Polish [and CEE!] VC activity in 2022 — why it paints positive outcome for the future.
Recap of the Polish VC market based on research Inovo VC has done in cooperation with PFR Ventures.
CEE Modules co-prepared with KAYA, LAUNCHub Ventures, Startup Hungary, Day One Capital, HowToWeb, and Underline Ventures.
Thank you! Alexandru Agatinei, Karel Zheng, Mario Stoev, Csongor Bias, Zsolt Weiszbart, Vaclav Ryslink.
TL;DR | What you need to know
Polish VC market in 2022:
👉 €775M invested in 435 Polish startups in 2022 vs €792M invested in 379 startups in 2021
👉 There were 13 rounds over €10M in 2022 (€472M in total — 61% of the market) — 4 of them in our portfolio companies! Zowie, Symmetrical, Tidio, Sunroof
👉 6 VCs raised the next funds in 2022 — Inovo VC [;)], Market One Capital, OTB Ventures, bValue, Simpact and 1 not announced yet.
👉 In this edition of the report we included snapshots of the Bulgarian, Czech, Slovak, Hungarian, and Romanian startup ecosystems!
Why it paints positive outcomes for the future:
👉 In 2022 in Poland, we had the highest number of startup investments in history, most of them at pre-seed/seed. We should see more follow-ons & later-stage & mega-rounds in 2023.
👉 Many good VCs raised the next funds, so founders don’t have to be afraid lack of capital on the market, they can focus on building great teams and products!
👉 We finally have a new class of investors, ex-entrepreneurs who sold their business (or did secondaries) and believe & invest in startups & VCs
👉 Most of the VC markets in the world dropped (mostly because a lower number of later-stage rounds). In CEE not, because we’re still relatively underdeveloped and we just starting to have later-stage startups & rounds. Before we drop, we have to catch up! ;)
We are dealing in interesting times.
The past few years have seen a rapid expansion of startup ecosystems in Poland and other Central Eastern European countries. However last year was tricky. On the one hand: global economic slowdown, the war in Ukraine, and falling stock market valuations. On the other: the largest number of investments, record-breaking rounds and further large funds of the best Polish VC teams — we are dealing in interesting times.
Despite the decline in global investment sentiment, the value of VC investments in Polish startups remained at the level of the record year 2021, about €0.8B. Our plan from the beginning of the year to break through the magic barrier of €1B did not materialize, but given the current conditions, this is still an undoubted success for the ecosystem. What is important, last year we set another record in terms of the number of investments, with 435 companies attracting investment, 40 more than in the previous year, also a record 2021.
Significant majority of the transactions were at the pre-seed / seed stage, and many of them were really interesting from the perspective of the follow-on rounds like e.g. Demoboost in which Movens Capital and btov invested. This paints a good future for market maturity.
Our market is shifting from an early-developing market with single startup outliers to a more mature one with more later-stage startups, next-gen local VC funds and second/third-time founders. Of course, we’re still at the beginning of this transformation, but the path is clear and even this very small bump in the road (2022 year) doesn’t change that.
Let’s focus on big numbers — top rounds!
In 2022, we had the highest number of later-stage rounds, and that’s another sign of the shift in our ecosystem, €10M+ rounds accounted for 61% of the market (€472M). Startups with such funding are no longer market outliers, that’s more and more market standard. A few years ago €5M round was a top round in Poland, now Polish funds sometimes do pre-seeds at this level.
I’m extremely happy that 4 out of 13 companies were backed by us since previous rounds. Our approach to investing in exceptional founders work! :) Congrats to OTB Ventures for having 2 startups in top 5!
Shut up and take my money — so many next VC funds!
Another very strong signal for future market development is that many of the Polish VCs managed to raise second or third funds, that’s a clear sign that our market is more mature. We have more and more wealthy entrepreneurs who sold their businesses (or did secondaries) and investors that believe in VC as an asset class.
In 2022, at least 6 VCs managed to raise the next fund (Inovo VC, Market One Capital, bValue, Simpact Ventures, and OTB Ventures), and all of them are €50M+. This number might seem small compared to other countries, but it’s still an achievement for the Polish startup ecosystem. I remember how challenging it was to raise a second (or first ;)) fund even a small one a few years ago, the market definitely has changed.
We see a similar situation in other countries with new funds managed by Credo Ventures, Launchub, Eleven Ventures, 500 Startups or Underline Ventures — CEE is on fire! Founders don’t have to be afraid lack of capital on the market for their startups, so they can focus on building great teams and products!
#BetterTogether - CEE edition
As Inovo VC we invest in founders from all CEE countries, that’s why in this edition of the report we decided to shake things up a bit and include snapshots of the venture ecosystem in Bulgaria, Czech Republic, Slovakia, Hungary, and Romania! Huge thank you for doing it together — KAYA, LAUNCHub Ventures, Startup Hungary, Day One Capital, HowToWeb, and Underline Ventures!
Why did we do this? Well, because we believe that the Central and Eastern European startup ecosystem is stronger when we work together! By understanding the venture landscape in each of these countries, we can better support startups as they scale across the region. And with cooperation between funds, we can bring more value to founders and their businesses through a broader network (customers/investors) or complementary experience (operational/ from other investments).
Czech & Slovak ecosystems
We invested in 2 companies in Czech Republic and Slovakia and I knew many great startups from Czech Republic, so I know how strong founders are there… However, I didn’t expect the total market value in 2022 at €1.6B! They crossed the magic €1B barrier in 2021 and still growing — amazing! All were invested many less number of rounds than in Poland (#96 in 2022). Czech & Slovak market seems to be more mature, there are many mega-rounds (€100M+) e.g. in the last year the biggest round was €312M investment in Cera+… about 2.5x bigger than in Poland (Iceye round), which makes a huge difference. What is more, there were 4 other bigger rounds in Czech. Just wow!
Bulgarian ecosystem
Bulgaria is a great example of how important is to have a leading tech company that can create new “mafias”. Estonia had Skype and Bulgaria had Telerik (bought by Progress Software for over $250M in 2014), which ex-employees and founders seem to be the foundation of the local ecosystem. They created one of the top local VC funds (e.g. Eleven Ventures) and the fastest-growing startups (e.g. Payhawk). In 2022, the ecosystem reached €377M in 89 transactions versus €301M and 67 transactions in 2021. The top deal (Quantive, €110M round, former GTMHub) was led by Index Ventures, so that’s another sign of market development.
Hungarian ecosystem
Hungary is a relatively small ecosystem for now, but given the many rising stars there, the situation may change within the next few years! In 2022, the ecosystem reached €131M in 39 transactions versus €110M and 64 transactions in 2021. The top deal (Seon, €87M round) was led by IVP, so maybe we’re seeing a new source of new top founders in the future? “Seon-mafia”, I wish you that!
Romanian ecosystem
Romania is still a relatively small ecosystem for now, but we deeply believe in the bright prospect of this market. In 2022, the ecosystem reached €102M in 73 transactions versus €66M and 71 transactions in 2021. But that’s under the assumption we excluded €750M UIPath round in 2021. We expect that we will soon see more exceptional founders inspired by mentioned success. We’re seeing more and more new, generation of top young founders there, the last €10M raised by Digitail founded by Sebastian Gabor and a round led by Atomico is a great example of it.
What would 2023 bring?
Forecasts for 2023 are difficult to predict with so many variables, but one thing is certain: Poland, and the entire of Central and Eastern Europe, has finally got a permanent place in the map of the global technological ecosystem. It’s no longer seen as a ‘risky’ bet, but rather an opportunity to invest in the huge pool of top tech entrepreneurs to bring innovative ideas to life and build world-class companies. This allows us to look positively at the future of the entire market.
I hope we finally cross the magic €1B barrier, but I was sure about that 1 year ago and it taught me a lesson. ;)
However the large number of pre-seed/seed/A deals in this year should convert into next rounds, so I’m positive about the market in 2023 — all we need is more bigger rounds (Czech ecosystem is a great example of it) and I see a few candidates to achieve them.
Methodology: how did we collect data
We conducted this research in collaboration with PFR Ventures. We sourced our information from aggregators such as Crunchbase, MamStartup, Pitchbook, and Dealroom.
What qualifies the transaction as “Polish”?
1. At least 1 of the co-founders is from Poland.
2. There is a Polish office with full-time employees on the ground.
3. The company is funded by a Polish VC.
4. The company recognizes Poland in its materials (website, press releases).Inovo VC is a first-choice VC for ambitious founders from Poland and the CEE region. We back early-stage startups with up to €4M of the first investment, and help them build global brands while driving growth of the local startup ecosystem. We take great pride in being close to top founders who think big. Since 2012 we’ve invested in over 80 top founders from 35 companies inc. Booksy, Infermedica, Spacelift, Tidio, or Zowie and co-invested with top global VCs inc. Insight Partners, a16z, Gradient Ventures or Tiger Global. Our thrid fund is reaching €100M.
For more information visit: inovo.vc
