The Earlybird Digital East Fund – a fund affiliated with Germany’s Earlybird VC, but managed individually – has launched a €200 million ($242 million) successor fund. The focus of the fund will remain the same: a seed and a series of funds focused on what known as “emerging Europe”; In other words, countries extending from the Baltics to Central and Eastern Europe and Turkey. The firm has also promoted Mehmet Atici, who has been with the firm for eight years, to become a partner. The new fund has so far made four investments: in FintechOS, Payhawk, Picas and Binalyze.
DEF’s back-story is an interesting story of what happened in Europe in the last 15 years, when technology introduced and Europeans came back from Silicon Valley. After leaving SelectMinds (where he was the founder and CEO) in 2005, Cem Sertoglu returned to Turkey. Although he says he “accidentally became the first angel investor there”, he was the right person in the right place at the right time. He told me: “I am very lucky and finished writing the first checks among the first few big results in Turkey.”
In 2013, Sertoglu collaborated with Evren Ucok(the first angel of Peak Games and Trendy), and Roland Manager (Earlybird). Dan Lupu, a Romanian investor who covered the region for Intel Capital, joined them, and together they raised the Earlybird Digital Pre-Fund I ($150 million) in 2014, centered on CEE and Turkey. This is an area where high quality enterprises can found but very little on the way to VC.
Since then, between 2014 and 2019, the fund has invested in UiPath, Hazelcast and Obilet. UiPath has become a world leader in the region known as Robotic Process Automation (RPA). Hazelcast is the launch of a short-delayed data processing platform with Turkish roots. DEF has also removed Vivense, Dolap and EMbonds, and more recently; this fund has expelled Vivense from the top PE fund of “Turkey’s Wayfair “. The team had great success. The four Turkish technologies from Peak Games, Trendyol, Yemeksepeti and GittiGidiyor have come out to date. Digital Pre-Fund was the investor in all of them. Peak Games alone had $1.8 billion in cash in Zynga last year.
- As of Q4 2020, the fund’s metrics are:
- Investment Multiple: 24.9x
- Gross IRR: 104.4%
- Net IRR: 84.1%
Therefore, in VC positions, they did quite well. I interviewed Sertoglu to pack the story of the Earlybird Digital Pre-Fund.
He told me that DEF had achieved multiple of a 17-x investment above $150 million in funding. He thinks, “It may be the largest European VC fund performance in history, and it didn’t come from Berlin, it didn’t come from London, but it was coming from Eastern Europe. Funding, no one has seen a stronger number than this.”
“Peak Games has become a great story. When you look at how tough it has been for Turkey, collectively. A single company of 100 people sold for $1.8 billion in cash, which was a shock to the local market.
The rise of the DEF from Turkey, with its relation to the Berlin fund, was not the obvious path for the VC fund. “One thing we realized early on was that we could invest with our own capital and syndicate to our friends, but we always had to go global for follow-on funding. In addition, it makes us weak. It made us feel that we were always dependent on the understanding of others about the opportunity we were facing. So when the idea of the first fund was published,” Sertoglu said.
“We felt that there was this unusual displacement between opportunity and capital in Eastern Europe. Our first fund was $150 million – meaning, a very clear size compared to Western markets. However, we have become the largest fundraiser in the region and have decided to focus this series on a gap where we feel that this is a great opportunity because we feel that there is still a lot of local drama in the series.