Deal in focus: Intel and Practica back CGTrader

In February, Intel Capital entered the Lithuanian market for the first time through its investment in Vilnius-based CGTrader. The firm's first foray into the Baltic nation underpins an increasing interest from venture capital firms in the hitherto largely untapped region.

"The venture capital ecosystem is growing a lot right now in the Baltics," says Intel Capital investment director Klaus Konrad, who covers the Baltics for the firm and worked on the CGTrader deal. "With the increasing availability of venture capital there are a lot of start-ups being founded, so the ecosystem is building up and there is more interest from international investors."

The deal also nods towards CEE's eagerness to establish its status as a frontrunner within the technology industry. The region has several of the prerequisites that make it a breeding ground for strong start-ups possessing many of the characteristics to attract venture funding. "One of the success factors for CEE is its engineering education – we see very good development teams and companies with unique technology," says Konrad. "Salaries in CEE for this quality of engineer are attractive and that certainly helps, because if salaries are not too high it gives a start-up more time to develop products and test out markets, so it's a very important aspect for the venture industry."

Previously underserved countries in the CEE region – namely Baltic states Lithuania, Latvia and Estonia – have turned out to produce tech companies that went on to become market leaders and make their venture capital backers impressive returns.

One of the largest venture capital success stories to come out of eastern Europe is without a doubt that of Estonian start-up Skype. Following several years of venture backing, the company was first acquired by eBay in September 2005 for $2.6bn – a deal that reaped 150x money multiples for both Index Ventures and Mangrove Capital Partners, as well as a 300x return for Draper Investment Company, according to unquote" data.

After being bought from eBay by a Silver Lake Partners-led consortium in September 2009, the company went on to be acquired by Microsoft for $8.5bn in May 2011. "Skype was a big catalyst for the venture market to grow," says Konrad. "I've met many entrepreneurs who told me explicitly that once they saw what was possible from a small country in the Baltics, it encouraged them to found their own companies."

Government attempts have already been made to strengthen the venture capital industry in the region. Towards the end of last year, there were reports that Estonia is planning on establishing a new $60m fund-of-funds to increase venture capital activity in the country's emerging technology start-up scene. The vehicle is reportedly hoping to discover the next Skype.

Vilnius-based CGTrader operates an online marketplace for computer graphics and 3D printing, designed to allow 3D artists to sell and share their designs.

The company has experienced exceptional growth in the last year. It claims to have a digital library of 3D models totalling 45,000, while it says it amassed more than 30,000 new users in 2013 alone. At the start of 2013, the company claimed to have 1,000 users and around 8,000 3D models in its library.

Practica first invested in CGTrader soon after the company's formation. The firm supplied the company with €180,000 via its €6m Practica Seed Capital fund in 2012. This time round, Practica has backed the company via its Practica Venture Capital fund, which held its final close in January on its approximate target of €15.7m.

CGTrader was founded in 2011 and currently employs 10 staff. Marius Kalytis is its CEO and founder.

People
Practica Capital – Petra Mičiūnas
Intel Capital – Marcin Hejka, Klaus Konrad

This deal was originally covered on 11 February 2014.

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• Topics
• CEE
• Expansion
• Consumer
• Lithuania
• Intel Capital