According to Deloitte’s 2022 study*, the financing available for fast-growing companies in the venture capital and private equity funds of the Baltic states is almost one billion euros.
We can be proud of the first Latvian unicorn or the billion-dollar company “Printful” and we have learned that a startup and a new company are not synonymous. However, for still rapidly growing companies in Latvia, perhaps the most suitable form of financing – venture capital and private equity – is less known and also less frequently used than other types of financing.
So what is it? Simply put, it is an investment in the company’s capital combined with the investor’s active support for the company’s management team, which aims to help the company grow ambitiously, even very ambitiously. It is one of the ways to grow from a start-up or local market company to a world-class company.
There are many companies worthy of pride in the portfolios of Latvian venture capital and private capital funds. Everyone is familiar with “Depot”, the creation and development of which was largely possible thanks to the investment in the business idea of the private capital fund “BaltCap”, investing in the company at a time when it lacked both understandable performance indicators of previous years and a market analog for its evaluation, as well as cash flow to cover loan payments.
Also, many use the services of “Mobilly” or gas station chain “Kool” on a daily basis, the growth of which was also helped by the local venture capital fund “ZGI Capital”. Santa Monica Networks, the leader in data transmission network solutions, developed in cooperation with the private equity fund “Livonia Partners” in recent years, until it came to the LMT group in 2021.
The development of rapidly growing companies, including start-ups, is already having a positive impact on the economy of the Baltic States, starting from income generation and jobs, which provide twice as high salaries for employees on average, and ending with additional tax revenues.
In the “Civitta” study** “Baltic startups in close-up: today’s reality, tomorrow’s opportunities” it is calculated – if the number of startups in the Baltic countries increased three times, then the total tax revenue from this relatively small industry would be approximately one billion euros, while the number of well-paid startup jobs would increase up to 140 thousand. Unfortunately, venture capital financing is used significantly less in Latvia than in other Baltic countries. Of the total amount of capital investments in the Baltic States in 2022, only 4% were made in Latvia, according to the “Firstpick” study***.
At the beginning of a new year, I would like to invite entrepreneurs and potential entrepreneurs to be ambitious both for themselves and for our country and to use the most suitable financing for such ambitions.
* https://www.balticpevcmarket.com
** https://civitta.com/articles/the-baltic-startup-scene-today-s-realities-tomorrow-s-possibilities
*** https://ain.capital/2022/12/19/key-trends-of-the-baltic-startup-ecosystem-in-2022-firstpick/
