In 2020, the Warsaw startup ecosystem is “a place to watch carefully” – TechCrunch
If you have registered trends that caught the attention of 20 Warsaw-focused investors who responded to our recent surveys, Automation / AI, Enterprise SaaS, Clean Tech, Healthcare, Remote Work and the Economy sharing would be at the top of the list. These VCs said they were looking for opportunities in the space of ‘digital twins’, proptech and extended blockchain tokenization within industries.
Investors from Central and Eastern Europe are generally looking for the same things as VCs based elsewhere: startups that have a unique value proposition, capital efficiency, motivated teams, post-income, and a well-defined market niche.
Among the cohort we interviewed, several told us that COVID-19 has not yet significantly transformed the way they do business. As Michał Papuga, partner of Flashpoint VC said, “The situation since March has not changed much, but we have gone from extreme panic to extreme optimism. Neither is good and I would recommend sticking to long term goals and not being pressured. “
According to RBL_VC’s Pawel Lipkowski, “Warsaw is at its focal point – think Berlin in the 90s. It’s a place to watch carefully.
Here’s who we interviewed for Part 1:
- Bryony Cooper, Managing Partner, Arkley Brinc VC
- Anna Wnuk-Błażejczyk, Head of Investor Relations, Experior.vc
- Rafał Roszak, Director of Investments, YouNick Mint
- Michal Mroczkowski, partner, Market One Capital
- Marcus Erken, Partner, Sunfish Partners
- Borys Musielak, partner, SMOK Ventures
- Mathias Åsberg, partner, Nextgrid
- Kuba Dudek, SpeedUp Venture Capital Group
- Marcin Laczynski, Partner, Next Road Ventures
- Michał Rokosz, partner, Inovo Venture Partners
To conclude, we spoke with the following investors:
- Karol Szubstarski, Partner, OTB Ventures
- Michał Papuga, partner, Flashpoint VC
- Michal Bachmacz, Partner, Aper Ventures
- Pawel Lipkowski, partner, RBL_VC
- Tomasz Golinski, partner, CofounderZone
- Szymon Janiak, partner, Czysta3.vc
- Bogy Skowronski, partner, Mitefcee.org
- Boris Kocot, partner, AIP Seed
- Bartosz Lipnicki, partner, Alfabeat
- Radek Czyrko, Partner, THC Pathfinder VC
Karol Szubstarski, Partner, OTB Ventures
What trends are you most excited to invest in, in general?
Gradual transition of businesses to increased use of automation and AI, which enables dramatic improvements in efficiency, reduced costs and a shift of business resources from tedious, repeatable and mundane tasks to more interesting and value-added opportunities.
What’s your most recent and exciting investment?
One of the most exciting opportunities is ICEYE. The company is a leader and pioneer in synthetic aperture radar (SAR) technology for microsatellites. It builds and operates its own commercial constellation of SAR microsatellites capable of providing satellite imagery regardless of cloud cover, weather conditions and time of day and night (resolution comparable to traditional SAR satellites with a cost factor of 100 times lower), disrupting the multibillion-dollar satellite imagery market.
Are there any startups that you would like to see in the industry but don’t? What opportunities are being overlooked right now?
I would love to see more startups in the digital twin space; technology that enables the creation of an exact digital replica / copy of something in physical space – a product, a process or even the entire ecosystem. This type of solution allows experiments and [the implementation of] changes that could otherwise be extremely costly or risky – this can add immense value to customers.
What are you looking for in your next investment, in general?
A company with a unique value proposition for its customers, a deep technological component that provides a competitive advantage over other market players and a founder with a global vision and focused on executing that vision.
Which areas are oversaturated or would be too difficult to compete with at this stage for a new startup? What other types of products / services are you wary or concerned about?
No market / sector is too saturated and has no room for innovation. Some markets appear to be more difficult than others due to the huge competitive landscape (e.g. food delivery, language learning apps), but can still be subject to disruption due to a unique value proposition of a new entrant.
How well are you focused on investing in your local ecosystem compared to other startup hubs (or everywhere) in general? More than 50%? Less?
OTB focuses on opportunities that have links to talent from Central and Eastern Europe (without prejudging any hub in the region) i.e. companies that leverage local engineering / entrepreneurship talent in order to create world-class products to be competitive on a global scale (usually a headquarters outside the EEC).
What industries in your city and region do you think are well positioned to thrive or not in the long term? Which companies are you passionate about (your portfolio or not), which founders?
The EEC region is recognized for its considerable and highly qualified talent pool in the fields of engineering and software development. The region is well positioned to develop solutions that leverage unique and deep technology, regardless of vertical (especially B2B). Historically, the region was particularly strong in AI / ML, voice / speech / NLP technologies, cybersecurity, data analytics, etc.
How should investors from other cities view the general investment climate and opportunities in your city?
The EEC (including Poland and Warsaw) has always been recognized as an exceptionally strong region in terms of engineering / IT talent. The inherent risk aversion of entrepreneurs has led, for a number of years, to a more ‘printed’ / local market approach, while hampering more ambitious and deeper technological opportunities. In recent years, we have seen a paradigm shift with a new generation of entrepreneurs tackling problems with unique and in-depth technological solutions, emphasizing global expansion, neglecting shallow local markets. As such, the quality of transactions has grown steadily and currently reflects the best quality globally, especially at the technological level. The CEEC market also shows a growing number of startups (in total), which is primarily driven by an abundance of start-up capital and success stories in the region (e.g. DataRobot, Bolt, UiPath) who are successfully evangelizing entrepreneurship among companies / engineers.
Expect an increase in the number of founders coming from geographies outside of major cities in the coming years, with startup hubs losing people due to the pandemic and lingering concerns, as well as the attractiveness of remote work?
I believe that local hubs will retain their dominant position in the ecosystem. The remote / digital workforce will increase in number, but proximity to capital, human resources and markets will remain the dominant force in forming local startup communities.
What segments of the industry you invest in seem weaker or more exposed to potential changes in consumer and business behavior due to COVID-19? What are the opportunities that startups can exploit in these unprecedented times?
OTB typically invests in companies with a clearly defined technological advantage, making a quantifiable and short-term difference for their clients (usually in the B2B sector), which represents added value regardless of the market cycle. The economic downturn generally favors technology solutions that allow corporate clients to increase efficiency, reduce costs, optimize and replace manual labor with automation – and the vast majority of the OTB portfolio fits that description. As such, the majority of the OTB portfolio has not been significantly impacted by the COVID pandemic.
How has COVID-19 impacted your investment strategy? What are the biggest concerns of the founders of your portfolio? What advice do you currently give to startups in your portfolio?
The COVID pandemic has had no impact on our investment strategy. OTB is always pursuing unique technological opportunities that can provide its customers with immediate added value. This type of approach provides a relatively high level of resilience against economic downturns (obviously sales cycles get longer, but in general the sales pipeline / prospects / retention remains intact). Portfolio liquidity is always the number one concern in times of uncertainty and challenge. The Lean approach must be reintroduced, companies must preserve their cash flow and continue to optimize – this is the only way to weather the crisis.
Are you seeing “green shoots” regarding revenue growth, retention or other dynamics in your portfolio as they adjust to the pandemic?
A good example in our portfolio is Segron, a provider of an automated test platform for applications, databases and corporate network infrastructure. Developing, deploying and maintaining software in the enterprise IT ecosystem requires continuous and rigorous testing protocols and, therefore, many manual tasks involving highly skilled engineers (which can be used more productively). somewhere else). The COVID pandemic has kept engineers at home (with no possibility of remote testing) while driving the demand for digital services (and therefore the demand for a reliable IT ecosystem). Segron’s automated framework enables full automation of enterprise testing, which improves efficiency, lowers operating costs, and provides corporate clients with peace of mind and a good night’s sleep regarding their IT infrastructure in one. difficult economic environment.
What moment gave you hope in the past month? It can be business, personal, or a mix of the two.
I remain impressed by the unwavering determination of several founders and their teams to overcome all the challenges of the unfavorable economic ecosystem.