LTstartups Ecosystem 2014 In Review – 46 Million EUR Invested In Lithuanian Startups

Photo Credit: Shutterstock/ Vilnius Financial District at Sunset

When we think about the best places to launch a startup – San Francisco or London comes to mind. However, new startup clusters are springing up all around the world, driven by lower costs and availability of talent. Many are quite promising, but not well known in the global startup movement. One of them is Vilnius city, the capital of Lithuania, a small & tech-friendly country in the Eastern Europe. Also, my choice for HQ location of our startup TrackDuck. 2014 was yet another record breaking year for #LTstartups with over 46 million Eur in investments (statistics according to StartupLithunia) and bunch of important events.

Sometimes it looks like everyone is moving here

Though there was plenty of action from local players in 2014, I would like to start from a growing trend of international startups moving to Vilnius. Last year, month after month new divisions and offices of foreign startups and IT companies were being announced:

• Uber established an office and started hiring developers. They currently employ an 8 person dev team, looking forat least 3 more and what I hear from rumors is they could hire up to 50 more people.

• Wix opened an office and created “Wix one team” to tackle some of their strategic projects. During office opening there were mentioned initial plans to hire around 150 IT people. They currently employ 31 people in Vilnius and are looking for at least 6 more engineers and designers.

• Revel Systems established “a division in Lithuania to expand its team of IT engineers and to distribute products in the EU.” They have hired prominent local businessman Tadas Vizgirda and at least 4 engineers already.

That’s just to name a few. For more about such companies as Nasdaq and Devbridge Group opening IT departments in Lithuania, see here. As happy I am that Lithuania is recognized in the global IT industry, this is also worrying because salaries for developers are growing month to month. On the other hand there are side benefits – while newcomers do warm up the salary market, competition for talent has spilled over to improving managerial practices and work environment – foreign capital companies in past years have been ranking as top choices as employers. There also are more benefits, as foreign and local companies dedicate more attention on the youth who are just entering the labor market. My biggest hope is, that some of the people from these companies will start their own startups and build products using their experience and network from international startups and corporations.

Another big part of the wave of companies establishing divisions or fully moving HQ to Vilnius comes from the east. Specifically, Russia, Ukraine and Belarus. Official reasons range from “entering EU the market” and “diversifying the talent pool” to being “closer to customers.” However, it is kind of clear that part of moving startups and established companies is due to general instability in Russian and Belarus markets:

• Game Insight, this global game developer with offices in San Francisco, Moscow etc established HQ in Vilnius and was covered quite extensively by media from various angles. It certainly shook up local tech and especially the game dev scene straight away with it’s activities and events, like Live Mobile Congress, the biggest LT Game Jam in the country’s history with more than 60 games created etc.

• Charlie Oscar studio initially worked from Stockholm, Kiev, Perm, Moscow and Sebastopol. In May 2014 they moved to Vilnius to develop a new “Gremlins Inc.” steampunk strategy game. Founder and managing director Sergei Klimov, along with his international team and super outgoing attitude has since became a promoter of the Lithuanian game dev community and Vilnius. If you read Russian, check out this blog post about our lovely Vilnius.

• Flazm, Dash & Dot, Sky Games, Plawius, Melior Games are some of the other game development companies that also moved recently. And there is a pipeline with companies in the process of relocation.

If you noticed that most of them are into game development, that’s due to effort of Invest Lithuania, a Lithuanian government agency which works to help foreign investors start their ventures in Lithuania smoothly. I was happy to get my 2 cents in with “Pavel, come to Lithuania!” initiative, which was signed by 52 startups, attracted quite a bit of media attention and tweeted by the President of Lithuania 
 

Rising Lithuanian startup stars

There has been so many developments in the past year that it is really hard to pick a sensible number of news items from the local #LTstartups announcements. I decided to focus on funding, as it’s easier to confirm. So name an industry – we have it covered, from the Mac App of the year to 3D printing platforms. Here are some of the gems of Lithuanian startup scene action in 2014.

Image editing app Pixelmator, which belongs to the best evaluated apps on the Mac App Store, Apple’s Pick For Best iPad App Of The Year. Oh, also at last Apple’s Town Hall meeting, the Pixelmator team demoed its app for the iPad.

The fastest growing second hand clothes marketplace, Vinted, has raised $27m B round last year. A record breaking one in the Baltic region, setting a new standard of performance for all startups in the region.

Mobile app market Getjar, the one’s behind ‘Steve Jobs is not our Dad.’ It has since been acquired by China-based Sungy, the developer of Go apps for Android, for an estimated $35 million, including $5.3 million in cash.

CGTrader, the digital material marketplace for 3D printing and computer graphics, raised an undisclosed series A round, backed by Intel Capital.

mWallet platform WoraPay, has secured a €400,000 funding round from Israel-based Entrée Capital.

TRAFI raised more funding in August, 2014 from BaltCap and expanded to Brazil.

Social trading app MoboFree, is expanding to West African countries after series A with the help of funding from Netherlands based eVentures Africa Fund (eVA Fund).

TransferGo was featured as “Top 25 Hottest Fintech Start-Ups” and attracted additional funding.

Rewalon got followup investment from Polish venture capital fund Online Venture and Practica Capital. They also recently introduced a new product – Challenger, a customer development platform for B2C companies.

Our startup TrackDuck raised 200k Eur seed round from Kima Ventures and Practica Capital, which was the 1st investment for Kima in Lithuania. We also went from 0 to over 10 000 clients and our first 100 paying clients without any paid advertising 

AdDuplex has strengthened their position as the leading cross promotion network for Windows apps and has passed the billion ad impressions a month mark and has been featured on stage at the main Microsoft developer conference, Build 2014. Btw, if you’re interested in Windows Phone market, AdDuplex blog is the main industry stats and info source.

Friday Lab smart fish finder sonar gadget and app called “Deeper” is now available in Apple retail stores. It has been spectacular to watch these guys grow from Indiegogo to tens of thousands users in a such short time.

I must mention Yplan, who raised $24 million series B last year. Though in my opinion this startup doesn’t have much to do with the Lithuanian startup community – Yplan started and grew in London. Yes, the founders are Lithuanian, but they were living in London for the past 5 years before starting Yplan. Others point out that BaltCap was one of the first investors, but then BaltCap itself is pan-Baltic fund. Lemon Labs mobile app development agency, which worked with a number of prominent startup from Lithuania and abroad, was acquired by health and beauty marketplace Wahanda. Now the deal was only announced recently in 2015, but Lemon Labs has been working with Wahanda for a while and clearly started negotiations a while ago. ManoDaktaras.lt strengthened its position byacquiring the most popular in Lithuania health related website Sveikas.ltMailerLite. The email marketing platform startup continues to grow without investment – in 2014 they fully redesigned their UI and grew to over 40 000 clients. TutoTOONS games platform, which allow users to create games without any programming knowledge, in 2014 had 85 games published, 4.7M game downloads reached, and all without any outside investment. They recently hit 6M game downloads.AdTarget.me successfully expanded to Poland and Ukraine after closing investmentfrom Practica Capital.Place I Live startup which provides deeper insights into neighborhoods launched in San Francisco, Chicago, London, Berlin and New York.Dragdis bookmarking tool continued to develop, getting featured (2nd in the list) and participated in Blackbox Connect Summer 2014 program in Silicon Valley.Bliubliu language learning startup got a grant and went to Germany for The Berlin Residency programme set up by EIT ICT Labs XEU Outreach.

8 early startups were selected for 2014’s Startup Lithuania Roadshow, all of them look pretty interesting and worth the time to check out.

Meeting Lithuanian startups

The startup community in Lithuania is pretty easy to reach – in 2014 LT Startup’s Community in Facebook grew to over 1,6k participants, Internship @ LT startups to 800. if you prefer Twitter, use #LTstartups. English is considered a default language next to Lithuanian, so feel free to post and comment.

Go for the biggest startup conferences: LOGIN and Silicon Valley Comes to the Baltics. LOGIN in particularly, it attracted 5 thousand tech geeks and startups from the whole Eastern Europe, not only Lithuania. LOGIN has been around for nearly 10 years now and has a strong brand, thus managing to lure in the hackers, startups and large businesses alike.

Part of LOGIN is LOGIN Startup Fair with startups pitching on stage and matchmaking possibilities with foreign investors. Last year over 200 startup-investors meetings were arranged and a small fortune was made in making coffee stands for the Fair.

Monthly startup meetup Open Coffee Club Vilnius. It has been happening for a few years, in 2014 every month 50-150 people gathered to discuss what’s going on. For the latest event check out #OCCVilnius.

Life Sciences Baltics 2014, an international forum of world-class biotechnology, pharmaceutical and medical devices had a number of startup participants and looks to grow even more this year.

For more startup events and meetups check out StartupLithuania.lt and StartupDigest.com/Lithuania, I am unable to list them all 

Coworking, hubs, tech centers

Last year was also marked by a number of new co-working spaces for Lithuanian startup ecosystem:

StartupHighway X (SHX) at Rupert Art and Education Center, run of course by StartupHighway accelerator.

ISM University started Innovators base, which became a popular startup event location and already hosts a bunch of startups.

Vilnius Tech Park was announced in 2014 (opens in 2016), which will have 100 seats in the co-working space established by TEO, the biggest telecommunications company in Lithuania.

Talent Garden “Tag” co-working space was announced and recently launched in Kaunas. Already dubbed “the most creative space in Kaunas”, Tag got a great reception.

Sunrise Valley together with Western Union launched a new coworking space for startups. Sunrise Valley is the leading tech center in Lithuania with companies and R&D in lasers, optic industries and other hardware focused technology definitely worth it to check out.

KTU StartupSpace incubator-coworking space in Kaunas continues to evolve, hosts a number of startup events and grew their portfolio to 19 student established startup companies.

Local startup investors

In terms of fundraising, the situation has improved dramatically from zero early stage startup investors just few years ago. The biggest contributors are VC funds financed by JEREMIE initiative. They recently published performance analysis, which states that more than 40 mln. EUR have been already disbursed to 75 SMEs.

One of the most active funds in Lithuania is Practica Capital. They invest in an early-tage development and a later-stage expansion of startups in Lithuania. In 2014 alone they invested in at least 6 startups. For startups who are not ready for a seed round yet, Practica has partner Startup.lt accelerator. Together they last year also signed a partnershipwith Kaunas University of Technology to set up a dedicated scholarship for KTU students and invest in their companies over 30k EUR.

New VC fund Nextury Ventures was launched. Set up by GetJar founder and investor Ilja Laurs. Nextury is planing to back 20 Eastern European startups a year, until now Nexture has made 5 investments.

Lithuanian accelerator Startup Highway in 2014 announced partnership with UC Berkeley to take LT startups to Silicon Valley Skydeck incubator and later with Barclays bank to develop fintech businesses. The applications to UC Berkeley | Skydeck incubator are still open and Startup Highway is still in the selection process of the best team which will participate in the programme, so apply now.

In 2014 Startup Highway in partnership with a high-profile Russian investor, Igor Matsanyuk has invested in two new start-ups – Planner 5D and DevtoDev.

Mr. Matsanyuk has moved to Vilnius and is founder of IMI.VC fund, with over 40 investments worldwide. FromIMI.VC portfolio Kula, 4talk, Planner5d, DevtoDev and Plague app have also moved to Lithuania. With such concentration in Lithuania it is logical to expect some investments to other local companies as well. Looking forward to hearing more news from IMI.VC in 2015.

What should we learn from 2014?

So why all this movement in, and to, Lithuania you may ask. Well, because Lithuania has a pretty good general environment for startups. Taxes and prices in Lithuania are among the lowest in Europe. IT labor is competent and hard-working, but still relatively cheap. We also have great ICT infrastructure: Lithuania continuously ranks among the top for Internet upload and download speed, competitiveness rankings for communication technology, mobile penetration and for cloud readiness (whatever that means:).

Things to learn from 2014 and expect in 2015:

• We have a great advantage with our tech talent and lower costs compared to bigger startup hubs.
• Sometimes, if not often, our ecosystem is valued more by foreign startups and companies, than by ourselves.
• Next year product managers, marketers, biz devs etc who have experience working with global products will be in even higher demand. Developers won’t be the only focus of startup head hunting.
• Lithuanian government should continue to support and even step up it’s game with startups based on last years results.
• There is a lot of great things coming up in the next few years. All the current startups will start to mature and enter growth stages.

So stay positive – this year should be pretty fun!