August 17, 2023

€426m funding hole brings Poland's early-stage VC market to a standstill

The unexplained year-long wait for the EU money threatens to push early-stage VCs in the country to closure

Zosia Wanat

7 min read

Poland’s early-stage startup ecosystem is facing a funding gap due to a year-long delay from one of the country’s most significant investors.

In July last year, state-owned fund of funds PFR Ventures announced it would invest 1.9bn złoty (€426m) of EU money into local early-stage VCs — but that funding is still yet to arrive with PFR Ventures. 

As a result, some VC firms are struggling to close their funds. They tell Sifted that the delay — alongside difficult market conditions, the scarcity of private capital in Poland and a corruption scandal at another public investor — could have a knock-on effect on pre-seed and seed-stage startups in the country.


“EU programmes play a key role in the development of the Polish VC market. It would certainly be better for everyone if the calls for proposals were already announced,” Maciej Ćwikiewicz, the head of PFR Ventures, tells Sifted in a statement, stressing that it’s especially a problem for first-time VC teams.

“General partners in Poland depend on public funding to a large degree, which means any delay in the allocation of new resources will have an impact on the market,” says Paweł Michalski, CEO at VCLeaders, one of the largest VC communities in central and eastern Europe (CEE). 

The delay

The new batch of EU funding — which comes from the bloc’s 2021-27 budget — is supposed to finance 500 early-stage Polish startups via 50 VC funds. 

The Polish ministry responsible for allocating the EU funds has the money, but hasn’t yet transferred it to PFR Ventures. 

The ministry tells Sifted that the funds should arrive this year — but don't explain why the process is taking so long. 

Sifted understands that some prominent politicians in the ministry wanted to direct the money elsewhere — but these people have now been dismissed.

Ćwikiewicz says that PFR Ventures “has been ready” to start the schemes “for many months”. PFR Vetures expects that the new funds will be activated by the ministry in late 2023 or early 2024 — over a year later than planned — and then available to VCs in the first half of 2024. 

Public funding

Public funds are crucial to Poland’s startup ecosystem. In the CEE region, the share of public money in deals has been growing — up from 25% in 2016 to 40% in 2020, while in the rest of Europe it now accounts for just 6% of VC funding, according to a report by Startup Hungary.

PFR Ventures, which was founded in 2016, uses EU money to back VCs that invest in early-stage Polish startups, new management teams and angel investor syndicates which don’t yet have the track record to raise capital from other LPs. It can contribute up to 80% of a fund. 

40% of CEE VC funding in 2020 was from public money — compared with 6% in the rest of Europe

Almost a third of the €775m invested in Poland’s startups in 2022 involved money from PFR Ventures.  


PFR Ventures also allocates money from its umbrella organisation, the Polish Development Fund, or PFR — it uses it to invest in more established VCs, including international ones, such as Lakestar and Northzone. To date, it’s invested in more than 60 VC firms, including 24 first-time teams. 

However, the process to get hold of the money is notoriously painful. Many investors complain that accessing PFR Ventures' money, especially that which stems from the EU, comes with masses of bureaucracy and restrictions.

The VC perspective

The delay has thwarted plans of those VCs that were hoping to raise their first or subsequent funds with PFR Ventures’ help. It’s especially painful given the tough market conditions and the scarcity of private capital on the Polish market, where pension funds and insurance companies almost never invest in VCs. 

“Although the Polish market is evolving rapidly, it has not yet reached a stage where we can confidently expect private LPs to bridge the financial gaps,” says Michalski at VC Leaders.

What’s more, many of these VCs raised their previous funds from PFR Ventures’ first allocation of EU funding, which was awarded in 2017 — and, according to EU rules, has to be fully spent by the end of this year. They tell Sifted they’ve been rushing to allocate the money before the deadline — and now many don’t have much left. 

Cofounder Zone, a Polish VC coinvesting with business angels, has already allocated more than 80% of its fund — 30m złoty (€7m) of the fund has come from PFR Ventures and has been doubled by the angel investors. General partner Tomasz Goliński wanted to raise a second, bigger fund but has had to postpone his plans. 

[The Polish market] has not yet reached a stage where we can confidently expect private LPs to bridge the financial gaps

If the PFR schemes had been open at the beginning of the year as they were supposed to be, he would have “seriously considered” taking part in one of them, he says; but now he has the limited set of alternative investors to reach out to.

“Everyone is looking at the European Investment Fund [the EIF] as the more experienced counterweight to PFR Ventures. But the EIF also has its limitations, its allocation for a region — I can't imagine that all the VC that were backed by PFR Ventures will manage to get money from the EIF,” he adds.

Wojciech Niesyto, a general partner at Kogito Ventures, PFR-funded vehicle that invests 50/50 with angel syndicates, is in a similar situation. The fund is now fully spent other than some reserved for follow-ons. 

Niesyto is raising a second fund now, but owing to the challenging fundraising environment, he’s been waiting for PFR Venture scheme to restart.

“The next batch of PFR programmes has been rescheduled several times, and the current break is very worrying,” he says. “The market needs continuity and growth to be healthy. It is a part of PFR’s objective to build new, professional general partners’ teams. If those teams do not raise and start deploying new funds soon, they will be forced to leave the market, and the effort of the last four years will be wasted.”

Impact on startups

Ćwikiewicz at PFR thinks some of these fund managers are crying wolf. He doesn’t think “there can be a significant funding hole in the market when it comes to startups”.

VCs still have money to invest, he says. “PFR isn’t the only active institutional investor, not to mention the only LP in the country. More and more VCs take money from the EIF.”

He says that all early-stage VCs that received the money in the first batch can invest it until the end of 2023, and that the money from the new batch should be available in the first half of 2024. 

For startups looking for funding, meanwhile, he points out that several early-stage investors in Poland raised substantial funds last year — and some of them did so without PFR Ventures’ help. Inovo, which raised its third fund of €105m, and Market One Capital, which raised a €80m second fund, had the EIF as an anchor investor. AIP Seed raised a €25m fund of fully private capital.  

Other VCs that participated in PFR Ventures’ first scheme — such as SMOK Ventures and bValue — managed to raise a second fund without its help. 

PFR Ventures is also actively investing the capital of its umbrella organisation; over the last year it’s chipped into Inovo’s third fund, invested in international VCs such as White Star Capital and DN Capital and created a pot to invest in green funds such as French VC Eurazeo’s Smart City fund and US VC General Atlantic’s BeyondNetZero fund. 

Now we are afraid of a funding gap. If it takes a few more months, we will be in serious trouble regarding VC teams which will leave the market

Ćwikiewicz told Sifted in an interview last year that in case of a delay with EU funds, PFR would be able to fill in the gap with its own money. Now he says PFR would do so “if necessary”. 

"We believe it’s worth waiting [for the European funds] because they usually finance the most risky investments,” he adds.  

But some investors worry that the delay will slow down the whole sector. 

Darek Żuk, general partner at AIP Seed, says that even though his VC is fully private and he wasn’t affected by the delay, he still operates in “a wider ecosystem”.

“Now we are afraid of a funding gap,” he says. “If it takes a few more months, we will be in serious trouble regarding VC teams which will leave the market. At the same time, founders will be more afraid to start new endeavours and will have less possibility to raise next rounds. This can be a huge problem for a startup ecosystem in Poland, especially regarding the current crisis on the market.”

“Without a functional VC market, we are risking that it will be investors from other countries, not Poland, that will benefit from the hard work and risk-taking of Polish founders,” adds Kogito’s Niesyto. 

Zosia Wanat

Zosia Wanat is a senior reporter at Sifted. She covers the CEE region and policy. Follow her on Twitter and LinkedIn