A walk through hell: How Eastern Europe’s first solo GP venture fund Underline Ventures raised $20M

When Russia invaded Ukraine, on February 24, 2022, our first closing was only one week old. 

We had closed $6.5 million — out of a target of $20 million. 

It may sound like nothing, but for an emerging solo GP based in Bucharest raising its first fund exclusively from private investors — it felt like a lot. We were on our way. Then the war, and the declining macro environment, made things harder. Much harder.

Disclaimer — I have been around for some time, first as a founder, and then I have worked on and off in funds or acceleration programs since 2013 (and made a few good investments). Also, I founded a group of friends at the How to Web Conference in 2010, now one of Europe’s top five startup events. 

The first deck

I started Underline Ventures in 2021. I had failed another fundraiser (2017-2019) and was not looking to raise a new fund, but when George Lemnaru from Green Horse Games exited his startup he asked me if I wanted to start my own fund and be my first LP. 

It took me some convincing, but with his and Vlad Ionescu’s support, ex-Head of Growth at UiPath, I put together the first deck in April 2021. Iulian, ex-founder, now investor, joined us later that year and helped us connect with the broader local business community. 

Default dead to default alive

2021 was a special year, and fundraising up to $12.5 million went really easy. But all those were soft commitments, not actually signed, and by the time we finalised the first closing, in February 2022, things were already changing. 

For some reason, I had decided that I wanted to do the first closing as soon as possible, so we signed only the biggest LPs and postponed the others for a subsequent closing. I think that saved us. We closed just half of the commitments, but we did it in time to get from default dead to default alive. 

We did the first drawdown during the first weeks of the invasion. Surprisingly, our investors wired us the money.

The second closing was scheduled for the summer of 2022 — out of the $12.5 million committed, plus a few approximately $1m million in new commitments, we signed only $10.5 million. Some commitments were postponed, and some LPs backed out. 

A walk through hell

“It’s fine, we’re now a viable fund.” At $10 million, I can afford to pay my fund administration team and have a decent salary. Luckily, we convinced RSJ Capital to invest in us — our first fund of funds — this must be the way!

The third closing closing, end of 2022, was targeted at $16 million. Even after restarting our fundraising full-speed and spending significant time on it, I still landed short at $14 million. 

First closing at $6.5 million, plus $4 million at the second one, plus $3.5 million at the third one. The next $6 million will be a walk through hell.

By the end of the year, the tide had turned completely — we were bordering a country ravaged by war, inflation was high, a potential financial crisis was looming, and the tech stocks had plummeted from the highs of 2021. 

Solo GPs are not for us

Most of the money raised came from technology founders and operators, who knew me because of How to Web, along with a handful of non-tech founders. And, obviously, the institutional investors had told me “Solo GPs are not for us”. 

All of them were deeply impacted by the tech’s downturn, and I was also out of contacts to ping. It’s my first fund, and Bucharest is a big rich city, but I did not want to raise money from people I did not know, nor try to maximise the commitments of the existing investors.

So I decided to sing at a different table and, at the beginning of 2023, started looking for the ultimate venture investor, the European fund of funds. Unfortunately.

European fund of funds are out of money

I also decided to go all-in — in order to have a more convincing proposition, I hired the entire platform team in order to get into better deals. The problem was, I had too little money raised and our management fee was not covering all expenses — we were losing money, and I needed to raise more money fast.

During the next 8 months, I emailed, called, or just flew in to meet with any fund of funds in Europe who had even a remote interest in investing in us. I got intros and recommendations from existing investors (Vuk, Petr, Carlos, Jon — thank you again!). I talked to 50+ investors — in theory, enough to raise the last $6 million of a fully functional fund. 

Unfortunately, it did not work. Post 2021, European fund of funds are out of money. 

There are multiple reasons why this has happened. Many of them invested heavily in 2020/2021 when the European venture industry seemed to take off. The major investors in the US are pension funds and endowments, which are almost non-existent in the European venture landscape.

Old Europe money vs. new Europe money

Europe’s economic growth is significantly below that of the US in the last 10+ years, and there’s generally less appetite for risk. And the funny thing — word on the street is that some/many European family offices, being risk-averse, prefer to invest in the bigger venture brands in the US rather than the emerging European funds, even if they provide smaller but consistent, returns.

Overall, it seems that “old Europe money” doesn’t have the guts to invest in the emerging European tech scene, and “new Europe money” is not enough for Europe to have a proper fund-of-funds industry. It may be the case that the future of this industry is American money, who have an appetite for the opportunity of the frontier. 

A game of de-risking

The final closing was planned for March 2023, but I had no new commitments. Postponed for June. 

Lucky for me, I did continue a few conversations with local potential investors. Does sending 15 updates in a row count for a conversation? Raising a fund is a game of de-risking, similar to financing a startup — you start with a deck, and as you add more deals, and grow the team and the brand, you de-risk your proposal and can then convince investors who had less confidence in the deck alone. 

And in June, we were almost there. But not quite. We pushed the closing to July. Not really. But after a lot of struggle, we managed to do a fourth closing in August and then a final-final one in October, bringing the total of our first fund to $20.05 million. 

15 years of work

My last investors were also tech founders from Bucharest, along with a handful of European fund of funds. But overall, out of the 50+ fund of funds contacted that were theoretically interested in investing in Eastern Europe, less than 10 were active. 

And voilà! After 15 years of work, I finally have a fund.

Now, you may wonder why I decided to share in detail my experience. The truth of the matter is, I hope emerging solo GPs can avoid some of the pitfalls that I did, and despite everything that said “no”, and realise that with enough tenacity, conviction, and rolling up of sleeves, “yes” is possible. Make it happen!

And now, just when all I want to do is have a nice long sleep, the hard work begins. Here we go.

PS: If Ukraine does not win the war with Russia, all my efforts, the efforts of the founders we have invested in, and probably all your efforts as well, will be in vain. Make sure that does not happen.

Lead image: Bogdan Iordache. Photo: Uncredited.