What`s hot in Poland?

The past year I have spent collaborating with a great team of Black Pearls VC, one of the 9 major Polish venture funds. For the first time in my 8-year long VC career, I had the pleasure of working with the entrepreneurs coming from my own home country. Much has changed since I left Poland in 2004. I met people that are hungry for success — with this burning ambition, which I am missing in some established ecosystems. More and more professional VC funds operate in the market.

Many Western European investors noticed that and started to get involved in the region. German Point Nine Ventures, South African Naspers and Danish Sunstone Capital to name a few. 62 companies acquired VC funds last year in Poland and there are over 2500 active startups in the country [1][2].

To better understand where venture business is done in Poland, I looked at over 150 active portfolio companies of the nine major VC funds in the region [3]. Here are some of the key findings.

Where do VCs in Poland invest?

Last month Startup Poland, an organization supporting the Polish startup ecosystem, published an extensive report on the state of Polish startups [2]. It creates transparency on where, how and what Polish entrepreneurs are working on. Building on that I completed an overview of which of these startups end up being picked by the venture capitalists. Throughout the article I will benchmark my data against the the Startup Poland report.

I applied the same categories for the analysis as introduced by a colleague from the industry and a Kauffman Fellow, Gil Dibner. He regularly publishes excellent statistics on VC in Western Europe and Israel.

Investments by Region

As in any other country, in Poland venture investors concentrate in a few city hubs with the capital playing the most dominant role by far.

Close to 80% of the Polish portfolio companies are in Warsaw (44%), Cracow (15%), Poznań (11%) and Tricity/Gdańsk (9%).

The nine major VC investors operate in these four hubs.

The startup distribution in general is a bit more spread across the country with 56% of startups residing in the four hubs. Gdańsk and Poznań host each around 10% of startups in general and of the venture backed companies. Cracow and especially Warsaw are both over-proportionally active investment hubs. This is understandable as 6 of the 9 investors are based in Warsaw. The capital is is home to 44% of the Polish venture backed companies and to 27% startups in general.

Given the large number of companies outside of the four hubs, it is not unlikely to find hidden champions in e.g. Szczecin or some larger cities in Eastern Poland.

Investments by Sector

Many Polish venture-funded startups are developing marketing solutions (20 out of 146). They can be roughly divided into two categories: brand and website tracking (e.g. Usability Tools, Sentione, Colibri.io, brand24 or Sotrender), and customer loyalty programs (e.g. Kekemeke, ZenCard or Soric).

The second and third largest investment sectors are Health and Lifestyle. This can be explained by the aging population and increasing healthcare costs in Poland.

The focus of startups at large is not too different. Relative to the venture-funded companies, there is a higher interest in industrial topics (IoT, Robotics, etc.) and education, and a lower interest in healthcare.

Investments by End Customer

The historical track record shows that CEE companies have been most successful in enterprise-facing businesses. The five largest exits in the region fall into this category.

Startup Poland reports that 75% of the Polish startups sell to corporations and SMEs [2].

Investments from the venture funds confirm this inclination towards the enterprise. 54% of the VC funded companies sell to corporations or SMEs. Consumer business is still popular amongst investors with 42% going into the space.

I expect to see even more investment in the B2B space going forward, given the focus of the companies at large.

Investments by Business Model

One in every three startups in Poland operates a SaaS business model (Startup Poland, [2]).

This is also the most common business model among the venture-funded companies (26%). Consumer startups operate mostly as marketplace platforms or e-commerce stores. The remaining enterprise businesses either sell services (e.g. Blue Dot Solutions or Przeswietl.pl), systems (e.g. Elmodis) or components (e.g. NanoVelos, Piktorex).

Key learnings about the Polish venture portfolio

  • Most of the Polish startups, both venture-funded and not, sell to corporations and SMEs. That’s in line with the rest of CEE.
  • Marketing SaaS solutions for the enterprise is the top investment category. Technologies improving life quality (such as health, energy etc.) are also very popular.
  • As “software is eating the world” SaaS businesses become more and more popular both in Poland and Western Europe.
  • Today, most of the venture money goes into companies based in Warsaw, Cracow, Poznań and Gdańsk.
  • Close to 50% of the startups in general reside outside of the top 4 hubs. We are bound to see some interesting companies coming from there.
  • Professional VC funds arise from the region supporting the top entrepreneurs.

Reach out to me on twitter @ewencja or me@ewencja.com with comments or questions.

[1] Invest Europe. (2016). Central and Eastern European Private Equity Statistics 2016. [2] Startup Poland. (2016). Polish Startups Report 2015.
[3] Innovation Nest, Giza Polish Ventures, RTA Ventures, MCI Capital, Black Pearls VC, Inovo.vc, Experior Venture Fund, Protos Ventures and Speedup Ventures. [4] Gil Dibner stats.