VC in Poland still barely taps science

Venture capital investment in scientific projects in Poland remains marginal. PFR Starter Science aims to change this by directing capital toward deep tech and the commercialization of research. But is that enough?

At present, the share of companies originating from universities or carrying a scientific component that receive venture capital (VC) investment in Poland remains low.

– We estimate that, in a very broad definition of the scientific component, this may account for around 10 percent of investments. If we narrow the criteria to projects whose intellectual property originates directly within university walls, the scale becomes minimal – says Rozalia Urbanek, acting president of PFR Ventures.

She notes, however, that the global startup investment landscape is clearly shifting. Funds are no longer focused exclusively on mobile applications, software, or marketplaces.

On the one hand, the market for such solutions is already largely saturated. On the other, given current IT capabilities, these projects are relatively easy to replicate.

New investment profile: from apps to deep tech

It can therefore be expected that advanced technologies will be the main driver of national economies in the coming years.

– Investors are increasingly directing capital toward companies based on “hard technologies” and offering B2B solutions. In a sense, this is a positive signal for the Polish VC sector. Until now, we have not been able to fully participate in the global wave of B2C solutions – from Uber to language models. This required enormous financial outlays to scale products globally, which was a prerequisite for achieving expected returns. In this space, the advantage lay primarily with the United States and China, rather than European countries. We have greater chances in advanced technologies, which are created, developed, and commercialized under entirely different models – emphasizes Rozalia Urbanek.

The problem, however, is that the source of such technologies is primarily the scientific community. In Poland, academia and business – especially the VC investment segment – remain largely disconnected from one another.

Support for investment at the science–business interface

In response to this gap, PFR has introduced an additional component for its funds established under the Starter program (within the European Funds for a Modern Economy – FENG framework): PFR Starter Science. The initiative is designed to incentivize investment in scientific projects.

– In Poland, we still see untapped potential at the intersection of science and business – many valuable projects emerging at universities do not reach the stage of commercialization and market financing. PFR Starter Science is a step toward changing this situation. We are creating conditions for VC funds to invest more frequently in scientific projects and to scale up the transfer of technology into the economy – said Mikołaj Raczyński, Vice President of the Polish Development Fund (PFR), announcing the new program changes.

Bonus only for declared funds

According to Rozalia Urbanek’s observations, an important shift is currently taking place in the technology market – both investors and public institutions must adapt their actions to new realities.

– PFR Ventures has influence only over one segment of the market: investments in innovative companies. We can encourage investors to pay greater attention to university-originated projects and reward the effectiveness of their activity. However, we do not have a direct impact on universities themselves or on the degree of their openness to cooperation with the capital market – emphasizes Rozalia Urbanek.

Funds will be required to declare in advance their intention to pursue a “science track” and obtain approval from PFR Ventures. Not all entities created under the Starter program will be eligible for this new option. A significant portion will continue to operate under the existing generalist model, which does not exclude the possibility of investing in scientific projects – but without eligibility for the “bonus” upon exit.

– Funds operating within the Starter program may submit proposals to PFR Ventures to modify their strategy, of course with the support of private investors. It should be taken into account that focusing on research-intensive projects may be associated with higher investment risk. We expect these funds to already have established business relationships with universities or experience in investing in scientific projects. In the case of new calls for proposals, funds will be able to apply directly to PFR Starter Science – explains Rozalia Urbanek.

She believes that out of the funds already established under Starter within the FENG framework, two have sufficient foundations to seek a change in their operating strategy.

The scale of the initiative will therefore not be very large. It should also be noted that the bonus for funds will only materialize at the exit stage, which is a horizon of several years. Deep-tech projects based on hard technologies are typically held in fund portfolios significantly longer than, for example, IT solutions.

Expert's perspective

University–fund VC cooperation still at pilot stage

The science component of the PFR Starter program was developed in consultation with the technology transfer community at universities. In its current form, it should be regarded as a pilot solution. Its scale remains very limited. This is partly due to the fact that both the academic environment and VC investors are not yet ready to implement such initiatives on a broader scale. Both sides set high expectations, while the process of mutual alignment and building effective cooperation is still ongoing.

Universities currently have a very limited number of deep-tech projects at an appropriate stage of development. They also lack efficient mechanisms for bringing them to market. The academic sector must improve its commercialization processes in order to participate effectively in such partnerships. Funds, in turn, need to better understand the specifics of R&D projects and deep-tech solutions.

One of the key issues with the now-concluded Bridge Alfa program, which was intended to support investments in R&D companies, was the financing of generalist funds that ultimately sought not deep-tech opportunities but safer university-derived projects. Meanwhile, cooperation with universities requires a specialized approach and appropriate competencies.

Effective use of this opportunity by both sides of the market will now be crucial.

Jakub Jasiczak

Chairman of the Special Purpose Companies Association

Universities as VC partners: potential and barriers

Given Polish realities and the very gradual opening of universities to the economy, can universities be good partners for VC investors?

– A university can either create barriers to cooperation with spin-offs and VC investors or provide meaningful support for the development of projects. At present, attitudes within the academic community toward cooperation with investors vary. The same applies in reverse – many funds have had poor experiences in the past when working with universities. I do expect, however, that universities will increasingly open up to the commercialization of projects with the involvement of venture capital, and that cooperation between the two sides will, in time, become more rationally structured. We have therefore not ruled out a scenario in which a university remains one of the shareholders in a project in which a fund invests – notes Rozalia Urbanek.

Investor's perspective

VC needs stronger support tools for deep tech

The venture capital market today requires stronger support mechanisms for early-stage investments in projects originating from academia. In this context, the launch of the PFR Starter Science track should be assessed as a step in the right direction.

Grant-based instruments alone are not sufficient. At the earliest stages of companies built on scientific discoveries, what is crucial is the combination of research capabilities with business experience. Investors bring know-how in building organizations and commercializing products – skills that are essential to effectively scale such ventures.

The National Centre for Research and Development’s Bridge Alfa program was widely criticized, yet its original purpose was to concentrate capital on early-stage scientific projects and R&D-driven ventures. Today, there is a lack of a similarly focused instrument on the market that would operate in a more transparent and accountable framework. At the same time, it can be assumed that past experiences limit policymakers’ willingness to launch new programs of a similar design.

At iif.vc, we invest in scientific projects at more advanced stages of development. Our performance – and that of other funds with a similar profile – is largely dependent on the quality and scale of deal flow at earlier stages.

Maciej Wieloch

Fund Manager, iif.vc

Key Takeaways

1. In response to the limited scale of investment in scientific projects, PFR has launched the PFR Starter Science component, designed to encourage VC funds to invest in university spin-offs. At the same time, the effectiveness of this initiative will depend on the supply of early-stage projects as well as the willingness of funds to accept higher risks associated with R&D-driven investments.
2. The share of companies originating from universities or containing a scientific component in venture capital investments in Poland remains low. According to estimates by PFR Ventures, this may account for around 10 percent of all investments in a broad definition. However, when narrowed to projects whose intellectual property comes directly from universities, the scale is minimal.
3. A shift in investor attitudes is visible on the VC market, with capital increasingly moving away from mobile apps, software, and marketplaces. This reflects both saturation in these segments and the relative ease of copying such solutions, which in turn increases interest in “hard technologies” and B2B models.