For years, Central and Eastern Europe (CEE) has been described as a region rich in entrepreneurial talent but short on capital. While the ecosystem has matured significantly over the past decade, structural funding dynamics continue to create inefficiencies that sophisticated investors can turn into opportunities. According to Peter Oszkó, Partner at O3 Partners, these conditions are making CEE one of the most attractive secondary investment markets in Europe.
“The region remains undercapitalized, but that’s exactly where the opportunity lies,” says Oszkó.
Unlike more developed venture ecosystems, much of the venture funding in CEE has historically come from public sources, often through government-backed or European Investment Fund (EIF)-supported programs. These funds typically operate under strict investment mandates focused on supporting innovation and early-stage companies. Secondary transactions, however, fall outside their core objectives.
As a result, when fund lifecycles come to an end, managers often face significant pressure to exit portfolio holdings within a limited timeframe. In countries such as Hungary, where dozens of EIF-backed funds were launched simultaneously in the early 2010s, many managers found themselves attempting to sell assets at the same moment.
For secondary investors, this creates a rare market dynamic.
“When many fund managers need to exit at the same time in an undercapitalized market, it becomes possible to selectively acquire strong companies at attractive valuations,” Oszkó explains.
A Proven Strategy
O3 Partners began actively pursuing secondary opportunities in 2018 and quickly saw results. According to Oszkó, the firm’s secondary investments significantly outperformed many traditional early-stage venture investments, delivering returns as high as 10x over four years.
The firm now sees a new wave of opportunity emerging. Many of the next generation of publicly backed venture funds were launched between 2016 and 2018 and are approaching their own exit periods, creating similar market conditions.
“We believe the cycle is repeating itself,” says Oszkó. “The next cohort of regulated funds is now reaching maturity, and many managers are once again facing pressure to realize exits.”
Despite the apparent attractiveness of the strategy, competition remains limited.
The reason, Oszkó argues, is simple: local knowledge matters.
Secondary investing in CEE is not simply about buying assets at a discount. Success requires deep familiarity with regional fund managers, founders and portfolio companies. Investors must understand not only a company’s current performance but also its history, original vision and execution journey.
“This is a market where access and relationships are critical,” he says. “Without local presence and years of accumulated knowledge, it is difficult to assess the true value of companies.”
Building a GP-Led Investment Platform
Over the past 15 years, O3 Partners has evolved from a venture investor into what Oszkó describes as a GP-led investment platform. The firm combines early-stage investing, growth capital strategies, and secondary investments under a broader family of funds.
Today, O3 manages more than €300 million in assets and sources capital through a publicly listed structure that provides access to retail investors, high-net-worth individuals, and institutional investors across the region.
While early-stage investments remain concentrated in CEE, O3’s growth capital strategies extend into the Nordic and DACH regions. Secondary investments, however, remain closely tied to the unique dynamics of the CEE ecosystem.
“We see secondaries as a core component of the market’s evolution,” says Oszkó. “They provide liquidity to fund managers while giving founders additional time and flexibility to create value.”
The Importance of Valuation and Alignment
At the heart of every secondary transaction lies a complex negotiation around valuation and discounts.
Unlike early-stage investing, where investors primarily back a vision and a founding team, secondary investors evaluate businesses with several years of operational history behind them. Determining fair value requires a deep understanding of both performance and future potential.
Discounts are a crucial component of the model, creating attractive entry points for secondary buyers. However, O3 has developed a structure designed to align incentives among all parties involved.
The firm frequently incorporates earn-out mechanisms into transactions, allowing original investors to participate in future upside if a portfolio company exceeds agreed return thresholds.
“We may acquire shares at a discount today, but if the exit outcome significantly exceeds expectations, we are willing to share part of that upside with the original investor,” Oszkó explains.
This approach helps ease the difficult conversation around discounted sales while ensuring that founders, selling fund managers and secondary investors all remain motivated to maximize value creation.
Delivering Liquidity in a Challenging Market
For founders, secondary transactions can remove historical constraints such as liquidation preferences and legacy investor pressures, effectively resetting the company’s growth trajectory.
For fund managers nearing the end of their fund life, secondaries offer an opportunity to generate liquidity while retaining exposure to future upside through structured earn-outs.
And for investors such as O3, the model can deliver compelling returns within relatively short holding periods.
The firm cites examples of investments generating returns of 10x in four years and even 16x in three years, demonstrating the potential value that can be unlocked through disciplined secondary investing.
Convincing Investors
Despite these results, raising capital for CEE-focused strategies remains a challenge.
International investors often acknowledge the attractive numbers but remain cautious about the region due to limited familiarity and perceived complexity.
O3 addresses this concern through its listed structure, which allows investors to gain exposure to a diversified, professionally managed platform rather than individual transactions.
The firm also operates its secondary strategy through an evergreen structure rather than a traditional closed-end fund. Because secondary investments typically have shorter holding periods and faster capital recycling, investors can choose between receiving ongoing dividend distributions or accessing liquidity through periodic share repurchase programs.
“It gives investors flexibility,” says Oszkó. “Some want regular profit distributions, while others want to stay invested for the long term. The structure accommodates both.”
A Market Few Are Watching
As another wave of venture funds approaches maturity across Central and Eastern Europe, Oszkó believes the region is once again entering a period of exceptional opportunity for secondary investors.
The combination of exit pressure, limited competition and strong local expertise creates a market environment that is difficult to replicate elsewhere.
For investors willing to look beyond traditional venture hubs, CEE may offer one of the most overlooked opportunities in European private markets today.
