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Credo Ventures eyes region’s tech startups

  11:45

Private equity firm is poised to make initial investments in promising Central European technology startups.

Czech venture capital firm Credo Ventures reached the €11 million first close of its fund focusing on Central European technology investments at the end of October. The fund was started by three private equity players with a track record in tech financing who thought the time was ripe for starting their own fund to make up for a lending shortfall for new technology in the region.

“I strongly believe that there’s more and more entrepreneurial ambition and talent in the Central European region and there’s really a lack of early stage financing, or at least of institutional early stage financing,” said Ondřej Bartoš, partner at Credo Ventures.

Credo started fundraising in the summer of 2009, aiming to raise funds from high net worth individuals as opposed to institutional investors. “We decided that we wanted to raise funds from individuals mainly because of our history and track record we had quite an extensive network of contacts,” Bartoš said. ‘There’s more and more entrepreneurial ambition and talent ...  and a lack of institutional early stage financing.’

Raising money during the ongoing financial crisis also made institutional capital far less available. Many of the fund’s investors come from the tech sector as well, including Eduard Kučera and Pavel Baudiš, the founders of the computer security software company Avast.

While fundraising during the financial crisis was challenging it also provided investors with an incentive to look at venture capital investment in a new light.

“The simplistic view would lead you to say that raising funds during a financial crisis is bad timing, and in a way it wasn’t the best timing in history, but it’s also true that during the financial crisis people lost a lot of money on assets that were thought to be relatively safe like stocks, banks, etc., so in a way it wasn’t the worst timing either. A lot of people were beginning to see that stocks and real estate were riskier than they’d thought, so why not put a small portion of our net worth into venture capital,” Bartoš said.

The fund is primarily focusing on technology startups in the Czech Republic and Slovakia, with a secondary focus on the rest of Central Europe, which Bartoš defines as running from Germany to Romania. Currently Credo is selecting from about two dozen projects seeking investment. Out of that group the company expects to choose two or three startups to invest in and promote. The first investments are expected to take place at the beginning of 2011.

In addition to investing the first part of the fund Credo will attempt to raise a further €9 million for the final closing of the fund to reach €20 million overall. “We plan to do the final closing by October of next year so we’re still open to investors, but the priority now is making investments,” Bartoš said.

Besides the partners own experience in the sector a tech fund was attractive for other reasons as well. “The reason why venture capital should look at or focus on technology is that it’s the sector where you can really build something from scratch relatively quickly that can make a difference that can actually change the way people behave or change the way markets work. Sectors like retail usually work slower and need a lot of capital, whereas with technology it can be about a really great idea,” Bartoš said, citing the potential sale of Groupon to Google for a reported $2 billion after only two years of operation as an example. Given regional tech success stories like those of Avast, AVG, Eset and Netbeans among others, Bartoš feels that Central Europe’s tech startup potential more than speaks for itself.

 

 

 

 

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