Polish startups make it
While the pandemic was the impetus for faster growth in the startup sector, the current crises have or may have a negative impact on the mood of young technology companies. For now, however, Polish startups are still doing well. Experts point out that there is no shortage of capital to complain about in Poland, and founders themselves are increasingly thinking about expanding abroad. We have researched the mood in Polish startups and are proud to present you with our annual, most important report: ‘Polish Startups 2022’.
– So far, the data from the Polish market is not bad, but it is difficult to state categorically that it will not take a negative turn here as well. The startup environment operates as a system of communicating vessels – in order to grow, it needs external capital, largely foreign, and this source may be drying up more and more, says Tomasz Snażyk, CEO of Startup Poland.
Do we have a bubble in Poland?
The value of VC investments in Europe has already fallen by 38 per cent year-on-year in the second quarter of 2022. In Poland, cautious optimism still prevails, with the value of investments in the first three quarters increasing by 76 per cent year-on-year. Founders’ opinions are divided, with more than half of those surveyed agreeing with the thesis that there is a bubble in startup valuations on the market. However, experts point out that there are still plenty of sources of capital available on the market.
– Today, there are more than 100 local funds operating on the market, and we have also managed to attract international teams who are looking at Polish companies with interest. PFR Ventures has invested more than PLN 600 million in 13 international teams that invest in domestic companies at a later stage of development, helping to fill the equity gap after the seed stage. Another challenge on the horizon is the implementation of funds from the European Funds for the New Economy (FENG) programme. These will allow around 50 VC funds to be injected. The market cannot complain about a lack of capital. The founders’ task now is to convince investors of their ideas and business models – Aleksander Mokrzycki, Vice President of PFR Ventures.
At the same time, experts point out that it is not necessary to reach out only to funds for funding – banks are increasingly prominent in the startup market.
– A bank, compared to a VC fund, has different goals. The fund wants to multiply the capital and exit the relationship with a high profit, while the bank expects repayment of the loan, but also a long-term partnership. So why is it ultimately worth using a bank at the right stage of development? The answer is simple – because it pays off. By raising capital from VCs, founders reduce their percentage shareholding, and by using a bank, you can diversify the sources of capital raising, strengthen your credibility and retain more control over the company, which also increases the reward for founders and employees using ESOPs, says Dr Magdalena Matuszewska, Product Offer Development Director at Bank BNP Paribas.
At the same time, it is worth emphasising that startups that want to seek bank financing must be at the right level of development – the idea alone is not enough. The MVP stage is also far too early – the company should already have a working product, first customers and investors.
Expansion or goodbye to Poland?
In last year’s survey, as many as 78 per cent of founders planned to enter foreign markets with their business in the next 12 months. From today’s perspective, this optimism may seem excessive. The war on our eastern border, the energy crisis or the inflationary crisis may have effectively cooled the enthusiasm for expansion, both among start-ups themselves and the investors who finance such a step. However, there are voices saying that the current situation may even encourage start-ups to seek customers outside Poland. They can count on the opportunity that the already visible deterioration in the condition of start-ups, e.g. on the American market, seems to have.
– Polish start-ups offer solutions based on advanced technologies, improve the efficiency of business processes, reduce the costs of operating an organisation and enable the scaling of solutions on the global market. These are just some of the common characteristics of Polish young companies, which have already been noticed worldwide. And although they are often not recognised by the end customer as B2B companies, they are raising more and more funds from funding rounds and have a huge potential to establish themselves on international markets. B2B startups helping to improve the efficiency of operations will have a particularly important impact on business in the face of the upcoming global economic challenges, says Michal Kramarz, Director of Google for Startups in Central Europe.
Polish startups certainly have the potential to grow internationally, but still a large proportion of founders (27 per cent) indicate that they have difficulties in expanding abroad.
– It is hoped that the Startup Poland Foundation’s new project called ‘International Startup Desk’ will help in overcoming the difficulties associated with entering ‘international waters’. It is an educational and networking platform designed for startups with global ambitions, which aims to support expansion by sharing knowledge, contacts with experts and other startups already present on foreign markets or planning to enter them,” adds Marta Pawlak, Head of Public Policy at Startup Poland.
At the same time, this year’s survey revealed a very worrying signal related to looking abroad. It turns out that almost half of the founders (48 per cent) are considering not so much expanding abroad as moving their business abroad permanently. This is a very worrying indicator of how comfortable startups are with doing business in our country at the moment. This makes it all the more important to appreciate the centres that successfully support the development of indigenous innovations and have a chance to keep them in the country.
– Wrocław has been working towards the title of Poland’s startup capital for years. Successive editions of our “Polish Startups” report show that the start-up ecosystem is doing very well here – the Lower Silesian Voivodship is leading the way in terms of the number of innovative companies and has been valiantly competing with Warsaw for the title of the “Polish Silicon Valley” for several years. Let the premiere of the eighth edition of “Polish Startups” – which we are organising for the first time in Wrocław and not in Warsaw as we have done so far – be further proof that startups feel good in Wrocław,” Tomek Snażyk concludes.
You can read more about the mood of Polish startups and forecasts for the future of the domestic startup ecosystem in the latest Startup Poland report created in cooperation with BNP Paribas, Google for Startups, PARP, the Walbrzych Special Economic Zone and PFR Ventures: