• Angel investing: Angel investors take wing in Poland

    Awareness of angel investing remains low and obstacles abound, but it is nevertheless growing in popularity in Poland

    Google. Amazon. Facebook. All are modern success stories and billion-dollar businesses. The oldest among them, Amazon, has only been around for 17 years. These companies, and others like them, have much in common, such as market dominance, a dependence on the internet, and plenty of fancy algorithms.

    And none of these firms would exist today if they had not gotten a lift from an angel investor.

    A fledgling sector

    Although it has not seen anything quite as spectacular, Poland too is home to angel-supported success stories. Health-food retailer Organic Farma Zdrowia, coffee shop chain W Biegu Café and book retailer Merlin.pl are all examples of businesses that have succeeded with the help of angel investors (also known as business angels).

    Angel investing isn’t quite as well known or understood in Poland as it is in the United States, for example, but the infrastructure to facilitate it is developing. There are at least eight regional or international networks in the country at present, along with several independent initiatives, and the largest include PolBAN and Lewiatan Business Angels (LBA), both in Warsaw.

    The average membership among these Polish networks is 30 investors. Meanwhile, the number of angel investors in the United States, the most mature market for business angels, is estimated at three million. In the second half of 2009 there were 303 angel investor networks in the European Union.

    “The Polish market of business angels is developing dynamically. We are seeing an increased awareness among investors and authors of projects,” said Adrian Fester, a project specialist at PolBAN.

    Currently, five networks of Polish angel investors are members of the European Business Angels Network (EBAN), an independent and non-profit association for business angels established under the auspices of the European Commission: Business Angel Seedfund, Polish Investment Fund, AMBER BAN – Polish Entrepreneurs Foundation, Lewiatan Business Angels and Secus Wsparcie Biznesu.

    For its part, the Łódź Regional Development Agency has formed the Guild of Business Angels (GAB), an initiative which matches innovative ideas for business or companies in the early stages of development with their own business angels. GAB also organizes conferences and training for small firms and start-ups in Łódź, Warsaw and Gdańsk.

    Like their counterparts in the United States and Western Europe, Polish business angels invest in sectors which give the best possibilities for innovation: biotechnology, multimedia, internet, electronics, medicine, services and ecology, but they also support traditional ventures.

    Successful investments and angels

    The aforementioned W Biegu Café is an example of a successful angel investment in Poland. The chain dates back to 2005, when its founder Maciej Adamaszek invested zł.400,000 in two coffee points in Warsaw and Kraków. To expand his business, Mr Adamaszek turned to banks, but after several fruitless attempts to get support, he presented his project to the Lewiatan Business Angels network. The project attracted the interest of Piotr Pośnik, a private investor and co-founder of Wittchen, a producer of leather accessories.

    He invested zł.1.5 million in exchange for a 50 percent stake in W Biegu Café. As a result, the chain has so far expanded to 16 coffee shops in seven Polish cities.

    Another example of a venture supported by a Polish angel investor is online book shop Merlin.pl, which was founded in 1999 by Zbigniew Sykulski. When the company needed more money for development, it turned to investor Piotr Wilam. Today Merlin.pl fills around 100,000 orders per month.

    Mr Wilam is one of the most active angel investors in Poland, having started his career as an investor in 2004. Early in his career he co-founded publisher Pascal, popular web portal Onet.pl and Optimus Pascal Multimedia, a producer of multimedia software. Apart from Merlin.pl and community portal Grono.net, he has invested in TV channel Kino Polska (which debuted on the Warsaw Stock Exchange in April 2011) and Krzysztof Kucharczyk Techniki Elektroforetyczne, a producer of equipment used in the medical and biotechnology sectors.

    According to Adrian Fester, the amount of money Polish angel investors put into individual projects is comparable to that seen in the British or American markets. These are sums ranging from zł.100,000 to a maximum of zł.1-2 million. In Western Europe, meanwhile, the average amount of money put into each investment generally ranges from €20,000 to €250,000, although some sources suggest it could even be as high as €400,000.

    Business angel investments are usually long-term. Jacek Błoński, chairman of Lewiatan Business Angels, estimates that the average time to see a return on investment in Poland is about four to six years.

    According to Adrian Fester from PolBAN, the average return rate for this type of investment is higher than traditional market returns.

    “Generally, investors expect to earn a minimum of five times as much money as they invested,” he said.

    Mr Błoński explained that most angels expect an internal rate of return of about 30 percent after this time.


    According to the experts, angel investing in Poland is hampered by a lack of awareness, a low level of mutual trust and a lack of external support for this kind of business activity.

    Other issues include legal obstructions and a lack of clear regulations concerning the knowledge and technology transfer, the reluctance of scientists to commercialize breakthroughs and poor cooperation between regional institutions.

    In 2009 only 24 percent of Polish entrepreneurs had heard about angel investors, but they did not know any details about their role or how they function, according to a study conducted by Pentor Research International. Only eight percent indicated knowledge of how angel investors function in the Polish market.

    This does not mean that new companies which are already aware of the existence of business angels are uninterested in this type of financing. However, not all the projects they propose are feasible or sufficiently professional.

    Mr Błoński said that at present LBA attracts some 200 projects per year.

    “The quality of these projects and their substantive value show that there is interest in starting companies with business angels, but few of them are really prepared enough to be an attractive target for such investors,” he said.

    According to Mr Błoński, the immaturity of the market is but one of many obstacles.

    “The Polish market provides no facilitation nor a specific impediment for business angels. Unlike Western European countries or the US, we do not have tax allowances for such investors. Data from the UK shows that such allowances considerably support angel financing,” he added.

    Many Polish investors still fear the risks inherent in this type of financing. According to Adrian Fester’s estimations, many of the investments financed by Polish business angels end in failure. Four companies in 10 go bankrupt. And only one in 10 gives a return of between 300 percent and 500 percent.

    Money awaits

    Will angel investing continue to grow in popularity in Poland? Based on the trends seen in other markets, the answer is yes.

    Mr Błoński from LBA was cautiously optimistic.

    “There is no reason to think that angel financing will not develop in Poland in the future,” he said.

    This view was supported by Mr Fester.

    “Alternative forms of investment are becoming increasingly popular in Poland nowadays,” he said. “In our country there are also more young millionaires who retire from business at the age of 30-40, but do not want to give up business activity. This group will look for inspiration and invest capital in interesting projects.”

    However, to be made as accessible to entrepreneurs in Poland as it is today in Western countries, angel investing needs stimuli for expansion and awareness of it needs to grow. Moreover, much still needs to be done in terms of producing attractive propositions for business angels.

    “It is commonly noted that there is more money in our market for these types of investments from private sources than good ideas for business,” said Mr Błoński.

    With a little more publicity and guidance for entrepreneurs, that money could find itself well invested.


    autorzy: E. Blake Berry, Katarzyna Piasecka

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