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 is not enough to build a startup today. The amount, which is still the peak of dreams in the private life of many Poles, has significantly devalued in innovative business.
Szymon Janiak, Co-Founder and Managing Partner at Czysta3.VC
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 a monthly +/- PLN 80K. Simple calculation: CEO (founder) 12K, CTO (founder) 12K, 2 programmers 30K, marketing specialist 10k, add office, accounting, external subscription services, – and that’s it. That’s how much a company that has a million zlotys budget can afford. Remember that these are the company costs, not net remuneration.
If the company is able to start selling extremely quickly, thus generating revenues – great, because it will extend its lifetime. 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 amount. These are capital-intensive areas that also require time.
The second problematic aspect of the million is the approach 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, one year is only enough to build an MVP and more capital is sought for commercialization before it even begins.
Let’s add to this the fact that effective fundraising, i.e. from the first meeting to the funds on the account, can last about 6 months for early-stage startups today. The demand is that you should already have these reasonable revenues after 6 months, and usually there isn’t even a product yet.
One thing is certain – one million for a startup is not a success, it is the beginning of an adventure.
The comment section came up with several amendments to the formula:
I will add that the process of entering the healthcare market with certified software takes 2 years. Before that, there is no question of any income. After the introduction of MDR in the EU, everything that serves diagnostics or therapeutics must undergo certification.
– Łukasz Bandała, Co-CEO and CTO at Revolve Healthcare
But why do you assume (not only you) that the founder must be a ‘suit’ whose main competences are communicativeness, charisma, and ease of establishing contacts?
What about startups founded by programmers? They have the advantage of not having to pay for the services of programmers – at least, the core, and those are probably the most expensive in your model.The economic calculation of such a startup will change dramatically.
Or maybe you do not take into account such startups simply because they are usually not a client for you for all this VC financing?
– Tomasz Klim, Founder at Polskie.ai
As a rule, such a budget will not be tight in every case, but it is worth analyzing the market for available alternatives. The software can be built using no-code/low-code platforms, which will shorten the time to market and allow for savings. The money saved can be used for marketing and sales. Alternatively, adapting the product to the needs of the customer who will be more willing to recommend the service/product, which significantly reduces the costs of acquiring a lead in the long run.
In this case, the probability of success indicators increase significantly, and at P&L we complete both sections at the end of the month, not just the L.
– Emil Bednarczyk, CEO at havenocode.io
In the case of spacetech, as well as bio and med, it often takes time because, for example, the manufacturing/testing technology itself requires X time.
Some barriers will not be overcome even by the most outstanding specialists, which is why these industries are so difficult. On the other hand, at least in my opinion, they are still quite underserved and there is plenty of room for innovation.
– Krzysztof Bratnicki, Head of Partnerships at Avra Software
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.
