5 reasons why 2020 was a record year for the Polish VC market: Report

Last year, the pandemic forced companies to change the way they operate and it also affected the economy of countries around the globe. However, we witnessed that companies didn’t find it difficult to raise investments for their businesses, in most sectors. Similarly, the Polish VC Market didn’t budge due to the pandemic. In fact, 2020 is said to have been a record year for Poland, with over 300 companies funded and the overall investment value  reaching €477M.

Last year was fraught with an uncertain market environment for Poland with a low second quarter due to the COVID-19 pandemic. However, it showcased a 70 per cent year-on-year increase in VC investments. This, and a lot more, is revealed by an annual report summarising transactions on the Polish VC market, which is prepared by PFR Ventures, and VC fund Inovo Venture Partners. Here are 5 points as to why 2020 was a record year for the Polish VC market.

Jump in Average VC investment boosted Polish VC market

Last year, Poland recorded new heights in terms of the average VC investment ticket value in its market. As per the report, it achieved a notable 52 per cent jump in investments, compared to 2019. The second half of 2020 in the country showed stable growth as the market rebounded from the dip caused by COVID in Q2 2020. In 4Q20, the average value of VC deals in Poland was slightly below €1M, a modest decrease compared to Q3 2020.

Local and international financing 

Local financing is said to have played a big role in the Polish market. Local financing’s share in the value of transactions decreased from 58 per cent in 2019 to 52 per cent. However, it was accompanied by a significant increase in the total value of investments – from €161M to about €276M. In Q4 2020, around 65 per cent of the capital was provided by Polish funds. Local funds also reported having deepened cooperation with foreign partners as the share of co-investments with international funds increased from 14 per cent in 2019 to 27 per cent in 2020. 

Polish Funds’ investments in foreign companies

In 2020, Polish funds also took the initiative to invest in companies without looking at geography.  The report also states that many teams started investing earlier last year. These two trends are touted to increase competition in the market. Managers of funds that invested in foreign companies are said to be on the lookout for companies all over Europe as they want to invest not only in the best companies but also with the best investors. In the coming years, more international investments can be expected. 

CVC investments in 2020

According to the report, CVC investments have been growing in Poland for two key reasons. The first one being the corporations, which have access and the opportunity to invest long-term. Secondly, technological change in many industries is posing a challenge, even for larger companies that have the privilege of being market leaders. The current pace of change caused by technology can cause mini-enterprises to replace current leaders within a few years. The report also suggests that although CVC funds are a good way to multiply capital, they are also an effective way to keep your finger on the pulse of this innovation.

Top 3 interesting deals

The five largest financing rounds accounted for slightly more than half of the total value in 2020. Out of these, the report considers the online learning platform Brainly’s funding deal to be the most interesting. The company raised just over €66M in its series D funding round. This, in part due to a greater emphasis on online learning that happened due to the pandemic. Brainly is growing even faster in international markets and is aiming to accelerate the deployment of new educational products to its 350 million students parents user base.

Booksy’s funding round comes in as the second most interesting deal in 2020. As per the report, the appointment booking startup was haemorrhaging money due to the pandemic but it quickly turned it around and by the end, it recovered and outperformed its pre-pandemic levels.  It raised over €57.76M in a Series C round that was led by Cat Rock Capital, merged with Versum.

The report also sheds some light on interesting exits, the biggest of which was Inovo’s sale of its stake in Booksy. Inovo became the lead investor in Booksy’s Seed round at the end of 2015 and in its series C round, it decided to liquidate a portion of its share to deliver a payout

to its investors. The company earned over 10x on its initial investment but it is still holding on to 80 per cent of its shares.