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Strong founders and innovative companies make for a digital hot spot, say Arma Partners

Founded in 2003, Arma Partners provides independent corporate finance advice to companies and investors active in the global digital economy, from software to deep tech and from young companies looking for growth funding to mature businesses seeking exit deals. Broor Spahr van der Hoek, partner, focuses on the private capital market and advised Prague-based e-grocer Rohlik on multiple funding rounds, most recently a USD 230m Series D fundraise in June 2022. Here he discusses how emerging Europe’s digital sector is now firmly on the international map.

What is your area of focus and how do you apply that to emerging Europe?

Arma Partners as a firm covers clients in the digital economy. The focus of the team I’m responsible for is on private capital, providing advice on growth funding and other structured minority transactions. What I do is that I work with exciting growing companies across all of Europe, and as part of that I have advised multiple clients in central and eastern Europe in the last decade, such as for example InPost and Rohlik.

We advise these companies when they want to bring in capital from new external investors to grow the business or diversify their shareholder base. We have deep connectivity with the global investor community across venture capital funds, growth equity funds, private equity players, family offices, crossover investors and sovereign wealth funds.

Digital technology now touches all aspects of life. Which sub-sectors do you concentrate on?

As a firm, we are fully focused on the digital economy and are active across all sub-sectors such as software, consumer internet, fintech, deep tech, cloud and internet infrastructure, and anything in between. It’s difficult to call out a particular hot sub-sector because the underpinning force is the fundamental shift to online and digital that is happening in the world..

How do you decide which markets and countries you look at?

What we naturally try to find are the most innovative businesses in the digital space, wherever they are in Europe, whether that’s Scandinavia, eastern Europe or the Mediterranean. What is nice about the times we live in is that these types of businesses can be found anywhere, including central and eastern Europe. There are countries like the Baltic states, Poland and Czech Republic where we’ve seen a number of very interesting companies built and financed by international investors over the last few years. The reality is that when we look now, we find very high-quality companies in pretty much all of the region.

I may not be a specialist in the region per se, but I’ve had the opportunity to work with companies and investors from this part of the world over many years. I’ve also advised clients in true emerging markets such as Africa and compared to them central and eastern Europe is quite mainstream.

What makes the companies you work with stand out?

We tend to find very strong entrepreneurs who combine a vision of the future with strong execution skills and a team who are motivated to push these local champions and turn them into European leaders. What we try to do is make sure these companies find the best possible partners on their journey, from inception to fully mature international businesses. We help narrow the information gap that naturally exists between companies and the investor community to make sure they get the right price and the right governance and also choose the best possible partners to help them achieve their goals in the long term. Often, we’re working with a mix of international and local investors.

Our engine room is in the Shard in London, but we work across Europe including central and emerging Europe. I still think it is important to travel and meet people, but nowadays we can work very effectively remotely. In this market, where things are a little bit more volatile, it is important that you are able to work as a team with the founder – it is not just about raising capital it is about achieving goals more broadly as a result of a transaction.

How has the financial ecosystem in the region developed in recent years?

I have had a great experience working with founders and teams in the region, both the internal teams and the advisers around them. One observation I would make is that not only do these companies attract the best talent from within the region but they have also –rightly– become a mainstream destination for high quality performers from other parts of Europe. There is a traditionally high quality of advisers and consultants in the region and we have seen this evolve with the new technology community.

The local VC community is outstanding and I would say they are on a par with the local funds with the hotbeds of technology in Europe. Another observation I would make is that I see a growing number of individuals from central and eastern Europe who are now working for US and European investment funds and bring their knowledge (and pride) of their home countries.

How does the success of companies in the region help put it on the global map as far as international investors are concerned?

There is a strong tradition of high-quality digital companies coming out of the region and for sure there will be more. I think each one that emerges helps to build the profile of the region and the expectations that international investors have.

One of the developments is that the universe of international investors looking at the region for the next big opportunity has also grown. I think, like me, these international investors rate the founders and business leaders in the region extremely highly. Ten years ago there was definitely more hesitation, or let’s say a more limited level of understanding, particularly among US investors, when it came to central and eastern Europe.

The fact that in recent years these international investors have seen these high-quality companies and impressive leaders has helped to put the region on to a level playing field compared with what were traditionally considered to be the mainstream areas for investment in Europe. That hesitation around geography, or heritage geography, is not there anymore. And these international investors often like to partner with local funds.

Take the case of Rohlik, which we’ve worked closely with for several years. This latest funding round in summer 2022 was led by Sofina out of Belgium. Earlier rounds saw Index Ventures of London and Partech of Paris make substantial investments, supported by other investors such as the EBRD, Quadrille Capital, R2G and Enern – a mix of local, regional and international investors.

Opportunities and challenges ahead?

We’re all aware that we live in tricky times and 2022 has been a year of many challenges, such as the energy crisis and conflict in Ukraine, yet deal activity has continued. What makes the digital field where I am active so fascinating is that there will always be, at every stage of the economic cycle, new and smart individuals building companies that will make a difference for people in the future. Having seen this over 15 to 20 years, I have the conviction that the tradition of high-quality digital companies coming from central and eastern Europe is going to continue, if not accelerate.

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Interview with

Broor Spahr van der Hoek

Partner, Arma Partners