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Inside Inovo

Coronavirus vs Polish VC funding rounds — Q2'20 summary

Polish venture capital market size reached all-time highs in 2019, followed by an equally strong first quarter of the year. Then, the COVID-19 outbreak happened. How did it impact the startup funding scene in Poland?

In the second quarter, we have identified 24 transactions, totaling 108M PLN (24M EUR). Q2 showed a significant decrease in both deal volume and magnitude compared to both the first quarter of this year, as well as the analogical period in the previous year. Here’s how it looks like quarterly since we began tracking the data ourselves:

Quarterly summary of Polish startup/VC market size by value and no. of transactions

The overall trend is positive, but the recent downturn is clearly visible. Let’s do a slightly more detailed breakdown of this situation below in order to see the real impact coronavirus had on the VC funding scene in Poland.

The year-on-year drop of -80% in transaction value is definitely the most striking, but also largely explainable — Q2'19 brought a 344m PLN Series E round of DocPlanner. If we subtract it, the difference would be of ~90m PLN, which is significantly lower.

The second thing we have to factor in is… media buzz. COVID has stolen the whole media attention in the last couple of months. What does that mean? Many startups (and their investors) have decided to postpone round announcements after the dust has settled.
Even though we always advise to make rounds public, 2020 so far has been pretty unusual, causing us not to report some of our recent moves. We’re also aware of some of our befriended funds doing the same thing. Regardless, we’ll report the aforementioned rounds soon and recommend the same to you!

Obviously, the other part of the decrease comes from the lockdowns that caused the global economy freeze, leading to many startups having to downsize its operations in order to stay afloat.
Perhaps, a generally hostile investment environment incentivized funds to make smaller investments in a larger number of companies, thus the drop in deal value and a less than expected drop in the # of total transactions.

The largest category of deals was Polish VCs investing in Polish startups that accounted for 63% of total deal value, which historically did not place first. International funds co-investing with Polish VCs made up 27% and the share of Polish VC investments in international startups of the total deal value stood at 10%. This quarter we have not identified a single international-only VC investment in a Polish startup, which also explains the low result — usually, such rounds are in double-digits (from the last year, DocPlanner at €80m, Booksy at 30m, Brainly at €30m would each be higher than the total value of Q2 this year).

Q2'20 market value divided into 3 geo- subsegments

By far the largest round was cashed by symmetrical.ai and was financed by a cohort of Polish, German, Dutch, French, and American funds. Symmetrical.ai was founded in 2019 and is a B2B2C salary advancement product, which allows employees to withdraw a proportion of worked salary.
They’ve been able to raised 25.5M PLN led by Global Founders Capital, which is in the top quartile of Seed funding rounds in Poland.

Q2'20 largest rounds snapshot

The second-largest sum was 12M PLN raised by LESS_, which is an online marketplace platform intended for selling and purchasing second-hand clothing. Interestingly, to our knowledge, it’s been an angels-only round, that has attracted the attention of i.a. prominent Polish football player, Robert Lewandowski.

The current, third quarter is tricky — after the first wave, we know where things stand, but it’s tough to predict where they will be in the coming weeks. As already mentioned in the text, multiple VCs are open for business (incl. ourselves at Inovo), so hopefully, we’ll see a solid bounce. We already know of some €10m+ rounds, fingers-crossed for more to come!

PS
Recently, dealroom.co along with PFR Ventures released a report about the state of the CEE startup scene, focused on Poland as the hub of the region. We had a pleasure to support the creation of it, and you can check it here.

Through our second fund, Inovo Venture Partners, we’ve done 3 investments in 2019, and 5 more in 2020 as of July’20.

Please make sure to get in touch via warm intro or reach us at pitch@inovo.vc if you’re looking to raise your Seed round!

Methodology: how did we collect data

Publicly available data sources on the Polish venture capital market often do not reflect its actual appearance, omitting significant financing rounds or improperly presenting those that took place. Because of that, we aggregated and we analyzed all the information available in many independent public databases as well as industry news portals such as Crunchbase, MamStartup, Pitchbook, and Dealroom. The goal is to present the actual state of the local VC ecosystem more truthfully and accurately.
Some differences between this report and PFR Ventures one may arise as they use slightly different sources (having access to PFR and NCBiR resources) and as they collect the data earlier, while many transactions aren’t announced yet.