I believe there is still a lot of untapped potential in deep tech and edtech in the Vilnius ecosystem and it is starting to uncover. With the Wargaming office opening, also together with the Unity branch, Game Insights office and independent game studios, the gaming cluster has good fundamentals to blossom.
Which are the most interesting startups in your city?
Vinted, Tesonet, Turing College, Omnisend, Millo Appliances, NanoAvionics, Pixevia, Monimoto, Redtrack.io, Interactio, Litilit, Foros.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
First, there are significant sums of EU funding available for early-stage startups, especially for the ones having a strong technical foundation and innovative solutions. Overall, the Vilnius ecosystem has grown significantly over the past five years with many more VCs being established, a strong business angels network (LitBAN), accelerators launched and more focus dedicated to early stage and bolder investment ideas.
Many investors remain focused on the Baltics and CEE and still have some way to go to establish more global mindsets that are more prevalent in Nordics and Western Europe. But the Vilnius ecosystem is still growing and more foreign investors entering shows the attractiveness of the ecosystem in this way also providing founders with more opportunities.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Vilnius is a very attractive destination. It boasts affordable housing (which many European capitals cannot offer), and when COVID-19 is reshaping our lives to remote work becoming a standard, many people will move out of expensive cities to more affordable ones, such as Vilnius. Also, it is an innovative city that has advanced a lot to easily compare with other European capitals (and overtake some of them) in terms of standard of living and career opportunities.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Mantas Mikuckas, Tomas Okmanas, Eimantas Sabaliauskas, Toma Sabaliauskiene, Rytis Lauris, Vladas Lašas, Rita Sakus, Tadas Burgaila, Inga Langaitė, Roberta Rudokiene and of course Iron Wolf Capital founders 😉
Where do you see your city’s tech scene in five years?
I believe that Vilnius will continue on growing and advancing to become one of the key European startup hubs. With favorable business conditions and a good standard of living it is expected to attract more talents who will contribute to fostering the ecosystem. However, Lithuania is already experiencing a brain drain and should take some special efforts to bring talents back and retain them.
Alex Gibb, partner, Katalista Ventures
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
We’ve seen an explosion of companies offshoring from Scandinavia over the past 10+ years in LT, which has led to the growth of competence centers and specialist R&D facilities for intangible services. I’m excited by the tech sector’s growth, which is primarily software, development and engineering. We’re too small to really have specific sectors but lasers have a trusted pedigree in LT.
Which are the most interesting startups in your city?
Cogastro is servicing insect farms with CRM systems — that’s pretty original and niche! Bored Panda was No. 1 on the App Store last year and continues to boom, Tinggly (disclosure — I’m a co-founder) is growing again rapidly after COVID, serving the U.S. market primarily. Vinted is of course head and shoulders above the others — both in valuation terms, but also the positive impact on recycling and reusing.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
We have a growing angel network with LitBAN that is boosted by the government’s co-invest fund — which recently facilitated a 34x return for early investors in Interactio. There is a good range of early-stage VCs in town, the gap comes in the 2 million+ space where startups need to go abroad for deeper pockets. The focus tends to be B2B but as we’re a small geography there are very few investors with a tight sector focus.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Move in! Vilnius is a compact and cool city [with a] high quality of life here and [it’s] easy to get out to the lakes and forests to relax. I still think we’re figuring out the hybrid nature of work from here onward, so people will mix and match to what suits their lifestyles. The positive shift is more power to employees and employers taking into account what employees need for positive mental health.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Greta Monstavice, CEO at Katalista Ventures — she’s top of the tree on all things sustainability related and passionate about empowering startups. JB Daguené at 70V is powering B2B startups with explosive growth tools. Sarune Smalakyte, head of Rockit, is nurturing fintech companies at their co-working space and blasting out many great (free) events for the community.
Where do you see your city’s tech scene in five years?
I’m excited about the city’s prospects. We have a lot ahead of us with many new startups coming through. The key challenge will be to get the next generation of tech talent trained properly and ready for the demands of an already squeezed workforce.
Jone Vaituleviciute, partner, Startup Wise Guys
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Vilnius is of course known on a global scale for its fintech ecosystem — though the majority of fintech “perks” come on a governmental/country level, Vilnius boasts a high number of banking, insurance and other financial services professionals, as well as fintech-focused startup hubs and a number of events. I am particularly excited to see a number of big foreign names (e.g., Revolut, SumUp and many other) moving their operations here; this way building up the ecosystem and level of fintech professionals. Gaming, edtech are also a few other up-and-coming areas, which signals that B2C is becoming more usual than not. On the improvement side, we still have not figured out how to include deep tech/R&D startups into the ecosystem and funding mechanisms. This is a challenge many cities have, but we hope Vilnius will move to the right direction, thanks to collaborations among universities and venture capital funds.
Which are the most interesting startups in your city?
Well-known names: Vinted, Trafi, TransferGo and several not backed by venture capital — Bored Panda, Kilo Health.
Up-and-coming: ZITICITY (mobility), kevin. (fintech), Ondato (fintech), Turing College (edtech).
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Vilnius is a good representation of all Baltic venture capital ecosystems. We have several pre-seed/seed stage venture capital funds that are coming in with experience and good understanding of various verticals. However, for a long time we lacked a proper early-stage funding ecosystem. This is changing right now with accelerators supporting idea-stage startups and a number of business angels appearing from successful startups who are ready to invest decent tickets resembling more Western Europe rather than Baltic funding trends.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
I believe the pandemic has been rather favorable for small ecosystems like Vilnius. Mainly because remote investing/pitching/selling became an absolute norm and founders do not have to fly hundreds of miles for an event or a meeting to close a deal. Thus, I see many entrepreneurs sticking to Vilnius due to its great life quality and well-knitted ecosystem.
Where do you see your city’s tech scene in five years?
We should be talking pre-seed/seed on the same level as West Europe or even the U.S. We are catching up with the standard, but with the maturity of the venture capital ecosystem, Vilnius should be a perfect city to kick-start your startup and take it to Series A with the same funding available. We should see more areas like fintech emerging with strong value proposition for foreign companies as well as initiatives for local ones to stay. Talent will be expensive, but this is how it should be. Second- and third-time founders will be creating more and more startups that will attract a number of foreign funds too.
Lukas Kaminskis, CEO, Turing College
What industry sectors is your tech ecosystem strong in? What are you most excited by? What is it weak in?
Vilnius is well known for its fintech and blockchain ecosystems — companies such as Revolut have banking licenses registered here in Vilnius. We have several strong players in medtech and cybersecurity — Kilo Health and Nord Security — which are growing super fast. Nevertheless, we’re lacking behind with education. Explicitly speaking, most IT programs in Lithuanian universities aren’t focused on preparing students for international competition. This is why a lot of companies are establishing their internal academies to upskill students from universities.
Which are the most interesting startups in your city?
Omnisend, Nord Security, Attention Insight, Turing College.
What are the tech investors like? What is the investment scene like in your city? What’s their focus?
Lithuania has quite a good pre-seed/seed investment scene with investors like Iron Wolf Capital, Startup Wise Guys, Practica Capital, etc. Moreover, there is a VC fund — Co-invest Fund, which invests the sum equivalent to the multiplier of any accredited angel investor’s investment sum by 3x-5x. Investors in Lithuania are mostly industry agnostic.
With the shift to remote working during the COVID-19 pandemic, will people stay in your city, move out, or will others move in?
Tendencies in Lithuania are quite similar to the ones we see in the global scene. Companies plan to adapt hybrid type of work post-COVID, while maintaining remote type of work as primary while the pandemic is happening.
Who are the key startup people in your city (e.g., investors, founders, lawyers, designers, etc.)?
Giedrius Kolesnikovas is the guy to know from the legal industry — he is the partner of Motieka & Audzevicius legal firm. From the investor’s perspective, there are several of them — Jone Vaituleviciute, Rytis Vitkauskas, Kasparas Jurgelionis and Arvydas Bložė. These guys can open doors to most of European/U.S. capitals.
Where do you see your city’s tech scene in five years?
I see that Vilnius will become a tech talent center of Northern Europe. Edtech startups and private training initiatives are emerging in our market to solve educational problems that we face because of the poor performance of public education policies in the last 20 years. As well, I see that the current government is making a huge effort to attract international tech companies to establish their branches here in Lithuania. Great examples are Wargaming, Moody’s, which established huge centers here in Lithuania.
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