Cem Sertoglu

Co-Founder and Managing Partner


Earlybird Digital East

Executive: Cem Sertoglu, Co-Founder and Managing Partner
Investor Name: Earlybird Digital East
Investor Type: Venture Capital
AUM: ca. USD 400m
Year Founded: 1997
HQ: Istanbul
Geo Focus: Central & Eastern Europe and Turkey
Target Sectors: SaaS, Enterprise Software, Infrastructure Software, Cybersecurity, Fintech, e-commerce

Earlybird Digital East is a venture fund focused on the early stage tech opportunity in Emerging Europe. What makes CEE and Turkey attractive destinations for VC investments, and how has the startup ecosystem changed since you have been active in the region?

Nowadays, successful companies in large technology markets can emerge from anywhere in the world. CEE has proven to be a fertile ground for such global achievements. This is largely thanks to the CEE’s strong talent pool, shaped by world-class technical education provided by the universities in the region. Additionally, CEE’s significant domestic market provides an excellent launching pad for local entrepreneurs to tap into before addressing the global markets.

Since our initial investments, the region has developed a fairly mature startup and venture capital ecosystem that allows it to leverage these fundamentals to their full potential – with increasing VC funding and numerous success stories, some of which we have been fortunate enough to be a part of. And although it may still be perceived as an emerging market, CEE, in my opinion, has now matured into a large and dynamic market fully integrated with global markets.

Earlybird held a EUR200m (~USD242m) final close for its second fund in 2021. Has the strategy changed since your first fund?

Our investment strategy has remained largely the same since our first fund. We are primarily a tech investor, focusing on early stage startups with global ambitions, and roots in Emerging Europe. We place great importance on the quality of the founder teams when making investment decisions. Apart from this, we don’t want to limit our investment strategy to any particular sector or niche.

One notable investment in our recent fund is Payhawk, a spend management software provider that has become Bulgaria’s first unicorn. Our investment in Payhawk was motivated by the world-class, product-oriented founder team that had previously taken part in significant tech success stories in the region. Payhawk is a perfect example of the type of company we prefer to invest in: startups with strong founder teams that target large global markets and have robust product moats.

Earlybird Digital East tends to invest slowly, even when the ecosystem is flush with venture capital. What is the strategy behind this discipline?

As high-conviction investors, we prioritize quality over quantity. Despite managing the largest VC fund in the region, we do not use the size of our fund to back more companies, but rather to increase our financial and non-financial support for the select set of companies we choose to invest in. Our selective approach is the primary reason for our prudent investment pace. The VC funding environment may fluctuate depending on the macro environment, but we prefer to insulate ourselves from external factors, keep our bar high, and stick to our disciplined investment approach that puts the most emphasis on strong business fundamentals and management teams.

Earlybird has had a number of successful exits, notably UiPath, as well as Peak Games, Minit, and others, putting the debut Earlybird Digital East fund among the top 5% of VC funds globally for the 2014 vintage. What is your view on the current exit environment for CEE startups?

From an exit perspective, we believe CEE startups should no longer be seen as a different breed. The most successful CEE startups are now treated on par with their counterparts, headquartered in San Francisco, New York, or London. Therefore, when we invest in a promising company, we do not worry about the exit prospects anymore. UiPath, for example, has emerged as the global champion in the sizable RPA market, while Peak Games was one of the leaders in the global mobile games market. Companies like these can easily exit via an IPO in New York, or through acquisitions by global giants like Microsoft or Zynga.

The COVID-19 pandemic accelerated business digitization and technology adoption across a number of sectors and industries. The war in Ukraine has been disruptive in a different way. As a tech investor, how has your portfolio been affected?

Our portfolio did not undergo any significant unexpected changes. We firmly believe that the underlying trends driving our investment thesis are already quite determinate and remain the primary growth drivers in the long term, regardless of positive or negative short-term shocks.

Digital transformation has dramatically changed how we conduct business and lead our lives. While COVID certainly accelerated technology adoption across the board, we now observe these trends reverting to their long-term means. However, as experienced tech investors, we are comfortable with making investment decisions based on these long-term averages, which we already find quite attractive.

On the other hand, countries like Ukraine, which were once considered on the periphery of the global tech ecosystem, can now create major tech firms. The war in Ukraine may have disrupted the business there for some time, but thanks to the resilience of the Ukrainian founders and tech workers, we saw the ecosystem there recover quite rapidly. As investment geography, Ukraine is currently as appealing to us as it has ever been.

To what extent are you looking at ESG considerations at the fund or portfolio level?

While we are not a fund primarily driven by ESG, as tech investors, we find that our investment strategy is pretty much in line with ESG goals. We consider responsible governance and transparent management to be essential to our way of doing business, not just for achieving commercial success but also for fulfilling social responsibility.

As investors, we aspire for our companies to set the standard in their local ecosystems, not only in commercial aspects but also in non-commercial aspects of their businesses. Our companies are very visible in their local markets, and we want them to lead by example and set the standard for other companies in the ecosystem, from an environmental, social, and governance perspective.