This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Innovate Poland is mobilizing PLN 4 billion (EUR 935 million) for investment in new technologies. Yet despite the fact that Polish public institutions are behind its key mechanisms, its funds – Innovate PL FoF and Future Tech Poland – have, paradoxically, been registered in Luxembourg. Is this evidence of the weakness of Poland’s legal framework for the venture-capital and private-equity markets?
The backbone of the Innovate Poland program consists of two mechanisms: Innovate PL FoF, a fund of funds (FoF) managed by PFR Ventures, and Future Tech Poland, an initiative of Bank Gospodarstwa Krajowego (BGK, state development bank) and the European Investment Fund (EIF) supporting investment in high-growth-potential technologies. The total pool for the program’s first phase amounts to PLN 4 billion (EUR 935 million). Finance and Economy Minister Andrzej Domański has described Innovate Poland as a project that could be a breakthrough for Poland’s capital market. The program is modeled on France’s Tibi plan, an initiative that mobilized private capital to invest in innovative technology companies. The announcements made so far, along with the first steps toward launching the program, have strengthened hopes that the ambitions behind Innovate Poland could have a tangible impact on the market.
At the same time, the way the program has been organized exposes the formal and legal weaknesses of Poland’s capital market and the investment-fund structures available domestically. Poland’s legal framework proved inadequate for an initiative of this scale, which requires simultaneous cooperation with both local and foreign investors. As a result, Luxembourg structures were chosen for both Innovate PL FoF and Future Tech Poland rather than Polish ones.
Future Tech Poland under EIF standards
Future Tech Poland (FTP) was established using a Luxembourg legal structure. Why? According to a statement from BGK’s press office, such a structure “is characteristic of funds managed by the European Investment Fund.”
The EIF is the entity managing FTP. It “has established, proven structures on which it builds its funds of funds,” the statement said.
It is not difficult to infer that the Polish side had little choice but to accommodate the EIF’s requirements.
Under this arrangement, BGK is the equity investor, while the EIF also acts as a co-investor.
Why do funds choose Luxembourg?
It is no secret that Luxembourg is a more fund-friendly jurisdiction. Polish structures are not sufficiently adapted to the market realities and international operating frameworks of the private-equity and venture-capital markets. Most of Poland’s large funds are registered outside the country.
“Polish structures currently used by venture-capital funds do indeed prove inefficient in some areas. Domestic solutions can complicate the day-to-day operation of funds, including the distribution of capital following investment exits. Distributing funds can take as long as six months, which is well outside market standards. In the case of Innovate PL FoF, the decision to use a Luxembourg structure was driven primarily by the ability to raise capital from foreign investors, rather than by shortcomings in Polish structures,” says Rozalia Urbanek, CEO of PFR Ventures.
PFR Ventures is responsible for implementing the Innovate PL FoF program, acting as the fund-of-funds operator. The initial capital pool comes from BGK, the Polish Development Fund (PFR) and PZU, its commercial partner.
Not just the law, but market experience
She adds that Luxembourg has for years served as Europe’s hub for investment funds. Many of the largest private-equity and venture-capital funds operate there, as do vehicles used by international institutional investors.
“Luxembourg is not only about access to investors, but also their perception of stability and security. Even if we create equally effective solutions in Poland, it will take years to build up experience, market practice and case law based on the new legislation. Luxembourg has that experience and has spent years building a reputation as a professional and predictable financial center,” says Rozalia Urbanek.
She points out that the European Investment Fund and the European Tech Champions Initiative 2.0 (ETCI 2.0), a fund of funds launched by the European Investment Bank Group, also operate under Luxembourg jurisdiction. This makes it easier for them to maintain consistent standards for all market participants.
Expert's perspective
European public investors also choose Luxembourg
The program was inspired by Philippe Tibi’s 2019 initiative, which mobilizes institutional capital for technology funds. It operates under the auspices of DG Trésor, while Bpifrance, one of its key investors, runs a fund-of-funds business covering around EUR 21.5 billion and 700 funds. In 2026, Bpifrance and KfW Capital agreed to invest EUR 400 million in French and German VC funds. KfW Capital invests in more than 150 funds and coordinates the government’s EUR 10 billion Zukunftsfonds; its programs allow funds to be domiciled elsewhere in Europe, not only in Germany. Invest-NL and the EIF launched DFF II, providing at least EUR 200 million for 10–12 funds. All three have exposure to Luxembourg-domiciled funds.
France, Germany and the Netherlands, among Europe’s largest VC markets, have their own fund vehicles. Luxembourg, however, remains a natural choice for fund domiciliation: it is Europe’s largest fund domicile and one of the leading centers for alternative funds, offering a neutral jurisdiction, recognized documentation and well-developed fund infrastructure.
A common jurisdiction makes investing easier
A second argument for choosing Luxembourg is that it simplifies investment administration. Innovate PL FoF will invest primarily in regional funds, many of which also operate through Luxembourg legal structures.
“The second benefit is that it simplifies the process of administering investments. The funds in which Innovate PL FoF will invest will largely be Luxembourg funds. These are larger regional funds that themselves raise capital from foreign investors. Investing from a Luxembourg vehicle into a fund registered in the same jurisdiction is simpler in terms of investment structuring, reporting and day-to-day administration,” explains the CEO of PFR Ventures.
Will the KFI reverse the flight of funds abroad?
The Ministry of Finance is currently working on a solution aimed at addressing the shortcomings of Poland’s existing legal structures for VC and PE funds. PFR Ventures was one of the institutions that initiated the process and is actively involved in it as a consultant.
One of the key elements is expected to be the introduction of the Qualified Investment Fund (Kwalifikowany Fundusz Inwestycyjny, or KFI), a new investment vehicle designed to better reflect the characteristics of the private-markets sector and provide an alternative to the structures many Polish teams currently choose abroad. We wrote more about this in our article, “Retirement Funds in Private Equity and Venture Capital? Government Opens PPK and OFE to Private Markets.”
The KFI is intended to bring Polish regulations closer to standards used in developed markets, including by introducing a committed-capital mechanism and more flexible rules for capital contributions and distributions. Experts caution, however, that changing the legal form alone will not determine its success. The choice of where to register a fund also depends on regulatory stability, institutional efficiency and investors’ confidence in the ecosystem as a whole.
“Just as venture-capital funds prefer to invest in established jurisdictions such as Delaware or use standard investment instruments such as the YC SAFE, limited partners prefer established jurisdictions, particularly Luxembourg and the Netherlands. This is not a uniquely Polish problem. This is how the market works: individual legal ecosystems specialize in particular types of companies or funds, build legal, accounting and judicial infrastructure around that specialization, and over time an increasing number of countries adopt these solutions,” says Borys Musielak, managing partner at Smok Ventures.
Rozalia Urbanek stresses that the frequent choice of Luxembourg by Polish funds does not mean that domestic solutions are entirely unfit for purpose. For smaller funds investing exclusively domestic capital, local structures remain cheaper to administer. The problem arises when they work with foreign investors.
Innovate PL FoF is counting on private capital
Attracting Polish and foreign private institutional investors is one of the program’s main objectives – and a condition for its success.
“Following its first closing, Innovate PL FoF already has nearly EUR 600 million (PLN 2.6 billion), and PFR Ventures is in talks with additional institutional investors following PZU. These are expected to include both Polish institutions and international players, including banks, insurers and large corporations. Investors will be able to commit capital to Innovate PL FoF for at least another year after the so-called first closing, in line with the standards prevailing in the investment-fund market,” Rozalia Urbanek says.
Key Takeaways
- Luxembourg was chosen for more than just its legal framework. For Innovate PL FoF, the decision to use a Luxembourg structure is driven – as PFR Ventures CEO Rozalia Urbanek stresses – primarily by access to foreign capital and the ability to operate in an environment that has specialized in investment-fund administration for decades. The market’s well-developed infrastructure and experience also matter. Another factor is that the fund will invest in entities, many of which also operate in Luxembourg.
- Luxembourg was chosen for more than just its legal framework. For Innovate PL FoF, the decision to use a Luxembourg structure is driven – as PFR Ventures CEO Rozalia Urbanek stresses – primarily by access to foreign capital and the ability to operate in an environment that has specialized in investment-fund administration for decades. The market’s well-developed infrastructure and experience also matter. Another factor is that the fund will invest in entities, many of which also operate in Luxembourg.
- The KFI is intended to create an alternative to foreign structures. The Ministry of Finance is working on the Qualified Investment Fund (KFI), which is intended to better reflect the needs of the VC and PE markets and bring Polish regulations closer to those of developed markets. Changing the legal form alone may not be enough, however, as investors also consider regulatory stability, institutional efficiency and confidence in the ecosystem as a whole. These factors will determine whether Polish structures can become a genuine alternative to Luxembourg.