In the past decade, Poland has become a hub of innovation with more than 3,000 startups — Polish ecosystem overview by VCleaders

Poland’s startup scene has seen steady growth in recent years, with around 3,000 startups currently operating. The total ecosystem is valued approximately at €47.7 billion in 2023. Software, fintech, and health are the top startup industries. VCLeaders has created Ecosystem Compass that analyzes the startup ecosystem, discussing its size, dynamics, industry focus, and the job market in Poland. AIN.Capital shares key notes.

Polish economy: main indicators

  • In 2022, Poland’s GDP per capita has increased from €14,60032 to an estimated €15,61233 in 2023.
  • However, the GDP growth rate has decelerated from 5.1% in 2022 to an anticipated 0.6% in 2023, signaling a possible slowdown in economic expansion.
  • The average monthly cost of living is €647 for a single person and €2,040 for a family of four.
  • Poland’s annual inflation rate was 10.1% in August 2023, easing from 10.8% in the previous month and marking the lowest rate since February 2022.

Ecosysem overview:

  • Poland has over 3,300 startups, its almost 25% of the startup scene in Central Eastern Europe, which has a total of 14,300 startups.
  • Additionally, Poland’s ecosystem was valued at €40.3 billion in 2022 and €47.7 billion in 2023, comprising more than 40% of CEE’s total ecosystem value, which is estimated at €102.8 billion for 2022.
  • The size of Poland’s Startup Ecosystem is relatively small comparing with the top 3 biggest and most mature players in the EU-27 group, such as the UK, Germany, and France, which are valued at €888.6 billion, €638.9 billion, and €312.3 billion, respectively.

“Poland continues to show promise as a growing player in the global venture capital landscape. While Poland’s funding amounts may not rival those of its European peers, its consistent growth demonstrates a maturing market.”

Magdalena Pietrzykowska, Fellow, VCLeaders.

Key industries to invest

  • The survey shows that local investors in Poland are concentrating capital predominantly across three key sectors — health, energy, and fintech.
  • Health tops the list, with 69% of surveyed local investors focused on this sector.
  • Energy and fintech follow closely behind, capturing the attention of 50% and 41% of local investors, respectively.
  • Other industries like e-commerce, software, and mobility secure smaller shares of local investor interest, ranging from 25-35% participation.
  • It is worth noting that food and “other” categories each received 44% of responses, indicating that investors are exploring beyond traditional sectors and are open to emerging or niche markets.

Top Polish cities for statups:

97% of Local VC funds and 94.1% of international VC funds believe that Warsaw offers the best infrastructure for startups. Wroclaw and Cracow are the next favorites, with 47% and 41% of local VC funds showing preference respectively, and 41% and 35% for International VC funds. Poznan is also on the radar, with 19% of Local VC funds and a slightly higher 24% of International VC funds acknowledging its potential.

Funding in numbers:

Investments in venture capital in Poland have steadily increased over the last five years. The total amount of funding has grown by 5.5 times from 2018 to 2022. The number of funding rounds has almost doubled, from 102 rounds in 2018 to 190 in 2022. The average funding per round has increased 3.5 times, from €0.7 million in 2018 to €2.4 million in 2022.

More recently, in the first half of 2023, there were approximately 243 transactions in the Polish VC market with a total value of €189 million and an average funding per round of around €0.8 million.

Over the past decade, only 7 companies received the top 10 largest rounds, highlighting the importance of having a few big winners. These rounds were mostly led by foreign investors. It’s worth noting that all of these 10 largest rounds occurred within the last 3 years: SunRoof’s €13.5 million Series A extension in January 2023, $70 million in a Series B round for Ramp, ICEYE with its $136 million investment.

Poland’s VC funds overview:

Approximately 90 VC firms currently operate in Poland, but their structures vary significantly, leading to ongoing debates about the true nature of a VC fund in this market. Most of them exhibit the quintessential characteristics of a VC fund, such as pooling investments, backing promising early-stage startups in exchange for equity, and leveraging the expertise of experienced venture capitalists to foster company growth and ensure successful exits.

The following is a brief overview of the 25 most active venture capital firms for 2022, according to the report:

To sum up the Polish state of the ecosystem state:

Currently, the ecosystem is contending with a series of significant impediments. Foremost among these is the challenge of fundraising: a majority (56.2%) of local venture capitalists face difficulties in securing financial commitments from Limited Partners (LPs).

Adding to the complexity is the “dealflow quality gap,” highlighted by 46.9% of local VCs who experience challenges in sourcing high-quality startup investments. A corroborating sentiment is echoed by international investors; data reveals that a resounding 91% believe there’s a dearth of private LP capital earmarked for Polish venture opportunities.