Piotr Majchrzak - Michał Rządkowski
The use of the term „startup” is relatively new in Poland. If you ask a passer-by in the street what a startup is, they will either look at you blankly or tell you it is probably something that local entrepreneurs started to offer. However, to most readers, the term „startup” plays a far more vital role than one would think. Almost everyone has a Facebook account but few people know that it used to be a startup too.
The number of startups in Poland is estimated at roughly 2,400 entities. They are associated mainly with new technology but it is only part of the truth as they operate in many different areas. Most often, they work in such fields as software, mobile apps, e-commerce and a wide range of other Web services. While starting such a business is more risky than pursuing more standard business ideas, the risk is compensated by a higher and faster ROI, of course if the startup succeeds.
As for the emergence of startups, Lublin does not lag behind other cities. Being the largest academic centre on the right side of the Vistula river, the city provides a natural business ecosystem for the development of such entities. Home to five state-owned and four private universities which have almost 70.000 students and about 20.000 graduates who enter the job market every year, the city is a perfect place for this type of business activity. For many people from Lublin, a startup is a way of finding an idea for themselves, which lets them pursue their passions and long-term plans. The relatively well-functioning system of institutional support is of great significance here.
The development and integration of startups, the help with accessing external financing sources and the mutual exchange of experience are all possible thanks to such innovation triggers as the Lublin Science and Technology Park.
The fact that at least several out of twenty companies which were set up with the support of the park have been successful proves its effectiveness.
The best example here is the website of iWisher whose owners make profit by facilitatating online money transfers and by earning commissions on sales generated for their partner shops. The website started half a year ago, but it has already gained more than 2,000 users who have made about 40,000 transactions so far. Furthermore, Lublin-based startups may develop also thanks to Business Link Lublin that offers not only office space but also a specially designed acceleration package. A hallmark of the startup-friendly ecosystem is a great number of business incubators, such as the Technology Incubator and Software Camp. The city of Lublin itself is also taking its first steps towards supporting startups. It is estimated that about 50-60 companies that describe themselves as startups operate now in Lublin or are in the process of formation, but the number may be understated. What is more, the dynamics of creating new ones is increasing.
The development potential of Polish startups depends on many factors. Some of them are local but the majority of them, as it is defined by specialists, are rather universal and apply to the whole area of Poland. Thus, their success often depends on the location, an internal structure, the financing funding, a good choice of trade areas, levels of new technology use and the status of key accounts. According to the aforementioned “Polish Startups. 2015 Report”, startups most often describe themselves as offering SaaS solutions and almost twice as many of them sell in the B2B model as opposed to offering B2C solutions. For this reason, the key account or co-operator plays a strategic role here because whether a company can survive depends in most cases on its ability to win not an individual customer but a customer in the form of a thriving company. Taking it into account and all the above-mentioned facts, we will present five reasons why, to our mind, it is worth starting a business cooperation with startups from Lublin.
Young working environment as a basis for dynamic development
As mentioned before, a startup is often a way of finding an idea for oneself. Around 40 percent of such companies are set up by young people who have little or no professional experience. In this way, people under 35 years of age are prevailing in such businesses. The data also applies to Lublin . For this reason, in startups there is no hierarchical structure characteristic of big corporations, which creates a friendly atmosphere. A small number of employees and working with peers create favourable conditions for achieving the main goal, which is the company’s development.
Commitment and hard teamwork are most important and not the superior’s commendation or acquiring next certificates from any new courses. In this way, there is no need to implement expensive HR programmes which would aim at eliminating unwanted behaviour, including the staff’s competing with each other. The employees will benefit from the development of the startup as they start to be better paid. Also, they can be a part of a successful company that has been built up from scratch. That is why many employees and owners of startups are ready to work no fixed hours. Startups give a possibility to have flexible working hours or telework. These factors make a company develop in a dynamic way.
Small initial capital and high return over investment when your company succeeds
The development of startups depends on one’s having adequate financial resources that help start and run a business. Although the majority of Polish startups are going to develop exclusively from both their founders’ own financing sources and sales revenue, about 30 percent of them are going to reach for external funding. These financing sources include: non-repayable EU subsidies, seed funds, capital from business angels and venture capital funds.
These 30 percent certainly involve the Lublin-based startups as almost the majority of them have taken advantage of external funds as the main financing sources and are still interested in this form of support. This means that the local trend is quite different from the one in other parts of Poland. In short, companies from Lublin still need money and the lack of financing sources can bring their dynamic development to a halt, which would mean a farewell to big dreams. Investors can easily afford to invest some PLN 100,000 – 200,000 as they invest considerably larger amounts of money in their day-to-day operating activities. Such a cash injection can prove extremely helpful for the local startups. Although it is common knowledge that supporting this kind of companies still involves high risk, a similarly high ROI will compensate for the hazards if the startup succeeds. According to the above-mentioned report, many startups do not prove to be successful and collapse after a short period of time. However, almost every third startup has an annual revenue growth by over 50 percent, and every fifth – by over 100 percent. This might be quite a tempting reason for external investors. It is also worth noting that the wide accessibility of EU funds in the Lublin region substantially facilitates the cooperation between local investors and startups – apart from the Regional Operational Programme and the Operational Programme of Eastern Poland Development, there is also more support on the regional level as compared with other voivodeships.
Investors’ direct influence on investments
The fact that Lublin startups need external financing sources results in better cooperation conditions with external entities. As the investors provide their capital, it is them who have a considerable influence on startup managers. Thus, being more experienced, the investors can control their investments in a direct way. Paradoxically, this also prevents the novice entrepreneurs from making mistakes that could ruin their newly created companies. In this respect, the benefits are mutual. For the startup creators, this kind of cooperation means that the company’s activity is financed in the early phase. For the investors, it means not only short-term profits, but also the possibility to control the startup, but of course to a certain degree. In this way, they know that the capital invested in the startup is safe. The eagerness of Lublin-based startups to cooperate is even more valuable as only one in ten startups that operate in Poland has used the help of a technology park, an accelerator, or other mentoring forms.
Know-how transfer as the chief asset of Lublin startups
An investor’s engagement in a particular project is in most cases connected with the transfer of know-how. Startup creators often do not have adequate experience. While they have a good business idea and the so-called explicit knowledge, they lack practical skills. These are the skills that investors have. Most often, they are experienced entrepreneurs who deal in large sums of money. Moreover, business angels are usually retired entrepreneurs who are interested in supporting new investments. They are eager to do this not only for financial reasons. Thus, the mutual cooperation between the two entities – an investor and a startup founder – is not only on the business level. There is also a transfer of know-how, which is an exchange of specific knowledge and skills. This type of business relationship brings considerable profits to the both parties, which has been confirmed by one of the main investors from Lublin cooperating with the LPNT. However, the transfer of know-how is a process that occurs not only within a startup-investor relationship. Knowledge can, and to our mind, should be transferred between the startup founders and the academia. Unfortunately, only one in four Polish startups cooperate with scientists and one in six has a founder who is involved in academic work. In this respect, Lublin comes out exceptionally well. Almost all entities that are related to the Lublin Science and Technology Park regularly cooperate with science or directly take advantage of its achievements during the implementation phase. Adam Kuzdraliński, Sc.D., a biotechnology professional who works at the University of Life Sciences in Lublin is an excellent example of such synergy. This outstanding scientist brings science and business together and is the president of the management board of the companies Vitagenum and Nexbio, the two startups whose focus is on human genetics as well as micro-organism, plant and animal genetics respectively. At this point it should be emphasised that Lublin and its closer surroundings create a natural business ecosystem for the development of startups that operate in sectors other than ICT. Bio-economy is one of the most thriving smart specialisations of the region. Taking into consideration the above-mentioned fact as well as the direct neighbourhood of the numerous academic centres and the said good accessibility of external financing sources, including especially EU subsidies, it should be noted that the transfer of know-how is the strength of the Lublin-based startups. This is a good piece of news because not only do startups related to academic centres use external financing sources more often, but they also more often provide solutions and innovations with a global reach.
Readiness to cooperate internationally as the key to success
More than half of Polish startups are exporters. However, only a small percentage of them take advantage of international financing sources. For this reason, it can be stated that the companies are open to international cooperation, but it is still one-sided. The startup landscape in Lublin is quite different. To all intents and purposes, only isolated companies export their products and/or services abroad, with most of them offering Web services. As a result, it is impossible to determine what services are exported exactly because the Internet is a network with a global reach. However, as it results from a survey conducted by the authors of this paper, the majority of the Lublin startups are ready to cooperate internationally. This eagerness is triggered by the fact that such startups have considerably better possibilities of development, there is a faster return over investment, and their chance to survive is much bigger. The business internationalisation is important for them also because of the products that they offer as about half of them claim that their solutions are innovative on a global scale, and so do other startups from the whole of Poland. The companies also expect the knowledge of how to start such a cooperation. They would be glad to use external financing sources in order to lower the risk of failure and not to lose their own capital. To sum up, Lublin startups are motivated to cooperate with international entities, but they lack the know-how and best practices. At the same time, new possibilities of a close cooperation with external entities and investors arise. Similarly important is the accessibility of the external financing of such businesses from the Regional Operational Programme for the Lublin Voivodship and the Operational Programme of Eastern Poland Development.
1. A. Skala, E. Kruczkowska, M.A. Olczak, Polskie Startupy. Raport 2015., Fundacja Startup Poland, Warszawa 2015, s. 10.
3. R. Horbaczewski, Siła pomysłów, Rzeczpospolita online, Warszawa 12.11.2015.
4. A. Skala, E. Kruczkowska, M.A. Olczak, Polskie Startupy. Raport 2015., Fundacja Startup Poland, Warszawa 2015, s. 7.
5. Badania własne.
6. A. Skala, E. Kruczkowska, M.A. Olczak, Polskie Startupy. Raport 2015., Fundacja Startup Poland, Warszawa 2015, s. 23-24.
7. Badania własne.
8. A. Skala, E. Kruczkowska, M.A. Olczak, Polskie Startupy. Raport 2015., Fundacja Startup Poland, Warszawa 2015, s. 26.
9. LPNT – Lubelski Park Naukowo-Technologiczny.
10. A. Skala, E. Kruczkowska, M.A. Olczak, Polskie Startupy. Raport 2015., Fundacja Startup Poland, Warszawa 2015, s. 28-30.
11. Tamże, s. 6.
12. Tamże, s 36-40.
– is an entrepreneur and the owner of the Lublin Academy of Development (Lubelska Akademia Rozwoju). He coordinates investment, infrastructure and research projects, is an assessing expert of the Regional Operational Programme for the Lublin Voivodship, and works in the field of consulting and Smart City technologies.
– is a psychologist and a graduate of the John Paul II Catholic University of Lublin. He worked in the Department of Emotion and Motivation Psychology of the Catholic University of Lublin and has been regularly cooperating with the Lublin Academy of Development. His interests include business psychology and management.