Saturday, June 22, 2024

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HealthTech, FinTech, ClimatTech and FoodTech are the sectors that have a significant share in Poland in recent years, if we look at the number of deals and their growth. Although the Polish market as a whole is going through a rough patch, these four leitmotifs continue to entice investors and attract their attention and money.

PFR Ventures and Inovo VC have prepared a report summarizing transactions in the Polish venture capital (VC) market in 2023. The data shows that during this period, 399 companies raised PLN 2.1 billion from 210 funds. This is the total value of capital that Polish and foreign funds invested in 438 deals in 399 domestic innovative companies. Comparing 2023 to 2022, the value of the market fell by 42%.

“Faced with the global crisis, VC funds, especially those investing in the growth phase, have reduced activity. This translated into a lack of large rounds and lower valuations. Hence the overall decline in investment values in 2023. I expect that the first six months of 2024 may be a difficult period in the Polish market: due to the end of POIR programs, there will be less capital for seed projects. The situation will be significantly changed by the inflow of FENG funds in the second half of the year, “ says Aleksander Mokrzycki, vice president of PFR Ventures. 

Among all investments, the most significant was the ElevenLabs round. The company raised around PLN 320 million and achieved unicorn status – meaning its market valuation exceeded $1 billion. Among ElevenLabs’ early investors was a large group of business angels with ties to Poland. Meanwhile, the latest deal involved such international funds as Andreessen Horowitz and Sequoia Capital.

“The success that ElevenLabs’ founders have achieved in such a short period of time is a remarkable inspiration for the entire startup ecosystem. This event could become a boost for the entire VC market,” says Karol Lasota, principal at Inovo VC.

The Polish market is still dominated by seed investments – 380 such transactions were carried out in 2023. Relative to the previous year, therefore, we recorded a slight decrease, by 7%. In contrast, the number of A rounds increased by 27%. We recorded the largest decline among B rounds, down 70%.

The average value of the deal also fell, which is now PLN 4.1 million, compared to PLN 6.6 million in 2022. Given that the sheer number of investments remained at a ceiling similar to previous years, there was evidently a significant reduction in the valuations of innovative companies. 

137 of the 438 deals were investments involving PFR Ventures funds. They provided about 1/4 of the capital for innovative companies. Also playing an important role in the seed segment are the funds of the National Center for Research and Development, which made 148 deals at a 9% share of the value.

Money from VC funds most often goes to companies that deal with innovations in the health area. This is a trend that has continued for the past four years. In 2023, they accounted for 15.8% of the total deals. SaaS (subscription model) remains the most popular business model, with a share of more than half. 

The start-up labor market has also slowed down. Nine of the 19 companies that raised the most VC funding between 2019 and 2023 have reduced the number of full-time positions. At the same time, the overall number of employees at all of the surveyed co-ops remained at a similar level.

Erol Dzhelik
Erol Dzhelik
I think we can overcome global challenges with mutual understanding, international cooperation and diplomacy. We offer you this insight at Poland Weekly.