More than good vodka: the Polish startup scene

Category: Ecosystem

If you were to ask any European entrepreneur in Europe about the real startup hubs in the continent, they’d probably mention London, Tel Aviv and Berlin first. However, over the past few years activity in the East has increased tremendously. Known for its talent and programming skills, entrepreneurs from the East have participated in some of the best and most successful European startups, planting the seeds for future generations. To know more about what’s happening in the East and specifically in Poland, we’ve invited Anna Spysz as a guest blogger.

Anna Spysz is the editor in chief of Bitspiration.com, which covers the Polish tech and startup scene. Every day, she strives to tell the rest of the world about the amazing things that are happening in Poland and of the people making an impact not just in Poland but worldwide.

The Polish investment ecosystem is exploding, and some might say that Krakow is at the very epicenter of it. That’s why I decided to talk to Cracovian Piotr Wilam, the co-founder of Onet.pl, which rose from the mid-90s Internet boom to become essentially the Polish version of Yahoo! today.

Following his early success, Piotr began investing in startups as a business angel in the mid-2000s. In 2010, he co-founded Innovation Nest, one of the most innovative and successful Polish venture capital funds and accelerators. I spoke with Piotr to find out more about the Polish startup ecosystem and its main backers.

Anna Spysz: First of all, could you give me a brief overview of the Polish investment ecosystem?

Piotr Wilam: The ecosystem in Poland is very different in different cities, and the two leading centers are Krakow and Warsaw. I think they are comparable in size. Krakow is much more compact and much more networked, and the number of relationships between people is larger. The leaders in this community in Krakow really support each other, so there is something really interesting going on here.

There are also several good companies here. At the moment there are five companies who have funding from abroad: Estimote, Base CRM, Kontakt.io, Brainly and Seed Labs. And there are several more that have great potential.

What’s happening in Krakow is that this community went from the initial stage of saying, “let’s do something”, to the second stage, where there are several companies doing well. I’m looking forward to it getting to the next stage, in which Krakow becomes a place to build a company. I hope that at this next stage there will be professionals in each area that are available, that are on the market and are looking for companies to join.

“The two leading tech centers in Poland are Krakow and Warsaw. Krakow is more compact and networked, Warsaw is very dispered but Google Campus might change that”Piotr Wilam

Warsaw, on the other hand, is huge. There’s the Google Campus [which will open in early 2015], and I think it will be the center that will unite the city. Warsaw is very dispersed right now; I’ve talked to different people in Warsaw and very often they don’t know each other, which is quite different from Krakow. In general, in Warsaw people are a bit more business-oriented, while Krakow is more technology-centered. Then there are also Poznań, Wrocław and Gdańsk, but these centers are a lot smaller.

As for Polish VCs, there are a few worth mentioning. These include Speedup, co-founded by serial entrepreneur Bartek Gola. In Krakow there’s the Satus group, which is very extensive. It is a network of incubators, so it’s a very large organization. Protos is a good fund, with experienced entrepreneurs behind it, and is based in Warsaw. And of course there’s my own Innovation Nest. There are also several funds that invest in bigger projects, such as Xevin and MCI. Many of these VC funds are set up with National Capital Fund (PL: Krajowy Fundusz Kapitałowy or KFK) money, which means they are public-private – usually 50% private, 50% from a fund of funds from the KFK.

Finally, there are business angels like Richard Lucas and Rafał Han.

You’ve been investing for a decade now, with four years as a VC. How has the Polish investment ecosystem changed? Have attitudes or the types of companies changed?

Let’s go back to the late 1990s. When I was a co-founder of Onet, it was the very beginning and it was a huge disruption. This was the time when the Internet was beginning to be used in a commercial way. There were several big companies that came out of that period. These include Onet, Wirtualna Polska [a similar site to Onet, though more news oriented] and Allegro [the Polish version of eBay]. They became big companies, and there were very few new startups coming out of that. Among the founders of these big companies, there’s Marek Borzestowski who is part of Xevin, and there’s me – we’re the ones that are still active, that I know of. There’s a very small group of people who moved from these big companies to starting new ventures.

After the end of this first period, there were a couple of years with very little activity. Then new people began starting companies. In this second period, from about 2004 to 2008-9, several local companies arose, but they were smaller opportunities compared to Allegro or Onet. This was a period when people created companies for the local Polish market. There were very few people who were thinking of doing something more international.

Then, a few years ago, there was a new wave of innovation, and the startup community arose just in the last couple of years. We, as Innovation Nest, started at the beginning of this period, in 2010.

polish startup scene

Photo taken by Tech.eu – Brainly is one of the most promising Polish startups; the edtech company has just raised $9 million to go global.

How did Innovation Nest come to be?

The story of Innovation Nest is related to the story of how this whole landscape was changing. I had been a business angel for a few years, and what I had observed was that people were only thinking about the local market, while the trend was different. It was getting easier to create global businesses – to sell abroad, to operate in other countries. There were more and more companies from the U.S. coming to such local markets as Poland. My idea was to build a fund that helped entrepreneurs build global companies when they start in Poland. That was the initial idea. I approached Marek Kapturkiewicz – he was one of the first employees of Onet – and we started Innovation Nest.

Our mission is to be an investor that helps companies that want to become global, and to give them this added value of helping them grow such a business. Over the last three years, the most interesting companies have been those that are global. If you look at Estimote or UXPin, which is another company in our portfolio, all of those companies I mentioned before from Krakow, like Brainly, Kontakt.io, Seed Labs – they are all global, they are not local Polish companies.

How does the Polish investment ecosystem compare to that of the UK, Germany or Silicon Valley?

London is much bigger – it’s a huge city in Europe, so the dynamics are completely different. It can’t really be compared. What we have over here is that Krakow has this culture of Silicon Valley, so the companies that I mentioned, most of them are very networked and plugged into the Silicon Valley ecosystem.

Krakow is like a remote outpost of Silicon Valley. That’s how I like to think of it. There have been a few dozen people who have had the opportunity to experience and learn from this culture in Silicon Valley, and they are bringing it over here. This is a really important change in the way of how business is done.

Of course, some things are different in Silicon Valley and will always be – the amount of capital available, the amount of people on the market, the size of the community, the experience that is in this community – you cannot compare it, it is completely different. But because it is much bigger, the whole process takes place in a very different way than in Poland.

What would you say are the main things that Polish startups still need to learn?

The main problem with Polish startups is that most entrepreneurs think in a very local way. They have a network in Poland, they think about the Polish market, they launch products here, and so on. There’s nothing wrong with launching a product for the Polish market, but people should realize that they are part of a global tech community, so even if they launch just for Poland, they are competing with American companies that can come over here with a similar product in a year or two. I think that Poland should become much more networked and interrelated with other markets, with the U.S. as well as with European communities.

“I think that Poland should become much more networked and interrelated with other markets in the EU and US”Piotr Wilam

On the other hand, there are two really big factors that help startups. And it’s not only in Poland, it’s in most of Central and Eastern Europe. Namely, the technical talent. If you’re building a startup in Silicon Valley, unless you’re a serial entrepreneur and have engineers who trust you and want to take a risk with you, it is extremely difficult to find people. Here, it is much easier and the quality is really good. The second resource is that people are really motivated: they are hungry for success. That’s a difference between Eastern Europe and Western Europe. I think that the third element that should be developed is what I mentioned before – thinking globally. This is changing, but it should be much deeper.

If we have these three elements, then there will be more good companies and then the investors, mentors, everybody else will be drawn here and will be eager to cooperate with companies from Poland. This is the moment we’re at right now.

This is the first post in a series that will try to highlight the best and brightest European startup markets. If you have any suggestions, please let us know in the comments. And in the meantime, remember that if you want to discover new interesting startups and find the right investors for yours… Startupxplore is the place to be.

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