The growth of the Polish venture capital (VC) market accelerated in the first half of this year. Startups raised €260 million, which is 55% of the total value of the investments in the whole of 2020, according to the latest PFR Ventures report. “In the first half of 2021, the VC market already reached the level of the entire 2019. It seems that the third quarter will be even stronger,” Aleksander Mokrzycki, vice president at PFR Ventures said. The biggest deal of the second quarter was the mega-round of Uncapped — a startup offering an alternative to traditional debt financing and venture capital — that raised €66 million in May.
Last year, total investments amounted to €477 million. Major deals included financing of satellite radar specialist ICEYE (€74 million), online learning platform Brainly (€67 million), and appointment app Booksy (€59 million). Polish B2B software companies received 50 rounds of funding worth €96 million, according to the report “Polish B2B Software Landscape 2021” by Innovation Nest fund. As many as 46 out of 110 VC funds came from outside Poland, mostly from the US and the UK, followed by Germany and Czechia.
LOW COSTS, HIGH QUALITY
Costs of running a startup in Poland are relatively low thanks to the availability of qualified professionals and a weaker currency. Labor cost in the country is still roughly a third of the average in the eurozone, according to Eurostat data, even though wages have been steadily rising in recent years.
Poland is characterized by the young age of startups: more than 60% of them have been operating on the market for less than two years. They were largely established by people aged above 30 who have already gained professional experience, the report “Polish Startups 2020. Covid Edition” by think-tank Startup Poland Foundation shows. Startup owners’ opinions about the pandemic effect on their business are mixed. Some companies found new customers, recorded notable sales growth, hired employees and expanded their offers. Others had the opposite view, saying the demand for their product and services declined and they had to withdraw from the market partially or fully, according to the report. More than one-third of surveyed companies (34%) said the pandemic had a very positive or positive impact, while 39% said the impact was negative or very negative. The results differed by sectors and industries. In cybersecurity, for example, more than 85% estimated the pandemic effect on the business as positive or very positive. A similar situation was noted by e-sport startups, where no surveyed company mentioned the negative impact. In GreenTech and CleanTech, focused on creating more environmentally friendly products, four out of ten companies said they benefited from the pandemic. However, a similar share noted the negative impact. Medtech and fintech companies are also generally optimistic as they were already gaining traction and got a further boost from the arrival of Covid-19.
A rather negative view came from sectors such as transport and tourism, which is not surprising in light of the government-induced restrictions. Overall, however, almost one-third of startups recorded revenue growth last year and nearly two-thirds don’t plan layoffs in the near future. Despite the overall economic slowdown, caused by the pandemic, the digital economy development in Poland accelerated sharply last year, opening opportunities for innovative companies.
MEET, STUDY AND PAY ONLINE
When the pandemic came, the apartments of many people around the globe also became offices, classrooms and fitness clubs. Zoom and Teams turned to crucial work tools and people switched to online activities. Startups were quick to meet new needs by creating additional products and services or by expanding existing ones. Next are five examples of companies that gained momentum after Covid-19 struck economies the world over.
As the crisis favors the emergence of new business models, there are three main attitudes on the market — waiting, creating a plan to move forward and breaking, said Arkadiusz Regiec, CEO at Beesfund crowdfunding platform. Everyone who lost time at the beginning of the pandemic later faced increased difficulties. However, those who were fast to spot opportunities provided by a rapid change did not wait long for investors’ support. “For all new business models, a golden decade is coming,” he concluded.
FIVE POLISH STARTUPS TO KEEP AN EYE ON
Appointment booking app Booksy founded by Polish entrepreneurs Stefan Batory and Konrad Howard and headquartered in San Francisco, raised in January $70 million in a Series C round to reach more service providers across its core market US and other countries. Booksy, which helps to find, schedule and manage appointments online, operates in six markets, including Poland, and collaborates with major tech brands including Facebook and Instagram.
“Despite the turbulence caused by lockdowns, we believe that in the long run, our solution will be needed and will make life easier for both salons and clients. It isn’t only about the hair and beauty sector. Since last year, Booksy has been collaborating with Polish banks, e-commerce, and telecoms firms,” Batory, the company’s co-founder, and CEO told The First News.
The investment round, which also saw funding from OpenOcean, Piton Capital, VNV Global, Enern, Kai Hansen, Zach Coelius and Manta Ray Ventures, made it one of the largest-ever Series C financing for a Polish-founded company.
The e-commerce boom sparked the demand for logistics services needed to handle an increased volume of orders. Warsaw-based Nomagic, which has developed robotic systems to automate repetitive tasks in warehouses, has raised $8.6 million in seed funding co-led by Khosla Ventures and Hoxton Ventures. The round also included participation from DN Capital, Capnamic Ventures and Manta Ray.
Founded by former Google Engineering Director Kacper Nowicki, Marek Cygan and Tristan d’Orgeval in 2017, Nomagic reduces the cost of fulfillment and allows warehouses to manage with fewer employees. Its robots can recognize different types of objects, pick them up and put them in a specific place. The company said it sees a huge need for logistics automation in the European distribution centers and plans to use funds to develop a robots-as-a-service (RaaS) subscription model with a monthly fee by customers.
ClickMeeting, a platform for online meetings, webinars and education, came into life in 2011. However, last year its popularity boomed with the number of users crossing 2 million. The startup also recorded a jump in the number of customers abroad, in countries, such as France and Germany.
Dominika Paciorkowska, managing director of ClickMeeting, told Rzeczpospolita newspaper that the boom will continue as online workshops allow to reach a larger audience compared to traditional meetings. She expects the trend for such events to remain after the pandemic, at least in a hybrid form.
As the demand for online education accelerated during lockdowns, more companies tapped into the market, offering creative solutions that fit into customers’ daily routines. One of them is the Englibot app by the Warsaw-based company Optimipay designed to learn language through Facebook Messenger. It allows talking to a virtual teacher, learning a few new words or recapping grammar.
“The time of the pandemic has brought both difficulties and opportunities to our business. On one hand, we had a good, innovative, ‘Covid-proof’ product. On the other hand, we could not predict if people would be willing to spend any money on it in such hard and unprecedented times,” founder and CEO Karolina Miłosz told the Warsaw Business Journal (WBJ).
Everything the management could predict based on past experience, knowledge and analysis was all of a sudden facing a totally new reality where everything was uncertain, she said. “We have risked a lot and invested a lot of time and money in the project, and at the same time, we were humbly adjusting to what sometimes felt like learning how e-commerce works all over again,” Miłosz added.
Since the launch of the service last July, its audience grew by almost one-fifth every month. At the time of going to print, it has over 3,000 paying users, mainly from Poland, the UK, Ireland, the US, Bulgaria, Hungary, and Czechia. The company plans to do further fundraising to prepare for the
launch of NewConnect by 2023.
Fintech was one of the industries that continued to grow despite the global pandemic. Just nine months before the pandemic outbreak, the Wrocław-headquartered company introduced a form of payment through scanning customers’ eyes, becoming the first company in the world to do so. Eye payment is a solution based on iris biometric authentication. When a customer makes the first transaction, their iris image is converted into a special numerical code used by the payment device.
In June this year, it had 150 partners, including restaurants, shops, hotels, and cinemas, and celebrated its first anniversary — exactly 30 years after the first payment card was issued in Poland.
“To a large extent, the pandemic period has spared many startups and even elevated a good number of them to the top,” Barbara Mróz-Gorgoń, chief marketing officer at PayEye told the WBJ. “Technological companies related to medicine, finance, or digitalization have gained tremendous traction and accelerated their growth. This also applies to us, as the move away from cash has accelerated the development of our biometric payment solution,” she said.
The pandemic has shown that paying with a phone is not always convenient given it’s tricky to unlock it with a finger while wearing gloves, as it is inconvenient to use facial recognition while wearing a mask. PayEye now plans to present its solution at the annual global tech event GITEX in Dubai.