• DEPO Ventures released a report highlighting the trends in Czech investments in 2023 and expectations for 2024
• Unlike in previous years, the current Survery encompasses the entire investment landscape and not just business angels
• The Survery covers trends, investment appetite. concerns, and much more

This April, the well-known Czech investment group DEPO Ventures published its fifth annual Survery of Startup Investors in the Czech Republic. This year’s report goes a few steps further as it focused not only on angel investors but all types of private and professional venture capital investors. The law firm Mavericks, the agency CzechInvest, and the Czech Business Angel Association (CBAA) became the strategic partners of the survey.

The survey is a quantitative research which was realized in the form of an online questionnaire.  The questionnaire was sent to 320 private investors and managing partners of venture capital funds in the Czech Republic during January and February 2024.

The Mission and Challenges

‘We have been focusing on supporting venture investors in the long term. However, in order to do this properly, we need to understand them better. Five years ago, we concentrated mainly on educating and nurturing angel investors, but we had lack data about them. We couldn’t compare our investment environment with foreign countries. That’s why we decided to conduct our own survey, which now provides valuable insights for investors, entrepreneurs, and governmental institutions focused on supporting innovation and growth in the Czech economic landscape,’ DEPO Ventures’ head of marketing and PR Eliška Vámošová tells ITKeyMedia.

According to her, it was quite a challenge to translate the original survey which had been aimed at business angels, to all types of venture investors: professional investors from general partners of VC funds or private investors who invest in startups in various methods such as directly, via VC fund, or through a syndicate. Ms Vámošová amits that the creation of the research took a month, from researching the best reports such as Atomico’s, to formulating questions and designing the questionnaire. An additional challenge was to put together a list of respondents who were both relevant to the research and willing to fill out the questionnaire.

Wrapping Up 2023 and Looking at 2024 So Far

After the lean year 2023, technology investments have stregthened significantly as Q1 2023 was unanimously treated with cautious optimism.

‘Investment appetite returned to the level of 2022 in the second half of the year, but there was no shift in valuations and investment amounts at the early stages of startup financing. However, we enter 2024 with optimism. In our transactional practice, it is already evident that last year’s scenario will not be repeated,’ Mavericks managing partner Tomáš Ditrych comments.

Concerns: Quality Startups and Proven Funds

According to the Survey, startup investors in 2024 don’t observe any shortage of startups in which they could invest, but they are concerned about finding enough quality startups. This worries 43% of respondents.

‘A quality startup is characterized by a founder with strong expertise in their field, the ability to connect that knowledge to business opportunities, and essential traits such as quick learning, self-reflection, and responsiveness. Founders should also possess a balance of ambition and humility, the capacity to make decisive actions in difficult situations, and effective leadership skills,’ Ms Vámošová explains.

Further the Survery reveals that general partners and fund investors agree on the greatest challenges but prioritize them differently. For the former, the biggest challenge is raising capital from investors, while the limited partners’s priorities are exits and liquidity.

‘For investors, it’s important to realize profits from their investment within a meaningful time horizon. However, exits have stalled due to falling valuations and rising interest rates recently. If the market picks up this year, it means greater liquidity prospects for investors and therefore a greater willingness to invest. All of this could mean that we are in a natural phase of the cycle, the market may be exhausted. It is small, and the capacity of investors is limited,’ DEPO Ventures’ general partner Michal Ciffra points out.

‘The Czech market remains small and develops slowly because investors are awaiting exits and liquidation of previous investments. Plus the number of investors is limited. Venture capital as an asset class is not yet a common part of investment portfolios. The market might also be saturated due to the recent emergence of new investment groups, leading to a mismatch between the supply and demand for capital,’ Ms Vámošová adds.

Fund performance is also a concern; investors are looking for funds with good results and the ability to generate returns. One might assume that when LPs are specifically looking for funds with ‘good track records’, it may mean that a new fund won’t have a lot of opportunities to gain a ‘good track record’ because its chances to get any LP attention are slim. To that Ms Vámošová argues that it becomes more challenging but not impossible and there is still significant potential with future and prospective LPs. Additionally, the increasing involvement of public money (such as from the EIF) can provide a level of credibility and stability for new funds, which can help attract LP attention.

Bridging the Education Gap

Another particularly curious issue that the survey reveals is the education gap, i.e. many investors would like to engage in venture investment but lack the information for it. To fix this, Ms Vámošová believes that it’s essential to encourage and educate journalists so they understand venture capital and are motivated to write about it, including success stories.

Other crucial mass enlightenment mesures should include establishing and supporting more quality workshops, masterclasses, and other events with networking opportunities specifically designed for investors to enhance their knowledge and skills. Active government support can also be helpful – for instance, developing a sophisticated ‘Estonia-inspired’ digital infrastructure, providing tax incentives, and establishing public-private co-investment funds.

DEPO Ventures’ Survery of Startup Investors in the Czech Republic provides in-depth insights into investment appetites, concerns, and trends, but also returns and both geography and niche focus. You are welcome to check out the Survey in full here.