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A talent for tech: Poland’s booming startup scene

Written by Josh Russell on Friday, 03 October 2014. Posted in Communities, Analysis

Poland’s tech startup scene is a huge success in its own right. But closer collaboration with Europe and the UK could massively boost its potential – not to mention our own

A talent for tech: Poland’s booming startup scene

There’s no doubt that Poland’s startup scene is picking up some serious momentum. Whilst it doesn’t quite have the same traction as London, Berlin or Tel Aviv, the rate at which the industry is growing is truly phenomenal with an ecosystem rapidly forming around the country’s burgeoning tech industry. “In terms of the critical mass and number of startups, it’s active, it’s noisy,” explains Pawel Chudzinski, the Polish co-founder and partner of Point Nine Capital, the Berlin-based venture capital firm. “Five years ago there wasn’t a startup industry; now it’s a valid career path for many people.”

And actually the difference between Poland and more established communities elsewhere in Europe isn’t as large as one might think. “It’s pretty much the same as in Berlin or in London,” says Marcin Szeląg, partner at Innovation Nest, the early-stage venture fund and accelerator. “The difference is probably in scale.” Whilst there is a disparity between the number of startups listed on Angel List – Germany has 1,200 and Poland has 350 – looking at the number of startups forming and the amount of support on offer shows that the Polish startup community is already very well developed. “If you put a number on investors and the people involved, it doesn’t look that different,” he explains. “We’re on our way to having an established ecosystem with all the parts it needs to work.”

One of the reasons for the growth spurt is the actions of the Polish government and the European Union. In 2007, the EU began an initiative to pump €67bn of ‘structural funds’ into Poland to balance the economic prospects of member states, with almost €10bn of this earmarked for growing the country’s entrepreneurial industry. “The EU poured billions of dollars into the Polish economy for new innovative companies,” says Szeląg. “They launched a couple of programmes where you could apply for a grant to set up a seed fund  and you’d get $3.5m to invest in startups.”

Initiatives like these have had a pronounced effect on the lending landscape in Poland, not all of it entirely positive. “There’s an over-supply of money in terms of the ratio of funds to startups,” Szeląg says. Part of the issue is with the ‘8.1’ programme, an oft-criticised initiative from the Polish Agency for Enterprise Development, that dishes out grants of €5,000 – €170,000 without taking an equity stake and has flooded the market with funds without the kind of due diligence commonly practiced in other countries. “There’s no rationale in terms of valuing the companies wisely,” he continues. “But that’s a transitional state; market forces will balance the supply and demand sides.”

But this stimulation has also seeded some excellent resources for fledgling tech enterprises. “There are so many incubators and business angels who can help you with a little seed money – $10,000 or $20,000 – so you can launch and just focus on your startup,” says Michael Sliwinski, founder of Nozbe, the productivity app. For this reason, it has become incredibly easy for tech entrepreneurs with a great idea to get their business off the ground without having to resort to living on the breadline. “This kind of money is quite readily available,” he says. “You don’t have to borrow from friends and family because you can very easily get access to funding from business angels.”

 Images courtesy of Innovation Nest

At later stages, however, this glut of capital tends to ebb, bringing the Polish investment landscape much more in line with economies elsewhere in Europe. “Where it becomes hard is where you get initial traction and an investment of zł1m [£187,000] or zł2m [£373,000] isn’t enough,” says Grzegorz Kazulak, CEO of Positionly, the SEO provider. As in the UK, there can be something of a funding gap prior to completing a Series A round; particularly given the fact that later stage tech firms are less of a secure bet, it can be harder to convince traditional funds to part with their cash. “You have funds that invest in bricks and mortar businesses; they’re more than happy to invest zł20m [£3.7m] in a network of coffee shops but it’s really hard to get Series A funding for a tech company,” says Kazulak.

Despite this, the startup community in Poland is definitely finding its feet. “We are following the blueprint set by Brad Feld in his book Startup Communities,” explains Szeląg. “We have accelerators, we have co-working spaces, we have mentors, we have investors.” Beyond getting the funding right, a considerable amount of effort has been invested in creating a viable startup ecosystem, kicking the enterprise landscape into overdrive. “There are now startups popping up everywhere,” he says.

However, none of this is to say there isn’t more to be done. “The community is very grassroots in a way,” says Chudzinski. Whilst Poland has developed a lot of the key infrastructure seen in the States and the UK, it is still lacking something: a Tech City or Silicon Valley of its very own. Many of the major cities – such as Warsaw, Kraków, Wrocław, Poznań and Gdańsk – have thriving startup scenes but no one city has emerged as the jewel in the country’s tech crown. “I’m a big believer in big hubs that concentrate a lot of activity but this one key hub has not materialised yet,” Chudzinski says. “Krakow could become it but it is not dominating the scene yet.”

Despite the lack of a clear home for its digital economy, Poland is seeing a lot of attention from abroad. At his Berlin-based fund, Chudzinski sees no shortage of German startups eager to snap up Polish CTOs for their strong tech skills. “There’s a lot of emphasis on mathematics and natural sciences in our education system as opposed to French or philosophy,” he says. Whilst he doesn’t think Polish engineers are necessarily significantly better skilled than their contemporaries elsewhere, the education system does produce a much higher number of technically minded professionals. “There are just many more people who have the skills and natural talent to do those highly analytical jobs.”

Filip Knioła, product marketing manager at InvoiceOcean.com, the e-invoicing solution, believes there is another factor at play: a natural self-reliance. “If we want to seek something, if we want to be good at it, we just learn it ourselves,” he says. Whether it’s getting to grips with new programming languages or finding new approaches to fix problems, he feels that Polish entrepreneurs have a natural curiosity which helps them get to grips with technical disciplines. “We dig, we do research; that’s what drives us,” he explains.

However, despite a very broad base of technically minded engineers and a strong desire to find new solutions, there are some areas in which the Polish startup market struggles. “Some Polish startups are run by very cool, smart people who just have no idea how to sell themselves,” Sliwinski says. “The marketing part, how to sell their idea, is missing.” The cocksure confidence of a Californian chief exec as they tell you why their product will disrupt a whole sector isn’t an approach the average Polish startup is at home with. “We criticise ourselves a lot and because we are so hard on ourselves we sometimes lack the courage to sell what we have,” he continues.

This is perhaps reflected in the level of ambition that has been shown thus far amongst a lot of the first-time entrepreneurs in Poland. “It’s rooted in our culture,” says Szeląg. “We only transitioned from communism to capitalism about 20 years ago so most people are trying to fulfil all of the basic necessities in terms of owning a home and having enough money to buy a car.” Many enterprises have built a significant presence at a national level but up until recently there has been less desire to aim for more. “We have very few people who are actually crazy enough to dream that they can build a global company out of Poland and compete with American startups that are funded tenfold,” he says.

But this has started to shift over the last couple of years, with the first generation of this new wave of tech startups beginning to see some healthy exits. “In the last year or two, we’ve seen a number of exits that were in the range of zł5m and zł20m,” says Kazulak. Although these are not huge windfalls – ranging from just shy of £1m up to around £3.75m – they are demonstrative of increasing confidence in the ability of startups to secure hefty returns.

Additionally a few giants of the community are paving the way for those that follow – LIVECHAT Software, the global corporate customer service chatroom provider, made significant waves with its recent flotation. “They recently IPOed on the Polish stock exchange with a market cap of around zł400m [just shy of £75m],” Kazulak says. “They’ve been successful in taking a Polish company to a global market and a global presence.”

This is beginning to have a significant impact, helping to galvanise the startup industry. “It’s the typical thing with that happens every tech ecosystem,” says Chudzinski. As with Skype in Estonia, high-profile wins clearly redefine what success looks like for the other enterprises in that ecosystem. “There is a big announcement, a major funding or a significant exit and that fires up people’s imaginations,” says Chudzinski. “It’s helping Poland find the bravery to go for it.”

But, of course, Poland is just a small part of a bigger story. Building major international tech brands will require close collaboration between tech communities, regardless of where they’re located.

Here in the UK we’re not lacking in evidence of how international collaboration can invigorate an entire community. “Tech City in London is a good example of the various number of startups and how close they are to people from different countries; they collaborate, share ideas,” says Marcin Malinowski, director at Outbox Group, the CRM consultancy. Already, joining the EU has allowed enterprises to work more freely across the borders, with many, such as Outbox Group, coming to these shores to contribute toward the UK’s thriving tech scene. “People from different countries in many cases have a different view and also if you combine them together you have a completely fresh view,” adds Malinowski.

Ultimately the real lesson to be learned from the developing startup ecosystem in Poland is that greater dialogue between nations will profit us all. “Poland can benefit from us working together with other ecosystems and these can benefit from Poland’s technical talent,” says Chudzinski.

Given the scarcity of engineers and tech skills in London, Berlin and even in Silicon Valley, a meaningful exchange of talent and knowledge – not to mention closer ties in terms of venture funding and media coverage – only stands to strengthen all who participate. “It cannot be that every country figures it out by themselves,” Chudzinski continues. “There is an international tech community and being connected as much as possible is the best way to bring ecosystems in tech forward.”

Certainly the future of the Polish startup scene is looking bright. “It’s amazing how much impact you can have from Poland,” Sliwinski concludes. “For me it is remarkable that, from a country that was the behind the Iron Curtain back in the 80s, I can create a global product and touch people from all over the world. It’s something I love being part of.”

 

Slow burner

Nozbe

It was whilst working as a freelance developer and marketing consultant that Michael Sliwinski first identified the need for the productivity app that would one day become Nozbe. “By nature I am a very disorganised person and I wanted to get more organised,” he explains. He’d read plenty of books on productivity but it wasn’t till he read David Allen’s Get Things Done that he realised he’d hit upon the right approach. “Get Things Done was the trigger,” he says. “I was like ‘yeah, I need to have a system like that’.”

However few software solutions seemed to support this way of working and so Sliwinski got to work coding his own. “I did a very basic mock-up, in MySQL and PHP, just for me,” he explained. “It was very ugly but it worked.” Before long, however, he realised there were plenty more people who could benefit from his tool and began to code a product for the English-speaking market.

Whilst its emergence wasn’t exactly greeted with a fanfare – “The first week I got ten sign-ups,” Sliwinski laughs – its user base grew rapidly, thanks largely to word of mouth, the support of bloggers and coverage from outlets such as ZDNet. Before long he found himself being invited to conferences in San Francisco to speak about productivity and Nozbe was announced as one of Lifehack.org’s 11 best apps of 2007. Fast forward seven years and Nozbe now has over 200,000 users around the globe, with Nozbe 2.0 launched in late September. “It’s a very rewarding business to be in,” says Sliwinski.

 

Global appeal 

Outbox Group

The CRM consultancy Outbox Group was always destined for big things, especially given the nature of the talent on board. “Our founders were five ex-PwC guys,” says Marcin Malinowski, director at the company. “And I would say the majority of the first-time employees also came from PwC, IBM, Accenture.” With such strong technical backgrounds, clearly there was a bright future for  the company.

Whilst its original focus was on the Polish market, perhaps inevitably given the profile of its founders, destiny came knocking and Outbox Group began working on contracts from elsewhere in Europe. “After three years, we started to cross over into doing business abroad and did a couple of projects in Germany and the UK,” says Malinowski. Whilst it continued to nurture its Polish customer base, gradually the UK, Germany, Austria and Switzerland have become its other key markets.

Malinowski puts the company’s success down to one factor. “It was based on the notion that we can only be successful if our clients are successful,” he says. “We believe that if you do projects well then your clients can benefit and you secure more work.” Given the consultancy has grown to be the biggest in the Polish market, it’s not a tactic you can quibble with. 

About the Author

Josh Russell

Josh Russell

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.

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