The post was originally published in Polish on Szymon’s LinkedIn profile. Szymon kindly agreed to republish what we think is of great value to our readers.
One million zlotys (EUR ~230K) is not enough to build a startup today, but investing institutions still want to offer only this much.
Szymon Janiak, Co-Founder and Managing Partner at Czysta3.VC
The amount that is still the peak of dreams in the private lives of many Poles has significantly devalued in innovative business. There are two reasons for the problematic million. The first is its purchasing power itself. With this type of financing spread over a year, it gives PLN ~80K per month. A simple calculation: CEO (founder) 12K, CTO (founder) 12k, 2 developers 30k, marketing specialist 10k, plus office, accounting, external services such as subscriptions and that’s it. That’s what a company with a million zlotys of budget can afford. Remember that these are the company’s costs, not net salary.
If the company can start selling extremely quickly and generate revenues – great, because this will extend its lifespan. However, it must be either a relatively simple technology or a really outstanding team. The sector is also important here – it is difficult to talk about a revolution in bio, med or space tech for this type of money. These are capital-intensive areas that also require time.
The second problematic aspect of the million is the attitude of investors. In Poland, it is often assumed that in order to get the second round, you need to show reasonable revenues, and preferably be profitable. In practice, however, it is only possible to build an MVP within a year and the next capital is sought for commercialization before it even begins. Let’s add to this the fact that effective capital acquisition, i.e. from the first meeting to the funds on the account, can take about 6 months at the early stages. So it is requested that you should already have these reasonable revenues after 6 months, and usually during this time there isn’t even a product yet.
One thing is certain – a million for a startup is not a success, it is the beginning of an adventure.
The comment section had to add:
Unfortunately, the VC funds are asking to be cheated themselves. And then they are surprised as to why there is no return on investment. The amount of 400-500 thousand zlotys to start – such a standard beginning of a conversation – is the kind of money that will not allow you to attract any really good IT employee to the company. It’s not about the salary but about the fact that people with qualifications need a sense of security, because they can get money anywhere.
As such, startups are built by young and inexperienced people who not only do not know what they are doing, but also burn through time and their health in the belief that tomorrow big success will just pop up. And then investors are surprised that it doesn’t work out.
– Piotr Żygadło, CEO at Orome AI
– A good founding team should be able to build an MVP and the first version of the product at virtually no cost in 80% of cases. Excluding categories like deep tech, bio, etc.
– A good founding team with a good and cost-validated product will easily collect any round of financing, even in Poland. Of course, our Polish ecosystem is far behind the US.
The main problem is the mismatch in the form of the quantity and quality of startups that apply for funding, largely due to the ‘I have an idea, now I have to find funding for devow’ ones.
– Adam Zaorski, Corporate Growth at Revolut
We can criticize and complain as much as we want, but it is what it is. “The dogs bark and the caravan goes on.’ Nothing changes because investors don’t feel the need for change on their side. Also, they are happy to come up with a catchy text to justify their decisions and elevate them to philosophical heights, e.g. ‘Startups must be like cockroaches, survive any conditions.’ It’s their right. As a result, only the founders can change.
– Piotr Golczyk, Co-Founder at Empatyzer
In this case, I can recommend considering no code / low code technologies which can reduce the cost of building an MVP several times. You can find many examples where e.g. a project that was valued at 700 thousand was built for 150 thousand using NCLC. Not to mention the fact that the product was delivered much faster.
– Mateusz Mirkowski, Flutter & FlutterFlow Developer at SafetyHeads
These 30K are probably enough for one good programmer…
But on the other hand, a year is a very long time. With proper management, you can validate dozens if not hundreds of hypotheses and run many experiments.
Technology has also moved forward. Programming is much faster than it used to be 5-10 years ago. What used to be done with 20 engineers in 2 years, today 3-4 well-equipped and well-managed programmers can do in 5-7 months.
No product after 6 months – OK. But no MVP, no validated first hypotheses after such a long time, this is a rather poor sign for the founders.
– Wiktor Żołnowski, Founder at Health Folder
Szymon Janiak is an investor and a business-driven Managing Director at czysta3.vc, a Venture Capital fund located in Poland. He has over 10 years of experience in the technology sector. Szymon is also a Member of the Supervisory Board at stockbroker Grupa Trinity S.A.
