Investors’ eyes set on Polish start-ups. Investing in a start-up can yield a profit of up to several hundred percent

Besides development capital, start-ups, through cooperation with investors, usually receive support in the form of expert knowledge and know-how which are normally not accessible to them. Reaching up to several hundred percent, the return on investment (ROI) is in this case much higher than with traditional investments. Nearly every fifth start-up in Poland records a growth in excess of 50% a month.

“Investors set their eyes on young companies because, growing so fast, they are likely to yield a high return on investment. Investors who contribute their capital to young businesses, provided that the latter achieve the expected pace of development, are likely to gain ROIs that far exceed those on traditional capital markets through debt instruments or bonds, not to mention deposits,” said Łukasz Blichewicz, President of the Management Board, Assay Investment, in an interview with Newseria Biznes Press Agency.

A recent survey by the Startup Poland Foundation, addressing a group of 760 young, innovative companies, has revealed an impressive 17% of them to grow at a rate of over 50% a month. However, as stressed by the authors of the “Polskie startupy 2017” (“Polish start-ups 2017”) Report, not every new business is a start-up by definition. The term applies to those undertakings which, by having a certain technological edge or operating in a market niche, exhibit potential for fast growth. Start-ups are companies established with a view to undergoing a large scale up over a short period. And this is exactly what makes them interesting for investors.

Yet, Polish start-ups are still being marred by the shortage of investment capital. There are no investor resources as those available to businesses in mature ecosystems. Nearly two thirds of Polish start-ups use only their own funds to operate. As regards sources of external capital, these usually come in the form of domestic or foreign venture capital, followed by public aid from EU funds (PARP or NCBiR).

“Young, innovative companies need two things. First, some capital to set the business in motion and, secondly, support, both in terms of expertise and contacts, and through networking with entities and investors which are normally not accessible to market newcomers. We try to do both, i.e. provide capital in the form of investments from own or investor sources, and put a young company in touch with a larger, experienced business able to provide a strong back-up to its development,” Łukasz Blichewicz said.

A benefit for the investor is the excellent ROI, higher by several hundred percent as compared to traditional investments.

“An example of such an investment is Jeden Ślad, a budding company present on the market for just over a year, having developed so much that its investor could reap a solid year-on-year benefit of several hundred percent,” Łukasz Blichewicz added.

The President of Assay Investment believes that the market environment in Poland is becoming increasingly friendly for start-ups. This can be largely attributed to the programmes deployed by NCBiR or the Polish Development Fund, the latter of which will, through five venture capital funds, pump PLN 2.8 bn into start-ups at various stages of development, helping them to expand. As indicated in a recent study by the Startup Poland Foundation, nearly every second start-up in Poland sells its products abroad. They are also more and more innovative, with 46% cooperating with scientific and academic institutions.

“Business undertakings in Poland are indeed very innovative, and there's a good climate for that. If a company pursues a new idea able to solve a specific market problem, whether on a European or global scale, and regardless of the sector where the problem originated, that climate will make the company grow really fast. Poles as a nation are, in general, very open to innovations and able to introduce many new services or goods to the market over a short period. Poland is a country with a welcoming stance towards everything new, and the associated transition process takes less time than anywhere else in Europe, especially in the West,” Blichewicz added.

Young, innovative companies need two things: the capital to set the business in motion, and support, both in terms of expertise and contacts, and through networking with entities and investors which are normally not accessible to market newcomers. So, these two things are needed the most and we try to provide both of them, i.e. the capital, in the form of an investment through own or investor funding, and by putting young companies in touch with large, experienced businesses which, through high product demand, can offer a strong back up to market newcomers in their fast development.

An investor contributing capital to a young business which develops as expected is likely to yield ROIs at a scale incomparably higher than those on traditional capital markets, i.e. investments in debt instruments or bonds, not to mention deposits. It's simply beyond comparison.

The environment is very conducive to doing business, because the programmes launched now by the Polish Development Fund or PARP support these young companies and are designed to facilitate their dynamic growth, whatever their initial financial standing.

Business undertakings in Poland are highly innovative, owing to a very favourable climate for innovations. So, if a company pursues a new idea able to solve a specific market problem, whether on a European or global scale, and regardless of the sector where the problem originated, that climate will make the company grow really fast. Poles, in general, as a nation, are very open to innovations and able to introduce many new services or goods to the market over a short period. We are a country welcoming everything new and able to quickly put them to use, and the related transition process takes less time than anywhere else in Europe, especially in the West.