Why is it impossible to measure the exact size of the Polish venture capital market?

Earlier this month, we have taken on a challenge to have a deeper look inside our local startup and venture capital ecosystem to figure out how is it developing, what are the current trends, and where we are compared to Western Europe.

The plan seemed to be quite simple, as we just needed to: collect the data about all the transaction happening in 2017 and 2018, clean and organize it, sum it up, and finally draw down the conclusions. It ultimately resulted in the publication of a bilingual report (which you can find here), but the task proved to be way tougher than we initially thought. Why exactly?

Private investors, including venture capital funds, have no obligation to report their investments. Fortunately, a lot of them do announce the transactions taking place, but this makes things only a little bit easier, as there is no primary source when looking for such information. For the purpose of our report, we have used online, publicly available to gather the data:

Three web-based data platforms aggregating business information about private and public companies:

CrunchBase (crunchbase.com)
Pitchbook (pitchbook.com)
Dealroom (dealroom.co)
as well as
MamStartup (mamstartup.pl) — the leading Polish startup and VC news website covering most of the financing rounds through announcements and press releases.

Such an approach turned out to be right, but not perfect — in 2018 the total number of transactions was at first 192, but… it also included grants, ICOs, crowdfundings and most commonly — many overlaps. After the first cleansing, the following happened:

The above graph shows the number of transactions and their total value by each source for 2018, for all the deals that we qualified to be included in the report. After cross-checking and excluding irrelevant, false, and most importantly overlapping deals we have recognized just 50 transactions, totaling around 212 million polish zlotys.

Only 5 investments were present in all 4 sources, and NONE of them had the same value in all of them!

So the number of issues arise: different reporting sources, different currencies, and different dates (e.g. RoboCamp: MamStartup announcement date: 20/12/2018 vs Crunchbase announcement date: 02/01/2019 — should it be included for 2018 or 2019 report?).

Quite often, various currencies are proposed for single financing round across the databases. Sometimes these differences amount to hundreds of thousands of zlotys — if there are several dozen transactions per year happening, it can add up to a couple of millions missing each year.

There is also a so-called reporting lag — a situation occurring when investors/companies report their transactions with a noticeable delay. As Dealroom points out: “the number of seed rounds in 2015 was first reported as 3,990, but two years later, this number had reached 5,680. That’s an increase of 42%!”. Thus, as we are currently preparing the next report covering investments in the first quarter of 2019, there is a huge probability that some of them are still not disclosed (or never will be).

Please keep in mind that the data, especially on Crunchbase, is self-reported and can be prone to manipulation. Even if the deal is made public and covered by a press release, we cannot be 100% sure that it is fair and accurate. We know a few situations, where investors and companies announced financing rounds much higher than they actually were.

Lastly, these sources often include financing types that we do not classify as VC, such as grants, corporate rounds, non-equity crowdfundings, secondary transactions, and others.

Is there anything we, as an entire ecosystem, can do about it? We believe the answer is positive. Estimating the size of any market is never easy, but the more data one has, the more accurate the calculations will be. We highly encourage both entrepreneurs and investors to be fully transparent with their transactions and inform the public about them by all the means possible, especially press releases and database updates, but also own website portfolio or social media announcements.