While the total value of the investment of the Polish VC market is already worth €209.2M, entrepreneurs in Krakow are often faced with the challenge of attracting VCs to fund their startups. To bring the issue in the spotlight, we asked Paulina Bialek to author this article. Paulina is a director at Expara VC firm. She is an advisor to Polish companies with interests in expansion to Southeast Asia helping them find business partners and investors, as well as set up the company in Singapore. She founded and currently serves as a President to a foundation called Lotus League on establishing cooperation between young entrepreneurs from Europe and Asia to provide the exchange of knowledge and experience between two continents.
Polish start-ups come from different regions of the country. This is largely due to the fact that universities, research centers and institutes are located in various cities. As such, it can be seen that a huge potential that exists in Poland, but at the same time – a huge problem for founders given that development opportunity, including the access to capital and best
mentors are not equally distributed in the country. A conference titled “Innovative Krakow Forum” took place last week as part of the Krakow start-up week. The aim of the conference was to match founders with potential investors and interest the latter in that city’s start-up ecosystem.
Location of VC funds does not correspond to the location of start-ups
Most of the Polish venture capital funds are located in Warsaw, which makes it easier for start-ups from the capital city to raise money than those from other locations. An expert from
PFR Ventures also points out the existing problem “Even though programmes managed by our institution have no geographical limitations, regarding the exact location of the fund, we
continuously observe high concentration of those from around Warsaw. VC market in Poland is in relatively early stage of development and majority of highly-qualified fund managers are
domiciled in the capital city. We managed to receive a couple of offers from applicants around Poland but the quality of those was very often arguable.
The problem does not lie in the start-ups
An erroneous claim is that the current situation results from the quality of start-ups. Krakow boasts great start-ups, such as Silverair, Brainly, Docplanner, CallPage, etc. Recent data
published by Startup Poland showed that the largest investments (over PLN 10M) dominated Krakow start-ups, accounting for as much as 40%! This is a great result and only confirms
our belief that Krakow founders are definitely not behind the level of those from the capital. This is probably due to the large internationality of Krakow, but also attributed to renowned
universities, large scientific facilities, a thriving Krakow Technology Park and the Jagiellonian Innovation Center. Certainly, some funds see the potential in this part of Poland. However,
where do these few players stand in comparison to the entire pool of Warsaw funds?
To answer that, we need to take a step back and figure out – who are the investors really?
The VC market in Poland is a young market – increasingly “hot”, but still relatively new. Fund Managers are more often than not former bankers or strategic advisors who have gained
their experience in global corporations. Hence, real entrepreneurs are still quite rare. Since global corporations are naturally based in Warsaw, it is not surprising that it is here where
most funds are created.
In addition, most people working in venture capital have international experience – whether acquired at university or at work. This, in turn, seems quite logical – traveling to countries with a better developed start-up ecosystem, where you can already observe successes in the form of unicorns or spectacular exits from investments, you can feel inspired by this sector. Here, in turn, Polish economic and technical universities play a huge role. The greater the internationality, the greater the chance that it will be their graduates who will later hit the VC market.
How to increase the number of investors in Krakow?
The most intuitive solution is to attract investors from other parts of the country. Definitely investors should be invited to attend different events, conferences, debates, demo days, etc. However, solely basing on the invitation is not enough – there must be a willingness from the other side to come and find out more about the region and local start-ups. Unfortunately, there is a trend for Polish fund managers to sit and wait for good pitch decks to come. Yet, it lies far away from international market standards and best practices, because between start-ups and VC funds, there should be a mutual willingness for cooperation that will exist not only for a few days, but at least a couple of years. And it is impossible to have this mutual willingness, if investors and founders have never had a chance to meet. That is why it is so important to be active and as close to founders as possible. This business is based on relationships.
We should attract investors, but at the same time create our own ones too. The possibility that someone from Warsaw will suddenly move to Krakow after pursuing their studies in Warsaw without any family, friends or any other connection to Krakow, is illusional. But what about interesting local students and graduates in a VC market, should they become professional VC investors in the future? However, to do so, Polish fund managers should be active at the universities. Partners of many foreign funds are often lecturers, teaching at the top universities in the world. They really have a mandate to say that they develop start-up /VC ecosystem. In turn, when it comes to Poland, such practices are not popular yet. And this task is not only for investors, but also for universities to invite investors for guest lectures. This will help to build the ecosystem of VC funds and in order to increase their quality, we need to interest more young people on this topic.