From Private to Public — Unexplored Funding Sources for Growth

A Funding Gap in Emerging Europe

How do you fund a great scale-up when the traditional sources dry up? This question looms large for founders in Emerging Europe (very often called Central and Eastern Europe, CEE). The supply of venture capital and private equity in CEE runs 8-11 times lower than the European average as 2023 data shows. At the same time, local stock exchanges in the region are tiny by comparison with their European peers – their total market capitalizations are 2–7 times smaller as % of GDP than those of Western Europe’s markets.

Sources: InvestEU Investing in Europe PE activity 2023, BEA, Trading Economics, BVB, PSE, ZSE, BSE-HU, BSE-SOFIA, LJSE, BSSE, Wikipedia, Impetus Capital analysis

Emerging European companies often face a funding gap just as they are poised for growth. Too many promising businesses stall or sell early for lack of capital. There is no capital, said plainly.

Where do you fund your growth from? One overlooked answer lies in an unlikely place: the public markets. Until recently, stock exchanges were seen purely as exit platforms – a place for investors to cash out, not for companies to raise growth capital. As I noted during a recent fireside chat IMPETUS hosted at the 0100 Emerging Europe conference

“We used to think that the stock exchanges are the place where you can see exits… Almost nobody thinks of them as an opportunity of financing growth”.

To fund growth and survive the mindset should shift. Forward-thinking founders and investors are beginning to explore how capital markets can fuel expansion, not just signal a company’s maturity. In fact, the conversation is now about how to tap on retail investors and then leverage public investors and platforms to bridge the funding gap for scaling companies.

Rethinking the Role of Capital Markets

Why  haven’t Emerging Europe companies tapped public markets so far? Part of the reason is habit and perception. For decades, founders and entrepreneurs here have operated in a siloed funding universe: angel, then VC, then maybe private equity – and only after all that, an IPO as a grand finale. In Western ecosystems, by contrast, we see more flexible thinking. Companies go public earlier on NASDAQ or junior exchanges; they treat the public market as just another growth investment round. Of course, you need to approach these markets with more discipline then a typical early-stage investor.

Sources: StockAnalysis 2020-2024, Renaissance Capital, McKinsey & Company, Capital IQ; Crunchbase, IMPETUS Capital analysis

Europe’s capital markets have been fragmented and less accessible, which hasn’t helped the situation. Yet change is in the air with the new EC’s Saving and Investment Union strategy. Regulators and exchanges are launching initiatives to make listings easier and cross-border investment smoother. As Vice President of IPO & Growth Financing at Deutsche Börse, Carsten Huth noted

“Today we have 170 unicorns in Europe and several hundred companies with the potential to get the unicorn status. So, it should be now our key priority to hold this talent in Europe, to enable them to grow further, as you just mentioned. The perfect case is Shelly Group.”

That “perfect case” – Shelly Group – is a beacon illustrating what’s possible when companies embrace the public markets for growth funding. Shelly Group (an IMPETUS Capital portfolio company), a Bulgarian smart home/IoT leader, made headlines as the first Eastern European scale-up to dual-list on a major Western exchange. We then worked to pave the way to an even stronger partnership with Deutsche Börse through the creation an innovative segment called Eurobridge, which connects the Bulgarian Stock Exchange with Germany’s XETRA. The results were immediate and eye-opening.

“The Bulgarian Shelly Group…double listed on Deutsche Börse and increased five times its trading compared to its previous trading year” 

I noted at the panel. In other words, liquidity quintupled after tapping that larger investor pool on XETRA. Carsten remarked that Shelly’s market capitalization hit a new high of around €760 million post-listing, with trading volumes doubling in just a few months – “that’s really a success story”. Shelly’s example is now inspiring at least ten other companies from the region to explore similar listings, proving that one bold move can start a trend.

The Shelly Group Story: From VC Desert to Public Success

Shelly Group’s journey from a private IoT innovator to a publicly listed market leader showcases the power of tapping public markets for growth.

Shelly Group’s rise wasn’t a straightforward Silicon Valley fairytale – it was an Emerging Europe story of resourcefulness and grit. I remember back in 2015 discussing with Shelly’s (then called Allterco) visionary founder at one of our frequent meetings. They had a concept for a breakout product in the IoT space and ambitions to scale, but the local funding ecosystem was skeptical. After extensive pitching, there was no other VC to support Shelly Group’s story and expansion plans. We funded the first seed ticket into the company and faced with a capital shortfall, we took an unconventional route: turning to the capital markets early in the company’s life. In 2016 – a point when many startups would still be chasing venture term sheets – Shelly raised growth capital through an oversubscribed IPO on the Bulgarian Stock Exchange, bringing in €1.1 million to fuel its expansion. Many investors were skeptical then. This was not an orthodox move in our region at the time, and it came with various risks, like strict reporting requirements, stronger corporate governance, need for investor relations, etc. But it gave Shelly the cash injection it needed to scale production, R&D, and international sales at a critical inflection point.

That bold decision paid off. Over the next eight years, Shelly Group grew into a global leader in smart home technology. With relatively little external capital raised – only €5.6m total proceeds from the IPO and the SPO, the company achieved what most startups only dream of: roughly 10× growth in revenue, 30× in profit, and over 60× in valuation since the end of  2016. A true testament for efficient use of capital and the boost that an early public listing provided. By 2022, Shelly’s success at home set the stage for an even bigger leap: accessing international investors. Via the Eurobridge dual-listing in Frankfurt on Deutsche Börse, Shelly didn’t seek an “exit” for early backers – it sought access to expansion capital and broader shareholder base for the next chapter of growth. The strategy worked brilliantly. Shelly’s stock found new liquidity and analyst coverage, its story started reaching institutional investors across Europe,  valuation surged.

“And the trading case of Shelly Group proves it. Since the start of this pilot case and the successful listing, dual listing in Germany and XETRA, market cap developed a lot. We see now a new high of €760 million…that's really a success story.”

as Carsten affirmed on stage. Importantly, this wasn’t just a win for Shelly’s founders or its first investors – it was a win for the local ecosystem. It proved that an Emerging Europe company can raise growth money publicly and thrive, rather than selling out or relocating to bigger markets.

Broadening Horizons: Lessons from Abroad

Shelly’s journey underscores a powerful lesson: great companies shouldn’t be constrained by local capital alone. If the money doesn’t come to you, go where the money is. That might mean bridging across borders or sectors. In Shelly’s case it meant leveraging a partnership between exchanges to reach a deeper pool of investors. But there are other paths, too. During our panel, we heard insights from North America – a region where tapping public markets early is more commonplace. Canada, for instance, has a well-oiled ecosystem for listing emerging companies. As Phillip Shum, Director, Listing Developments of the Canadian Securities Exchange (CSE) explained, many European entrepreneurs look at Canada as “a pathway to North America”. By listing on a junior exchange in Toronto, a growth company can attract North American capital, get an OTC U.S. listing, and eventually graduate to a major U.S. exchange when ready. This “back door” route has funded countless Canadian tech and mining companies that needed patient capital for long-term projects. The key is flexibility and openness to alternatives – a mindset of “go where the capital is, even if it’s outside your backyard.”

Another eye-opener is the role of retail investors in some markets. In Canada, for example,

“about 95%” of CSE investors are retail where“You do not have to be a $500 million company to get listed in Canada. We have companies that are 15, 20 million market capitalization that will raise $2 to $3 million on a go public…you tell the right story… the retail market is there to support you”

explained Phillip. European markets historically haven’t engaged retail shareholders to the same extent. Yet, consider the untapped potential: household savings in Europe amount to trillions of euros sitting dormant in bank accounts. Mobilizing even a fraction of that into growth investments would be a game-changer. That requires educating retail investors, providing incentives (like tax-advantaged accounts or investment credits), and making equity stories accessible. Founders, too, must learn to speak the language of public investors – crafting a narrative that excites not just VCs behind closed doors, but also pension funds, family offices, and individuals who believe in the mission. As Antonin Pfleger,  TCF Capital’s (main shareholder in the $2 billion online grocery company Rohlik Group) CFO put it on the stage

“every time it is about a story, about a current story and a future story” 

Whether you’re pitching to a VC fund or a crowd of retail shareholders, the fundamentals are the same: a compelling growth story and vision for the future.

Changing Mindsets: From Exits to Expansion

To unlock these unexplored funding sources, we need a collective change in mindset. First, founders and investors must shed the old “VC versus PE” labels and focus on what really matters: fuelling growth. Whether capital comes from a venture fund, a crossover fund, a family office, or an IPO, it’s all part of the same continuum. As I raised during the discussion, people too often ask “are you venture capital or are you private equity?” when they should be asking how we can attract more growth financing for companies. Growth-stage businesses don’t fit neatly into one box or the other – and their funding shouldn’t either. We are starting to see support from capital markets players for crossover investors in Europe (something commonplace in the US and Asia): funds with flexible mandates that back a company pre-IPO, participate in its IPO, and continue supporting it on the public market. These kinds of investors blur the line between private and public equity, and they can be crucial allies for scaling companies.

“The big goal is really to mobilize capital within Europe. There is enough money, but the goal is really to make sure it comes when it is needed…part of a strong savings investment union should also be the creation of new type of funds. What we have in mind is a European cross-over vehicle, that has a strong and flexible mandate, can invest pre-IPO, at IPO and after, making it a key partner of European growth companies. And already see some great players, such as IMPETUS, but we need more in Europe,” added Carsten during our panel.

It’s about building a bridge between the private and public capital worlds, so companies don’t fall into the gap in between.

Second, we need to redefine success. An IPO shouldn’t be seen as simply the finish line for founders or the exit door for early investors. It can also be a launchpad for the next phase of growth. If entrepreneurs, VCs, and PE funds approach public listings as a partnership opportunity – bringing in new capital to accelerate expansion – then going public becomes far more attractive for all involved. Likewise, stock exchanges and policymakers must do their part to make public listings more accessible for growth companies. This includes streamlined listing processes, segments tailored for SMEs, and stronger marketing of these platforms as growth financing venues (not just arenas for blue-chip giants). Some European exchanges have already launched secondary markets or special segments for high-growth firms, and cross-exchange collaborations (such as Eurobridge) can help overcome national market limitations.

Finally, education and culture are pivotal. Europe needs a mindset shift among its investors – both institutional and retail – to embrace the idea of financing young, high-growth companies via public markets.

 “We need to create a big push in setting a new type of equity culture in Europe… for the private capital market, but also for the public side,”

as Carsten urged. This means celebrating success stories like Shelly Group, so others follow suit. It means showing LPs and fund managers that holding onto equity through the public transition can yield great returns, rather than selling off at IPO. And it means reminding everyone that behind the ticker symbol is a real company with a vision – one that still needs patient supporters after the IPO pop. In short, stock exchanges should be seen as allies for growth, not just exit ramps.

A New Path Forward

In the end, building thriving companies in Emerging Europe will require all hands-on deck – private and public capital working in concert. The good news is we see that it could be done achieving great results. Founders are getting more creative and bold in seeking out funding beyond the usual suspects. Investors are warming to the idea that a public listing doesn’t mean “game over” – it can be the beginning of a broader value creation journey. And cross-border success stories are proving that our region’s champions can make it on the global stage without abandoning their roots.

As someone who has spent years guiding entrepreneurs through these uncharted waters, I can say confidently that the effort is worth it. Watching Shelly Group ring the bell on a major exchange, or hearing a family-office-backed unicorn talk about an upcoming IPO, drives home a simple truth: there is more than one way to finance growth. We just have to be willing to explore the full spectrum of options. This is a narrative I will continue to champion, because I believe the next wave of great companies from our region will rise on the back of fresh capital and open-mindedness. As I emphasized to my fellow investors,

“European alternative markets scene will benefit when alternative funds start looking at the stock exchanges as an additional funding provider of growth financing, not as an exit option.”

In other words, when we embrace public markets as partners in growth, we all stand to gain – founders, investors, and economies alike. The journey from private to public can be transformative, and it’s high time we unlock those unexplored funding sources for the next generation of success stories.