Story and state of the Polish VC market in the nutshell

Hi, it's Wojciech,

Nothing good comes easy. So does the story of the development of the Polish venture capital market, which I wanted to present today in the context of the latest report published by PFR Ventures. This story is like a rollercoaster. There are ups and downs. There are good moments and lean years. The finale is noteworthy because The Polish VC market has scored its record third time in the row - more capital was invested through all 2021 than in 2019 and 2020 combined. And it was like this...

The beginning

The story began several years ago. Similarly, as it happened in other countries, the first steps of investors were supported by public funds. They allowed building first startup projects and teams managing VC funds. Thanks to the National Capital Fund (KFK), established in 2005, capital went from first VC funds to 200 startups. Near after, the Polish Agency for Enterprise Development (PARP) supported seeding startup projects. Support was dedicated not only to VC managers. Also, startup teams could apply directly for seed-stage money to start projects.

Lean years

There was plenty of capital available on the market to start your startup adventure. The National Centre for Research and Development (NCBR) has decided to join the game by launching a pilot program called BRIdge Alfa, to bake R&D projects. Several funds were selected under the financial instrument and started investments.

The launch of the new program for VC took place at the end of the PARP funding perspective, which meant the end of the support programs. In total, about 3000 entities were supported. Despite the vast scale of the activity, not all commentators of the technological scene in Poland liked the results, but this stage of market development was necessary and allowed to construct new, better programs.?

Unexpectedly, the pilot of the BRIdge Alfa program was suddenly closed. A small group of funds managed to use the whole available investment budget. It was a difficult time for VC fund managers in Poland and startups looking for more funding rounds. There was little private capital on the market, and that which public funds backed ran out.?

A new beginning

However, there was a glimmer of hope for developing innovative projects. The institutions responsible for supporting entrepreneurship began to construct new support programs. What is more, they divided competencies among themselves, thanks to which particular tools did not cannibalize each other. The Polish Agency for Enterprise Development decided to support acceleration programs innovatively, where gas pedals connected startups and corporations. Within Space3ac, we had the opportunity to participate in the pilot of this program. And all its subsequent editions, including those dedicated to startups outside Poland. PARP has also launched other tools supporting the creation of new startups, the so-called Startup Platforms, which were the programs for startup incubation.

At the same time, NCBR launched another edition of the BRIdge Alpha program and selected 20 VC funds which went on the hunt for exciting investment projects with an R&D component. As a result, the market revived with news of new investments every month. In 2017, thanks to Black Pearls VC there were also the first investments placed in foreign startups in Estonia. At the same time, the first Polish funds backed by EIF appeared on the market. These were Market One Capital and Innovation Nest.

Unexpected complications

When everything was developing like a string, the VC market was shaken by implementing one of the EU regulations. It significantly reduced the maximum investment ticket for funds operating on the Polish VC market. Through the so-called "Omnibus" startups once again lost chances to get solid funding rounds from local VCs and build a good runway. It also meant to take a step backward for VC funds. Instead of more significant deals, they had to do three times as many small investments. It required more work and changed the economics of the funds.?

The interconnected system

However, the crisis caused by the "Omnibus" regulation did not last long. A new institution appeared on the scene, which took on the mission to support Polish startups. The Polish Development Fund (PFR), which, through PFR Ventures, launched some new instruments to finance startups. What's more, these were tools that made it possible to finance projects across various funding foundations. In combination with existing programs for incubation, acceleration, support for R&D projects, they created a system of communicating vessels, allowing Polish startups to pass through the so-called valley of death.

PFR Ventures launched funding for VC funds operating at the seed stage. It also supported the first corporate VC funds and entities to invest at further financing steps. As a result, capital has flowed into the market in a broad stream. And what is interesting, it is flowing more and more.?

What was the Polish VC investment market like in 2021?

Record-breaking. Once again. What's more, in 2021 alone, the deal value was higher than in 2020 and 2019 combined.?To briefly summarize:

• 379 deals
• 792m of invested capital
• 69% of invested capital came from private funds
• 112 VC funds involved
• 58% of investments on the Polish market resulted from foreign funds

Largest investments:

• Docplanner - Making the healthcare experience more human - Series F - 130M €
• uncapped - Fast, flexible funding for marketing, inventory or hiring from $10k - $5M - Series B - 66M €
• Ramp -crypto-fiat flow for your app?- Series A - 47M €
• Packhelp -Custom packaging designed in minutes -?Series B - 40M €
• Infermedica - Guide your patients to the right care - Series B - 26M

Significant exits:

• 18,6x CoC - Black Pearls VC exit from Skyrise.tech to Etteplan
• 11x CoC - Innovation Nest exit from Survicate
• 8-10x CoV - bValue exit from PushPushGo

Most active funds:

• 12 deals: Black Pearls VC, czysta3.vc, SMOK Ventures
• 10 deals: Next Road Ventures
• 9 deals: Evig Alfa, LT Capital, Tar Heel Capital Pathfinder

So that’s the data in the nutshell.?Now let’s see who is worth knowing and working with on the Polish market?

VC funds:

• Marke One Capital?- Fund founded by former startup members. Seed fund empowering network effects platforms across Europe. They have several unicorns in their portfolio. Backed by EIF
• Black Pearls VC?- an early-stage venture capital firm focused on investing in leading tech startups with defensible technology and the potential to become market leaders. Invests all around Europe, concentrating specifically on the Baltic Sea Region. The first Polish VC fund in Kauffman Fellows - a global network of 500+ leading VCs.
• Movens Capital?- for founders by founders. Movens invests at different stages of financing in projects that will revolutionize traditionally large industries mainly through the use of machine learning and artificial intelligence in process automation.
• SMOK Ventures?- Polish-American fund. Founded by an experienced startup entrepreneur and focused on supporting serial entrepreneurs and early-stage investments. Primarily focused on gamedev and software startups.
• bValue?- their goal is to be aligned with the interests of the Founders to the maximum. Fund wants to bring fresh ideas, new thinking, and different perspectives. A seed investor that provides support across the board beyond that.
• Inovo Venture Partners?- funding teams with unique tech skills and with products that customers love. Invests in post-traction companies. Backed by EIF.
• OTB Ventures?- is a venture capital fund investing in technology with unique IP, links to the CEE region, and global ambitions. Provides Series-A funding to empower entrepreneurs to scale their business globally, while retaining a strong focus on technology.
• Innovation Nest?- a European VC that invests in early-stage B2B software companies. Backed by EIF

Startup accelerators:

• Space3ac ?- the most active polish acceleration program in CEE that connects corporates and startups to invent the future. Space3ac is an equity-free acceleration program. We provide up to 65 000 EUR per team, collaboration with a corporate customer, mentorship from world-class experts, and soft landing in Poland. Our accelerator is placed in the biggest stand-alone business complex in Poland - Olivia Business Centre. Want to learn more? Join our webinar. You can also ask one from over 150 of our alumni if it was worth their time :)?
• Huge Thing?- an accelerator that connects startups with partners so you can show what you do best - develop tech solutions. This usually means: accelerating you to the point where you're ready to validate your business with corporations or VC funds.
• MIT EF CEE?- CEE-based, equity-free startup acceleration program. The accelerator is affiliated with the world-renowned Massachusetts Institute of Technology (MIT). Their mission is to help build a robust value proposition, to be able to scale in the local and international markets, primarily in the United States, via the acceleration process.

Other entities:

• PFR Ventures - the biggest in CEE Development Finance Institution dedicated to fund investments. A part of the Polish Development Fund (PFR), fully owned by the Government of Poland.
• Polish Agency For Enterprise Development - As a key authority responsible for creating a business-friendly environment in Poland, PARP contributes to the creation and effective implementation of the state policy related to enterprise, innovation, and staff adaptability. Pursuant to the principle “Think Small First”, in all its activities the Agency puts a particular emphasis on the needs of the SME sector.
• National Center for Research and Development - is a centre for supporting and developing innovative technological and social solutions, creating an ecosystem of knowledge of, and information about, innovation. It organises and implements undertakings contributing to the civilization growth of the country.?
• Bank Gospodarstwa Krajowego – is a Polish development bank – the only institution of this type in Poland. BGK's mission is to support sustainable social and economic growth.?We want to be the leader of programmes for sustainable development.
• Startup Poland - The most important technology think-tank in Central Europe. We represent Polish startups in dialogue with the Polish government and parliament, The European Commission and local governments. We connect startups with clients and investors.

So that was a massive bunch of data. But still,?if you’re hungry for more about the polish startup and investment market check the report ?? "Polish VC market outlook 2021 " :)?

Startup competitions & funding opportunities

EIT Food Seedbed 2022 -?a six-month program that aims to transform science and technology-based innovations, that can help solve global food system challenges, into market-validated businesses. The program is delivered by world-class EIT Food partner organizations, operating from different regional hub locations in Europe.

Why to apply?

• Funding and access to our thriving ecosystem to facilitate market testing activities with potential customers or end-users
• Each cohort team is supported by business coaches and sector experts to be ready a successful business launch

Deadline for applications:?February 28, 2022

Registration: ???https://bit.ly/3gf0KPs

Links of the week

Corporate world news:

7-min read -??Elon Musk SpaceX rocket on collision course with moon.?The Falcon 9 booster was launched in 2015 but after completing its mission, it did not have enough fuel to return towards Earth and instead remained in space. ???Read full story >>

Business Development:

10-min read -?Customer Experience In The Trenches: Four Tactics For Companies To Win The Battle For Customers In 2022.?It's no secret that the Covid-19 pandemic catapulted digital customer experiences to new heights. Now, the million-dollar question is: Where will it land? ???Read full story >>

Startup news:?

4-min read -?10 skyrocketing Swedish startups to watch in 2022 and beyond.?Globally recognised as one of the most innovative, safe and wealthy countries, Sweden is also becoming a Northern European centre for startup activity. ???Read full story >>

Book of the week

?? Four Steps to Embracing Digital Intelligence ?by?Harvard Business Publishing Corporate Learning.?Today’s leaders need not only the awareness and knowledge of digital matters, but the acumen and mindset to apply that awareness and knowledge. As learning and development professionals, it’s imperative to get your leaders on board with an important new capability: digital intelligence. These four steps will help you and your organization embrace digital intelligence.

Why to read it?

• Valuable knowledge communicated in a simple way
• Interesting research conclusions and observations
• You can read it in one evening :)

We are glad that you are a part of our Business Development Club and?we hope that the following information will help you grow.?Feel free to share this newsletter with your community and invite your friends to subscribe!