Guest post by Abed Alaili – a tech entrepreneur living in Poland

Where to start? there’s so much to say, positive and negative … well, let’s start with this, no place is perfect!
Even the Silicon Valley is not perfect for startups, rent is so high in the silicon valley that everything becomes very expensive, even for software engineers. In Silicon Valley people with non tech jobs are leaving the city, imagine a place where teachers, nurses, taxis and waiters can no longer afford to live …

My experiences with startups in Poland

Startups in Poland are fewer than in many surrounding countries, but more importantly much less than what the 6th most populous country in the EU must have. For example, in a recent classification, Warsaw took the 14th spot in Europe by the number of startups, way behind London, Berlin and Paris, the situation is improving year over year, so we need to be a bit patient, the number of startups is roughly 1/4th to 1/5th of those in the top capitals.

Startup culture in Poland

Startup culture in Poland still have a long way to go, there is no enthusiasm when you talk about startups, and an IT guy is mostly considered an employee rather than a startup founder. Furthermore there’s no effort to make it cool to be a startup founder. And maybe it’s a good thing, taken in consideration the percentage of startup failures, maybe it’s better not to fill the heads of young people with false hopes, which might lead into financial ruin. Or maybe not, maybe failure is an essential step in every entrepreneur’s path to success.

Main factors holding back startups in Poland (in my opinion):

1- Poles are more reasonable (maybe) than other nations in the pursuit of success, especially when launching a startup is costly and highly risky.

2- Software engineers and programmers do not need to launch a startup to become rich, they are already doing great, earning 5-20 times more than the average polish employee, mostly thanks to the nature of programming which allows foreign companies to outsource software development to polish programmers.

3- ZUS makes entrepreneurship hard in general (see my ZUS article).

4- Entrepreneurs are usually the risk takers, but these risk takers sometimes take another type of risky decision, which is immigrating, and many of Poland’s risk takers have indeed immigrated to Germany, UK, USA, Canada, France,  etc … There’s at least 10 to 20 million Pole that have immigrated to another country, meaning the pool of people who are genetically programmed to be entrepreneurs is reduced.

5- Very small Middle class and upper middle class.  Most people live from paycheck to paycheck, mostly due to the amount of credit granted by banks. Credit is not something specific to Poland, many countries have their population indebted to banks. But as a former communist country, there was no capital transfer from generation to generation (we are basically at the fist generational capital transfer), thus almost everyone was poor after the fall of communism, and since then the banks credits have effectively hindered the creation of a real middle and upper middle class, simply by promoting consumption.
Before jumping in, and telling me i “know nothing”, let me ask you, what is the percentage of people that are not paying a house,car or consumption credit, and how many people can afford not to work for a year, without losing their house/car etc …?

6- No huge success stories, there’s no Skype, Nokia, Yandex , Avast, Spotify, SoundCould etc… I actually went through a 2013 list of 120 top European startups, and only 1 was Polish,now we might have a couple promising ones, but still no huge success stories.

7- Brain drain,many Polish developers work for foreign companies remotely, even some foreign companies are establishing structures to find and lure the best, like Google Campus Warsaw. (This might be the most influencing factor, as it deprive the country from smart creatives)

8- lack of capital, i will not talk a lot about this point, i’ll just show you the latest stats about fundraising in the world, with Poland + Many Eastern Europne countries  combined getting 0.4% of world capital in 2015.

Why Polish Startups can do much better:

1- Poland have a strong human capital, Polish programmers are among the best in the world, in the top 10 (if not top 5). As you can notice from the above points, many foreign companies are actually hiring Polish programmers.

2- Poland have the potential to be a strong startup hub, it is located in the middle of Europe, a couple countries away from any other country.

What should be done?

This is the question that every government in Europe is asking itself, some are taking steps other are just contemplating answers… I personally would reshape the entire ecosystem if i had the power. The only advice i can give governments, is to have some balls.

What am i doing ?

Well i have a couple projects going on, if successful they would have a huge effect on the Polish and European startup ecosystem, so obviously your support and funding are welcome,

1- StartupZ , it’s a startup networking project, something that can help improve startup culture, but also create ties between startups and investors.

2- InkubatorZ, it’s a startup incubator project, in early phase.

3- Sparta Startups, it’s a startup accelerator project, also in early phase, aka, raising funds….

This blog post was written by Abed Alaili. To send me hate mail or connect with me, you can find me on Linkedin, Twitter, Google+, & tumblr

The last few month i have been on a mission, my mission consisted of raising funds for a tech incubator i founded in a small city, called Zielona Góra.

My Logic was, hey it’s only 200km from Berlin and between 2 polish tech centers Wrocław & Poznan, i imagined i can get some European investors to be interested.

But the situation is not that simple, the money i am trying to raise, is the money needed  to fund and run an incubator, more precisely a tech incubator / accelerator and get few startups off the ground, in other words it’s the kind of money you would expect a western European incubator or startup to ask for (why? because otherwise it’s a waste of time).
Well, the problem is that most western European investors see Poland as Eastern Europe and Eastern Europe is for many investors a No go zone. (We’ll consider Poland in Eastern Europe for the sake of argument)
As for Polish investors, or at least most Polish tech investors  … they are cheap, and i mean really cheap.

Yet, startup wise, Poland is as good as any place in Europe. Startups have a high fail rate, and the biggest reason the fail rate is high is because they end up either not getting enough funds or spending the money too fast. (see related article about why startups fail)
And for these reasons, Eastern Europe has an advantage over western Europe, it’s cheaper to hire people in Eastern Europe. For the software development there’s no huge difference, but it’s cheaper to hire all the other important and necessary team members for marketing, sales etc …

Investing in Poland

When it comes to Investing in Poland, like in any country, most people flock to stocks, currency and real estates.

Currency : Is highly risky, i learned this lesson my own way, when i lost 20-25% of the value of my money a couple years after changing it to PLN. Currency is not a sound investment, there are way too many factors that can not be controlled.

Stocks: Stocks are a reasonable investment, they are usually stable if picked correctly, but to make profit on the investment it will take some time and it might not be much.

Real Estates: Real Estates is an attractive investment anywhere, till you get a housing crisis, but crisis apart, the Polish real estate market is not an interesting investment for foreigners.  Demand is not rising, there’s no increase in population that pushes demand up, and Poland is not yet a booming touristic destination (sorry it’s not), except maybe Kraków, the weather is not helping either, in winter it’s too cold and in summer it’s unreliable, i mean when in the middle of July and it’s raining and you have to put a jacket on …

Unlike most people, many professional investors, invest in tech startups.
These are the ones that take the most risks (there’s even tech bubbles), but also the ones that reap the biggest rewards.
for example: Peter Thiel invested $500,000 in 2004 Facebook and it was turned to more than $2 billion, and he still have stocks in Facebook.
That’s basically more than 4000 times what he invested!
A 4000 times return on investment is maybe an exception, but 100x 500x are not!

but to be able to make money investing in tech startups, you will need to invest in many startups, and expect that most will fail,
basically you are trying to find the 1 startup that will yield a 100x or 1000x return on investment.
To do so, you will need to invest in a lot of startups or maybe more conveniently a tech incubator, that invest in and grow these startups.

So here you go, if you want to really invest in Poland, invest in tech!

(Polish tech sectors have several problems that i will list in a separate post – to end this post on a positive note)

Disclaimer:

i am the co-founder of Sparta Startups a tech incubator and accelerator – and yeah we are raising money.

This blog post was written by Abed A.
To send me hate mail or connect with me, you can find me on Linkedin, Twitter, Google+, & tumblr