Private equity and venture capital are one of the most popular forms of investing. In 2003–2019, nearly EUR 29 billion was invested in private equity into 4,300 companies in Central and Eastern Europe alone, creating millions of jobs throughout Europe. Venture capital has also recorded major investments in recent years. Hence, both these risk capital areas significantly contribute to the gradual economic growth of the entire Central and Eastern European region. At HAVEL & PARTNERS, we also considerably support economic growth as a part of our private equity and venture capital practice.
Both types of these funds primarily look for products with global scale, variable range, and ability for constant innovation. From this perspective, attractive companies are those which have their own team of top R&D experts.
Unlike 10 years ago, the founders of target companies currently welcome investors who provide more than funding. They look for smart money. That is why many investors do not invest only funds but also their know-how on strategies, business, management, marketing, or HR, with the aim of supporting, as much as possible, the further growth and development of the company, especially when expanding abroad. Investor’s portfolio companies also play a significant role as they can create exponential synergies with the newly invested company.
Investments mainly go to technologies in various business stages (currently mainly AI, blockchain, IoT, API, gaming, and the like, while earlier the highest demand was primarily in comprehensive IT solutions). E-commerce platforms and technologies, fintech and telco have also remained popular. Even though most assets go to these fast-growing fields, other areas such as the health sector, energy, industry, retail, agriculture, and the food industry are not lagging behind either.
Annual investment value in the CEE region
Connecting law with finance and business mindset
Together, private equity and venture capital make one of the key advisory areas HAVEL & PARTNERS provide. The law firm was offering services linked to private equity transactions already upon its establishment in 2001. Our experts have specialised in venture capital since 2005. That is when HAVEL & PARTNERS took part in the process of laying down the basics and essentials of this legal expertise in the Czech Republic and Slovakia. A year later we formed a team of experts that can now boast 15 years of experience and practice in comprehensive international transactions and advice to large and mid-sized companies and SMEs, investors and start-ups.
“We connect law with finance, technologies and business mindset. Hence, we can offer comprehensive legal and tax advice in all stages of private equity and venture capital. We help young entrepreneurs launch their company. We advise our clients where to further move their business. We interconnect strategic partners. We always look for the best practical solution for our clients,” described Václav Audes, a partner in the law firm and one of the leaders of the expert group.
We connect law with finance, technologies and business mindset. Hence, we can offer comprehensive legal and tax advice in all stages of private equity and venture capital.
In fact, the law firm also draws upon its own experience. “Twenty years ago, we were also a start-up and we were working 7 days a week. However, thanks to our utmost effort, quick decision-making, and professional commitment, we quickly transformed our company of a few people into the most dynamically expanding law firm in Europe. Thanks to our experience, we can efficiently assist young projects,” said Jaroslav Havel, the managing partner.
The company has not lost the dynamics of a start-up even now – with over 500 employees and turnover of over CZK 1 billion. “We are trying to maintain continuous growth, elements of quick decision-making and the ability to flexibly adapt to customer needs. This is also possible by being in constant touch with emerging young entrepreneurs and managers. As of 2008, we have also invested in several venture capital funds and start-ups,” added Jaroslav Havel.
Private equity and venture capital on the Czech and Slovak markets
The private equity investment sector is dominated by local players such as PPF, KKCG, J&T, Penta and others that are not traditional private equity funds in the global sense of the word. These can be smaller but independent and long-established funds such as ARX, Genesis and Oriens. Family investment holdings, so called family offices, creating various investment portfolios managed in a similar way as private equity funds have also been playing an ever more significant role.
In the past, international players engaged in investments during privatisation and later on in major assets in telecommunications, financial services, and the pharmaceutical sector. For these global investors, however, there is along-term lack of suitable assets on the market in Central and Eastern Europe, which is why investments are carried out mainly by their portfolio companies aspart of add-on acquisitions.
Contrary to private equity, venture capital on the Czech and Slovak markets is more international, both in terms of fund management and the origin of the capital. It is invested primarily in start-ups that have innovative and smart ideas but lack funding and experience for the further growth and development of their business. While in the first decade of the new millennium, the Czech and Slovak markets were dominated by foreign venture capital funds and investors, after the financial crisis, in 2008 and 2009, Czech and Slovak funds emerged in Central Europe. In the past approximately 7 years, the interest of European investment funds in the Czech market has been strongly intensifying, and since2019, the Czech market has also seen funding flowing from the European Investment Fund.
The time of economic growth that preceded the current period of the COVID-19 pandemic was marked by the emergence of other very strong players – angel investors, i.e. individuals who were looking for opportunities to increase the value of their assets.
“The number of venture capital transactions on the Czech market has been steadily growing since 2014, with the largest proportion invested into information technologies and the digitisation of production and logistic processes. Last year, the Czech Republic was at its peak with the highest number of the fastest growing companies in Central and Eastern Europe. Still, the Czech and Slovak market has room for growth,” said Václav Audes. Compared to Western Europe, the valuation of Czech start-ups is much lower. While last year, over EUR 50 million was invested into Czech start-ups, start-ups in neighbouring Austria received four times that amount.
The activity of Czech start-ups has often been slowed down by red tape and insufficient technical infrastructure, while progressive taxation on capital is not too motivating for them either. Moreover, venture capital must still have to deal with the conservative approach of certain Czech investors. Investments into venture capital funds or directly into start-ups, however, can be an interesting alternative for investors who are willing to take the risk and invest their funds into the growth of a team and a product they trust. In fact, a number of these progressive sectors benefit primarily from the changes in the behaviour of consumers and companies to whose needs entrepreneurs in these sectors can quickly adapt.
Key contacts for private equity / venture capital:
Jaroslav oversees the team for private equity and venture capital, including international relations. Thanks to his managerial, business and investor experience, he can provide comprehensive legal and tax support to investors, as well as the founders and management of companies and start-ups in the Czech Republic and Slovakia. Jaroslav helps companies and start-ups that are unique in their product or personality with their business development.
In 2005, Václav co-founded the firm’s private equity and venture capital practice and currently leads the team specialising in this area. He has extensive experience in complex international and domestic transactions. In the Czech Republic and Slovakia, Václav advises strategic and financial investors, medium- and small-sized companies as well as new potential start-ups.
Robert co-leads the team specialising in technology law. He has completed a number of transactions for private equity and venture capital investors and other transactions for strategic investors and sellers, for example in the IT, services, retail and engineering sectors. Robert also advises corporations and start-ups on information technology law, intellectual property law, and regulation.
Tomáš specialises in venture capital. In recent years, he has been involved in a number of transactions, particularly on the part of investors, but also on the part of founders or target companies. Tomáš actively participates in events organised on the start-up scene, and gives lectures at and participates in webinars on start-up topics.
