A COUNTRY OF DIAMONDS
Be There, has contributed to a number of projects both as advisors to investors and in a consulting capacity for tech companies; this experience has allowed us to identify the predominant barrier to investment in Poland. Contrary to popular believe, it is not the lack of knowledge, talent, subject matter expertise or awareness of the scientist’s or tech innovator’s role in business. Sometimes a shortage of capital can definitely be cited, however, what really restricts this tremendous potential is the lack of maturity of the local investors.
What we have also noticed, particularly among companies set up by scientists and academics, is a lack of experience in the arena of investment and business procedural acumen. Disproportionately large concessions are made at the start of a venture with huge portions of equity being given up in exchange for financial support. Often, these concessions are made and justified by unsubstantiated beliefs that the new shareholders will in some additional way contribute to the business (apart from simply providing funds). Additionally, failure to anticipate the next suitable course of action to be taken, in order to keep the momentum moving forward in the direction of developing a new tech, can also be seen. This lack of experience almost always translates into a failure to quickly or appropriately scale a business and thus an inability to sell faster than Western competitors.
Worse yet, when not appropriately advised, company founders often ensnare themselves in unfavorable contracts, thus losing the initial impetus that led to growth. Left to their own devices, they desperately divert their efforts to seek more funding instead of further developing their new technology. Now embroiled in what they see as a fight for survival they must focus on how to make ends meet and the noose tightens tighter and tighter while the clock keeps ticking. This leads to mounting pressure that results in further poor decision making which ultimately ends in the company either securing insufficient funding (while giving up another sizeable piece of the pie) or worse, completely going under. Now, our initially very promising proverbial diamond mine has collapsed.
How do we prevent this spiral?
Since we have plenty of unicorns and technologies that may soon be worth billions of dollars here in Poland, it is imperative that the same measuring stick be used, as is applied to companies set up on the other side of the Atlantic. As we know, each innovative firm must first beat competitors to the punch by adeptly conquer its target market. While a company’s founder is unquestionably an expert in their own domain, they should immediately ally with a business advisor or partner who can see strategically beyond the first funding round and have the necessary skills to understand the firm’s potential, plan for an appropriate exit strategy while also being able to select the right mix of investors. A seasoned legal advisor is also imperative to assist in this process to ensure that the founders’ interests are appropriately protected while remaining attuned to the nuanced dynamics of the complex investment process.
They say that money cannot buy happiness – True or False?
True! However there are some requisites for additional funding being the solution for future success. The start-up must specialize in delivering a complex solution to prevalent technological problems; or be a project involving many scientists and specialists (based on research experience spanning several decades) that is already coupled with an adept business team able to develop solutions which are practical and not readily reproducible. Or the company must, not only, be initiative, but also, linked to an industry of the future that is immuned to the regulations of a singular market or continent. Such projects, however, are in very short supply. Few start-ups can offer such a technologically irreplaceable or irreproducible product. Most often it is a unique business model offering quick ROI that constitutes a start-up’s major asset and not simply a product.
So, in most cases, THIS IS FALSE! Money can indeed buy a form of business happiness, particularly because it allows for dynamic expansion. However, investors need to remember that by buying in to this kind of an investment they really have a higher degree of risk than anticipated: this risk is not solely a financial one, as most believe. Investors must also take on the role of, “supportive older sibling,” one that does not hinder growth but also assists in identifying gaps and expertly helps to bridge them. How do we fix these blind spots in investor beliefs, by passing the reigns to a highly skilled team to create the optimal conditions for technological development and commercialization. Ensuring capital liquidity and providing support in areas of competency gaps is the only way to truly prevent market rivals from copying or replacing a unique invention. This helps keep market rivals at bay, stops the thwarting of the success of a new tech or business model while paving way for a high ROI.
Highly innovative solutions on a global scale are not rare in Poland. However, in the absence of capital and often due to the inability to “Think Big,” more often than not the Polish firms fail to compete.
Reasons to be optimistic
Seasoned business partners around a family office are able to greatly assist foreign investors see the potential of the Polish technological marketplace. Additionally, Polish entrepreneurs are also becoming more eager to invest and in turn are setting up a framework to aid in fostering the development of dynamic organizations without the aforementioned detriment to the fledgling company’s innovativeness. This also engenders an incentive for further growth.
Contributions from experts from across the ocean also continues to increase, while at the same time, more Polish entrepreneurs venture abroad. By establishing businesses outside of Poland, this new globalized breed of businesspeople boost both their visibility and access to the global investment market.
Contrary to the current trend in the start-up arena, we advise these owners to shift their focus from solely attempting to secure more grants, win more competitions etc. to engaging in more conversations with larger players (i.e.: investors). Funds are important, but finding the appropriate balance matters significantly more. At the end of the day, founders must ask these questions: What is the ideal kind of capital needed to scale while avoiding being outrun by the competition? And, how fast is it needed? The mindset must be altered from “taking anything we can get” to “what do we truly need?” Instead of settling for any capital, you must look for true partners who will help secure not only the money needed, but also all the other resources to accomplish your dreams. You must learn what to do to become more attractive to investors and choose the best possible path from point A to point B, not just any path from A to B. Do not let yourself be pushed into a corner; in that position, it is extremely hard to sustain the enthusiasm that motivated your decision to move your business forward.
By: Dorota Sajewicz, CEO/co-founder of BE THERE company representing investors and firms during capital acquisition and sale/purchase transactions.