Polish VC landscape in Q3’22 — a bump in the road or the calm before the storm?
Recap of the Polish VC market based on research Inovo VC has done in cooperation with PFR Ventures.
TL;DR | What you need to know
👉 €110M (PLN 513M) invested in 127 startups by 83 VCs — The lowest value invested since Q1’21
👉 €544M (PLN 2.5B) invested YTD — ~45% growth Y/Y
👉 Top 5 rounds: SunRoof, Nevomo, RedStone, More Growth, and The Village Network; 2 of them were our companies!🥳
👉 In this edition of the report we included a snapshot of the Romanian startup ecosystem!🇷🇴
Where are we now
In the last 3 months, over €110M (over PLN 0.5B) was invested in Polish startups. That is 12% less than in the corresponding period the year before and much, muuch (almost twice) less than the last quarter. The third quarter of the year is usually the least active time for VCs/fundraising also we’re living in a much more turbulent time than a year ago. Despite that, YTD 2022 is almost 50% higher than the previous year.
Now, to beat last year’s record (~€800M) we would need to see another PLN 1B (~€200M+) invested in Q4, so we’ll probably have to wait until next year to see the magical billion euro threshold broken.
A step back… to make 3 steps forward?
While pre-seed and seed rounds have always been by far the most common round type, this level of dominance in all rounds has not been seen since Q2’19. Out of 127 rounds this quarter, 120 (95%!) have been the earliest ones. Now, the timing for raising a big round at a high valuation is not favourable, so startups that did not have to raise a round didn’t. This translated into only 5 series A and 2 series B rounds. We have a saying in Polish (that will twist your non-Polish-speaking tongues): “Co się odwlecze, to nie uciecze”. It roughly translates into “what is delayed, is not lost”. Meaning that all those companies that decided to postpone raising series A, B, etc. will raise it once the circumstances are better for them. And they will come out of it streamlined and smarter! However, even in this slower period, 2 out of 5 biggest rounds were in our companies! (If we include my angel investment in The Village a year ago, it grows to 3. :))
What is more, some of the top Polish funds have spent Q3 on fundraising activities, so their deal-making capabilities were limited. So, in addition to waiting entrepreneurs, we also have shiny new war chests and funds with money to invest in the most exceptional of them.
Solid foundations
The value of this quarter’s largest rounds (SunRoof and Nevomo: €15M) was the lowest in a long time. This, of course, brought the average value of a round down — by almost 60% Q/Q! The median amount of a transaction, however, remains steady at a little over $200k.
Also, the focus on earlier stages allowed local funds to shine, and they did! Polish funds were responsible for more than half of the invested amount (for the first time this year), which shows that not only Polish startups are growing, funds are too! Of course, it’s partly because international funds were focused on their core markets and supporting current portfolio companies and their activity in CEE was lower, but still, VC foundations of the Polish market are better and better, and within the next few months, we will hear about a few next funds.
Outlook for Q4 and further
As I said, beating (or even coming close to), Q4’21 is unlikely. The macro environment is not improving, war keeps raging on. What we can realistically hope for is keeping yearly numbers even with 2021. However, we know that some big rounds are happening (or already happened ;)), which puts PLN 1B (EUR ~200M) in Q4 possible.
Now, as for the more distant future… I think that even though this quarter’s numbers may seem underwhelming and disappointing, this will do more good to the ecosystem as a whole. We maintain our solid YTD growth, let’s remember that global VC market sentiment is worse than a year ago e.g. the value of VC transactions in Israel dropped by ~80% our almost 50% YTD growth looks very strong from that perspective. This was a record quarter in terms of number of rounds, 120 of which were pre-seed and seed. Of course, many of those companies will not live to see another one, but the more seed rounds now, the more series As in ~18 months! That’s why our outlook is positive.
PS Romania — the new CEE tiger?
In this edition, we include a snapshot of the Romanian market, one of the fastest-growing tech market in Europe and future/current tech hub. The success of Romanian-born UiPath has drawn the attention of many international investors and inspired dozens of people to start new startups. We expect that we will soon see more exceptional founders inspired by mentioned successes. That’s why in our third fund, we want to make Romania one of our core countries and invest there €10–20M.
Stay tuned — more news about Romania and our deals there soon! :)
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
