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How can asking questions to the customer revolutionize your marketing and sales efforts?

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As part of the ScaleUP Academy Library, we present you another literature item.

In the era of hyperinformation and digital acceleration, the customer has unlimited sources of knowledge about products and services at their fingertips. What they find about your company online has a greater impact on their purchasing decisions than ever before. That is why it is worth getting to know the TAYA (They Ask You Answer) method, presented by Marcus Sheridan in his book "What does the customer want to know? How to create content in inbound marketing and sales that answers your audience's questions".

In today's world, where the consumer has a huge amount of information, the role of marketing and sales has changed dramatically. Traditional sales methods are no longer effective, and the key to success is understanding the customer's needs and problems. In his book What Does a Customer Want to Know?, Marcus Sheridan presents the TAYA method, which is based on a simple premise: listen to what customers are asking and then answer honestly.

The TAYA method is not only a marketing strategy, but a whole philosophy of running a business. It is based on two main assumptions: customer education and honest communication. By creating and publishing content that answers customer questions and problems, a company becomes an authority in its industry. By educating customers and answering their questions, trust and loyalty are built, which in turn leads to increased sales and conversions.

Creating valuable content that educates customers about products and services is crucial in TAYA's strategy. Customers are looking for information before making a purchase decision, so it is worth providing them with comprehensive answers to their questions. The line between marketing and sales departments is becoming more and more blurred. Currently, marketing has a greater impact on customers' purchasing decisions than traditional sales activities. Therefore, it is crucial that both departments speak with the same voice and focus on building authentic relationships with customers.

In Marcus Sheridan's book, we will find numerous practical examples of companies that have successfully applied the TAYA method and have been successful. Companies such as Zappos, CarMax and River Pool & Spas confirm that listening to the customer and answering their questions honestly can be the key to business success.

The book will be available to you in the coming days. We believe that this book will be a kind of handbook for building relationships with customers and will allow you to effectively use the tools that the author also mentions in his book.

We wish you a pleasant reading and a lot of inspiration!

ScaleUP Academy, Library

Read more …How can asking questions to the customer revolutionize your marketing and sales efforts?

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3D – advisors debate about subsidies

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  • Main paragraph: We present a short recording of the debate of Grant Advisors, which took place as part of the conference organized by WP2 Investments in April 2023 at the Marriott Hotel. The debate was attended by Karolina Jóźwik from Crido, Tomasz Skalski from Euro Invest Group and Piotr Wanicki from Elpartners. The debate was moderated by Mariusz Bagan from WP2 Investments.

We present a short recording of the debate of Grant Advisors, which took place as part of the conference organized by WP2 Investments in April 2023 at the Marriott Hotel. The debate was attended by Karolina Jóźwik from Crido, Tomasz Skalski from Euro Invest Group and Piotr Wanicki from Elpartners. The debate was moderated by Mariusz Bagan from WP2 Investments.

Mariusz Bagan: We are interested in where our companies can obtain funding for business development and scaling under subsidy programs? We have completed a special webinar on the SMART path in the FENG Program, so we assume that there is some knowledge on this subject, so at the beginning I will ask what else besides SMART FENG?

Karolina Jóźwik: In addition to FENG, it is also worth looking towards ROPs, i.e. Regional Operational Programmes, where funding is slightly lower, with a lower allocation, but still attractive. There, we can also apply for funding for e.g. R+D projects, but here it is no longer necessary to prove innovation at the supranational level - depending on the rules of a specific competition, an innovation on the scale of an enterprise or a country is sufficient, hence sometimes it is simply easier to get such financing under the ROP.

Piotr Wanicki: Sometimes it is also the case that slightly different accents are placed in FENG and slightly different in the CHR. In the Regional Operational Programs, more attention is paid to formal issues, project financing, i.e. how the own contribution will be ensured. For example, it may be important whether someone has a loan promise or a loan agreement. However, when it comes to the SMART path, the main emphasis here is on innovation and the description of research and development work.

Mariusz Bagan: So if we know that we do not have an innovative project, it is worth checking the ROP instead of SMART FENG. What else? What other program can also be a good solution then?

Karolina Jóźwik: Eastern Poland Programme. It is a program narrowed down to a few voivodeships on the eastern wall, from Podlasie, Warmia, Masuria and the Lublin region to Podkarpacie and Świętokrzyskie. Due to the fact that these areas are still below, let's say, this EU level of development, they have an additional fund created for such activities. 

Tomasz Skalski: Eastern Poland is a very tempting subsidy prospect, but it is worth remembering that there are also sometimes restrictions for companies from outside the region in competitions, e.g. as regards the obligation to have a registered office or branch on the eastern wall. However, we should remember that this is a requirement, not an obstacle, especially when we think in the context of the entire EU perspective for 2021-2027, and not just the next year.

Piotr Wanicki: In addition, in the new perspective, there is a new instrument related to the Just Transition Fund for former post-mining areas with a separate allocation to which significant funds will be directed for research and development projects, for green energy and for increasing competitiveness. This is mainly about the Silesian, Łódź, Greater Poland, Lesser Poland and Lower Silesian Voivodeships, with particular emphasis on the Wałbrzych subregion or the Bełchatów subregion in the Łódź Voivodeship.

Mariusz Bagan: If we were to sum up, what projects and which sectors have the best chances in the new EU programmes?

Piotr Wanicki: All of them. If someone has a good product, has an innovative solution, wants to scale it, or just wants to develop it. There are almost no exclusions, unless it's tobacco and alcohol and things like that, so these types of projects are out of the question. However, there is no point in looking through the prism of the industry. When it comes to your industries in these three areas in which you operate, there are fintech, digital & tech, and renewable energy sources, there are no contraindications.

Tomasz Skalski: In previous programs, there was a very strong emphasis on a new, innovative or fundamentally changed product. However, according to the new Oslo textbook, an innovative process is also important. And this is a big change, because at the moment we are preparing several applications, for example, we do not have very innovative products, but the technological process of producing these products and changes in the production process result in a specific reduction in energy consumption, a reduction in costs that were not treated as innovation in the past. And at this point, they have already been.

Mariusz Bagan: Speaking of energy, what about greentech companies and companies from the renewable energy sector? The FENIKS Program was supposed to be dedicated to them, which will start only in the autumn of this year, but maybe there are ways to process them as part of already open Programs such as FENG or ROP?

Tomasz Skalski: I have 2 or 3 biogas plants that complement large projects and they are responsible for managing 100% of waste. The electricity produced from this waste stays in the company, and the heat is sold outside, and we have a response from the Implementing Authority that in this case the implementation module in the SMART path in the FENG Program and the greening module have been recognized as qualified. This is the best proof that with proper gymnastics, it is possible to build a biogas plant already in the FENG program, as an extension of the existing production plant. However, it is true that before we started writing the application and accepting this contract, we first sent over 20 inquiries to the Institution implementing this program.

Piotr Wanicki: When it comes to the circular economy, it is still potentially possible to finance from, for example, Eastern Polish Poland, but only for those entities that will implement the project there, because in this case it is not important where you have your headquarters, where you have a branch, but the place where the project is implemented is important.

Mariusz Bagan: We started with energy companies and biogas plants, and going further through the industries in our portfolio, the question is, is there any program dedicated to fintechs? FERC, or European Funds for Digital Development, something that should be a natural direction for this sector at the beginning, is in fact not?

Tomasz Skalski: What is in the programme assumptions often flattens out in the competition regulations. This was the case with robo grants. There were supposed to be robo grants, and then suddenly the ministry made a snap and made robo grants, but only for the furniture industry. So at the moment, there is nothing dedicated specifically to fintechs, but there are other publicly available programs where any fintech or non-fintech company can submit applications.

Mariusz Bagan: We already know what opportunities we have in individual sectors in 2023, and what can we count on in 2024?

Tomasz Skalski: Most of the programs mentioned above will also have their editions in 2024. On the other hand, with the most popular SMART path in the FENG program, the idea of the Leading Institutions was to close the SMART path by June 30, 2023. The next round is not expected to start until January 2024. This year, until August, there will only be projects submitted in consortia.

Piotr Wanicki: There will also be an edition of the SMART path at FENG until the end of August 2023 for accessibility, i.e. meeting the needs of, for example, excluded people with disabilities. On the other hand, the SMART path in 2024 will operate on different principles than these 2 current rounds. I am convinced of that. Because the current deal for the ministry is a kind of pilot project. There has never been such a program in a modular form before. They also learn. 

Tomasz Skalski: It may also be that a lot of funds will be contracted, and then they may simply return to the pool. Because, for example, someone can plan a very comprehensive project. First, the R+D module of developing an innovative solution. In the next module, implementing innovations, building a factory, purchasing fixed assets, greening and so on. However, it will turn out after the B+R module after the first two stages that the project does not make sense, because we are not able to achieve the result and all other modules lose their meaning. Therefore, when it comes to dates and allocations in individual rounds, I wouldn't get too attached. However, what I can recommend, I can only recommend that since we have a detailed description of the priority axes and basic information on what activities are to be supported and what the funds are to be used for, it is worth considering simply in terms of needs. You need to map the needs in the company and pre-adjust the sources of financing. Then, when the schedule appears and the regulations appear, confirm these assumptions and then apply for it together with the subsidy company.

Mariusz Bagan: Speaking of needs, what if the company needs internationalization? Are there special subsidy programs that will help us scale our business internationally?

Piotr Wanicki: In October 2023, a program  will be announced, similar to what Go to Brand was before. That is, related to internationalization with the possibility of obtaining funding for trips, fairs, conferences or trade missions. Until now, it looked like this: Go to Brand was settled as a lump sum and the level of eligible costs could not exceed EUR 100,000. However, under the new guidelines, this level has increased to EUR 200,000. 

Mariusz Bagan: 200,000 euros is not a dizzying sum, but it should be enough for hotels, flights, conferences and fairs; ) And seriously, of course this is also something, because it is almost PLN 1 million. To sum up - internationalization can be done either as part of the successor to the Go to Brand Program you mentioned, or as part of the optional module in the SMART path. How do they differ?

Piotr Wanicki: The main difference is that in the SMART path you cannot have more than 20% of the eligible costs of the B+R module. The advantage here, however, is that you can choose any events, fairs, economic missions, etc. On the other hand, in the new Go to Brand, there will be industry promotion programs designated by the ministry, i.e. specific events will be indicated in advance and only after meeting a certain minimum from the list, they can be supplemented with additional trips. It can be done and it is not that difficult.

Mariusz Bagan: In the context of subsidies, entrepreneurs are usually interested in 3 things: how much can we get, how much do we have to put in ourselves, and how long does it all take?

Karolina Jóźwik: I'll tell you like a real advisor, it depends. We can assume that on average the subsidy is between 50 and 60%. So the own contribution is then at the level of 40-50%. Sometimes in various subsidy programs there may be some additional restrictions, or bonuses and these rules may be different, and for example, then the own contribution may be at the level of up to 30%. However, answering the question of how much we can get, again on average, it can be assumed that most often these are amounts between PLN 2 and 5 million.

Mariusz Bagan: And what about the time needed for the whole process?

Karolina Jóźwik: As far as time is concerned, it must be assumed that writing an application and gathering the necessary documentation takes at least 5-6 weeks of intensive work. After that, the Managing Institution has a certain period of time to evaluate the application, in accordance with the rules of a given competition - in the case of the SMART path, it is up to 100 days for consideration, although in practice it is more likely to be up to 120 days, i.e. about 4 months. Then plus-minus a month to complete the documents and sign the contract when the application is approved.

Mariusz Bagan: Ok, so we know how much plus or minus we can get, we know how much we need for our own contribution, we know how long it all takes, we know what programs we have at our disposal this year and next year, so now let's answer the questions that are obvious to you as experts, but are not so obvious to others. Something that is often said during working meetings with companies: if someone has applied for funding, can they apply again?

Karolina Jóźwik: There is a rule that the project that is under review cannot be submitted again. It must wait for the decision.

Piotr Wanicki: Yes, the same project cannot be the subject of a different assessment, but if a company has an idea for 3 projects, it can even submit 3 projects to the same Programme. Unless there is a different provision in the regulations or in the criteria of the Program.

Mariusz Bagan: Another question that is often asked: is it possible to submit the same application to several Programmes? And immediately the second question that often arises: is there any Program that finances 100% of the project value without own contribution?

Tomasz Skalski: Of course, but you have to be a scientific and research unit, in addition to being in conjunction with a consortium ;)

Piotr Wanicki: And it is a scientific unit that does not run but implements a project as part of a non-economic activity.

Tomasz Skalski: Yes, that's when it's 100% the most ;) However, you can submit to several programs at the same time, but after a positive outcome of the competitions, you still have to choose only one.

Mariusz Bagan: What if we know that we have nothing today? Because there are also several such companies - we do not have an innovative solution, we do not operate on the eastern wall, we have no idea. The question is, where to start, how to look for this innovation, how to understand it?

Tomasz Skalski: I can start because I really liked Kornel's statement. We worked together for 3 months. I saw, more and more with each meeting, that this would not result in innovation in the subsidy definition. Kornel was very persistent and tried in all possible ways. The truth is that starting from the idea you have, you need to know that it is often not innovative in understanding the world of subsidies. Something that is innovative for you in terms of business, according to the definition of the Institution running the project, is not. These are regulatory things. Hence the conclusion that first you need to understand this mode of evaluation and qualification of the application, which, it is true, is not particularly startup-like. 

Karolina Jóźwik: I agree. In our country, it is often said that writing an application is the least of the problems. The same applies to the financial modeling of this project. The hardest part is to pick out this innovation. This is a large part of the conceptual work.

Piotr Wanicki: It's true, not every innovative solution that you think is innovative is research and development work in the sense of grants. Another thing is to determine how to describe these research and development works. So that they simply meet the relevant definitions that are set out in the competition, i.e. in fact, that they are an answer at the level of technological readiness required in the documentation. The most difficult thing is to define this innovation and parameterize it, i.e. to indicate specifically the numerical values with which you are able to refer to the competition, that this solution is indeed x times better, faster, more qualitative. Because we can always write that our solution will be better, but the expert will ask, but what does better mean for you? In what sense can it be faster? Or whether an acceleration of 5 seconds in a given process will indicate an innovative solution and some special competitive advantage for which there is market demand. And this is also sometimes very difficult to define, but it can be done.

Mariusz Bagan: What else is important? What else should you pay attention to in the entire grant process, not just when writing an application?

Piotr Wanicki: It is very important to also have experience in accounting when writing an application. Because this administrative settlement is laborious, but it is not so burdensome if you know the mechanisms and keep track of deadlines. On the other hand, settling payrolls and the financial side is already more difficult, and the consequences are more serious. There are many regulations that regulate the method of determining the eligibility of expenditures, so it is also important to have experience in managing and settling such a project.

Mariusz Bagan: Agnieszka from Natural Antibody said exactly the same thing, that it is best to delegate the settlement of the project to a subsidy company, because doing it in-house takes much more time. In addition, the risk of formal errors is much greater and hundreds of thousands of zlotys are lost, as Krzysztof from Verestro told us in his example. Therefore, hearing these voices from our companies, it is also worth asking not only about the settlement of the project, but also about its management? I am thinking here about inquiries and all those other variables that take up time for our companies, and for you this is something that is regular work, is easier and, importantly, safer for the entire project.

Tomasz Skalski: I can't imagine carrying out a project in which entities like ours will write applications, lead to the signing of a contract, and then the applicant will settle it on their own. Of course, this is theoretically possible, but from my many years of experience, I have had maybe one or two such cases. And it's not about the fact that we scare or encourage people to cooperate with us, but the number of bookkeeping that appears when managing and settling the project is simply growing. In fact, you need to have a document for everything. When it comes to settlements, for example, my billing department is much larger than the department of writing applications. And this is probably the best answer. 

Karolina Jóźwik: You just have to be able to write these reports and it really takes a lot of time, and in addition, the agreement with the Institution imposes various other requirements. Then an entity experienced in many different specific situations knows what to look for. That is why I also recommend using a qualified entity to manage the project and settle it.

Mariusz Bagan: Several times during this meeting, we talked about the National Recovery Plan, which is heavily delayed for political reasons. It is worth mentioning it at least in a few sentences, because it is a very important component of the entire subsidy budget. Out of 100 billion euros for the development of the Polish economy, 24 billion were to be from the National Recovery Plan. Without the NRP, there will be 25% less. This is a big loss, especially since 1/3 of it was supposed to be used to support entrepreneurs.

Tomasz Skalski: KPO is like Yeti. Everyone has heard of him, but no one has seen him yet. 

Piotr Wanicki: These funds are 2 years late. The Ministry has said so many times that it is just a moment away, most recently in mid-March. Now they say that it will be in May, that the work is still in progress, that he is already finishing some documents. It is clear that this will be dragged out until there is no official decision.

Mariusz Bagan: Time for questions from the audience. Welcome.

Paweł Chrzan (Wellbee): A question about innovation. I have some experience with applications and I have the impression that these programs are well written, but for the production process, e.g. for a steel mill, and less so for online. What advice do you have for writing and creating such projects or innovations? How to describe them, how to define milestones, what to compare with what? What does it mean that we are better, better than anyone, by how much, how to measure it, etc.?

Piotr Wanicki: It has to be adapted to a given project and there is no one golden mean for it. You need to carefully analyze what you really want to do and whether it has to be innovative. I think that nowadays there is no such thing that we reinvent something, but there is always some competition. You have to compare yourself to it and see what we are better at and how much better.

Paweł Chrzan (Wellbee): But we don't have access to this data from our competitors, it is often classified data.

Tomasz Skalski: That's right, and that's sometimes a real problem. Then you have to rely on the available knowledge and build arguments on it and, for example, show what you are better at by that one nanosecond, which will then translate into xxxx terabytes of data and save time, resources, etc. Or you put an engine that will consume less power on the server.

Adam Bartkiewicz (Stone): You mentioned that one company can submit several applications at the same time. And now, if there are several of these applications, does it increase the chances or just the opposite?

Tomasz Skalski: It depends. With research projects, experts may conclude that it is the same thing. That it is an artificial division of the project, that it is the same research topic. With other projects outside of B+R, such a risk is rather non-existent.

Piotr Widacki (DOV): We have a project in the field of financial intermediation, and there is an innovation somewhere on the side, so can something like this be financed from subsidies or not? And the second question about the crypto project. Are the institutions responsible for grant programs interested in this?

Piotr Wanicki: If there is innovation there, then in the SMART path, of course yes. And here it does not matter whether it is financial intermediation or another category. Cryptocurrencies are not on any banned list either. I had projects, financed from the Regional Operational Program from the Lower Silesian Voivodeship, which concerned cryptocurrencies. So it is doable. 

Tomasz Skalski: We have to look at the area of innovation and whether it will actually happen.  And whether it is a financial intermediation or an innovative drug, it does not matter anymore.

Mariusz Bagan: We close the debate with a question about finance and cryptocurrencies. I would like to thank our guests for participating in the panel and all of you for your active participation. Thank you!

ScaleUP Academy, Conference

Read more …3D – advisors debate about subsidies

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Execution is the most important thing in the strategy

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  • Main paragraph: To be successful, you need to be active - says Zbigniew Jagiełło - former long-term President of PKO BP, and currently a member of the supervisory boards of Asseco, Blik, MCI and Ekoenergetyka, who was a special guest at the conference organized by WP2 Investments.

To be successful, you need to be active - says Zbigniew Jagiełło - former long-term President of PKO BP, and currently a member of the supervisory boards of Asseco, Blik, MCI and Ekoenergetyka, who was a special guest at the conference organized by WP2 Investments.

What does life outside the bank's management board look like and is it possible to effectively fulfill yourself as an advisor?

Zbigniew Jagiełło: I was preparing for my departure from the bank and I knew what I wanted to do. For over 20 years I worked as a CEO, first at Pioneer Pekao TFI, and recently at PKO bank. Being a CEO in such companies is a 24-hour job that never ends. Especially when these modern possibilities of transferring information and decisions at a distance have come, we are "at work" all the time.  This requires a lot of self-discipline from every entrepreneur and manager today. The human brain likes crop rotation, and the homogeneity of the things we deal with is certainly not conducive to creativity, which I like very much.

Why achieve success when you can't taste it? Now I feel happier in what I do, because I went back to the times of my youth, when I wanted to be a Renaissance man, that is, to deal with various things. This curiosity about the world remained in me. I always asked questions, disagreed with authorities, tried to go my own way.

What challenges do founders of startups in the technology industry face in the face of the current economic downturn, high inflation, economic growth slowed down to virtually zero and general high uncertainty? The business model in which technology companies operate, i.e. financing development in subsequent rounds, is becoming more and more challenging. What would you say to entrepreneurs, based on your experience - what should they focus on now in this difficult period to wait out this economic downturn?

Zbigniew Jagiełło: First of all, you are lucky that there is a crisis. For a good entrepreneur or a good manager, the best situation is when things are difficult, because companies that do not see any risks, proverbially push the pedal to the metal and drive 300 km/h are out of the game... and they fly out at the first turn. When everyone has easy access to money, when there is a large increase in GDP, the market grows on its own, there are no problems in sight...  Now is the time for verification.

Referring to what you said about difficult times, it was already mentioned today at the conference that we have 3 main types of financing - bank debt financing, venture capital financing and grants. As representatives of venture capital and banking, don't you see subsidies as competition, as something that can make entrepreneurs lazy?

Zbigniew Jagiełło: If there is money that someone gives away, you have to take it. Why? Because you will be uncompetitive in the sense that if others take this money, and this is our competitor, it is simply worse for us - and this is the first issue regarding subsidies. The second one - concerning debt and equity. For a large part of my work in a bank, I was surprised when I talked to entrepreneurs, because they wanted to receive equity in the price of debt. They did not understand this difference, and I still remember a man who applied for a loan "which does not have to be repaid". I asked where I could get one, because I would be happy to take one too. Inevitably, every credit institution wants to repay the principal, interest and make it highly probable to repay through a financial plan. At the same time, it is best to protect yourself even more. I maintain the thesis that if there is money in the form of various types of grants, then you should simply take it and demand more. It seems that this may simply be a wise complement to other forms of financing.

What does the financing of young companies that have no revenues look like? Do companies that come to large banks receive financing from them or do they rather leave empty-handed?

Zbigniew Jagiełło: As I said, if someone wants to borrow money, they have to make this repayment more probable by showing the business model, customers, etc., and only then can they get a loan. On the other hand, you can become a bank customer by opening a current account where you generate various types of flows. Only later, when these flows appear on our account, we show the so-called financial history of the company.

How to make such an institution as a large bank enter into cooperation with a startup?

Zbigniew Jagiełło: We have a big change today, which probably began about 10 years ago. I was at PKO BP at the time, we were looking for ways to stimulate the market, we discussed various ideas with employees. One of them was to use a program created by MIT (Massachusetts Institute of Technology), which is the "most important technical university" in the world. As PKO BP, we invited them to cooperate to create an acceleration program for Polish small companies. This is how we started to stimulate this type of activity. From the bank's point of view, it was a non-profit activity, we were not able to come up with a business model, but I believe that every large company, regardless of whether in a small or large environment, has some kind of social responsibility. So, since I am a large entrepreneur in my town, I should feel responsible to create and make the social environment better than it is. Of course, this can be done in various ways. Nor is it about taking action in this direction to replace our core business. At that time, we at PKO BP came up with, among other things, this cooperation with MIT, under which we invited small companies with interesting ideas to such a laboratory. We chose such companies and tried to make a "pilot" with them, taking advantage of the size of the financial institution, and then the project could live its own life. Whether in symbiosis with our bank, with other banks, or in symbiosis with our economic environment.                                 

Today, there are many institutions of this type, some are more transparent, others less. On the other hand, in order to be successful, an entrepreneur cannot be passive, he must "sit in the front rows", he must constantly try – search, build relationships, visibility, simply be active. That is what I would expect from the young entrepreneurs I see in this Chamber.

From the point of view of banking activity, but also from the point of view of investment, and now from the perspective of a mentor, what recipe would you give to those running companies at different stages of development - should you look for synergies, shared benefits with other companies, or rather create your own model and possibly convince others to it?

Zbigniew Jagiełło: Again, I don't have one recipe. When you look at your own life, you will certainly notice that you were and are more active than your peers. This definitely distinguishes people who later achieve success in various fields. The success of your own company in which you are managers requires interpersonal skills, emotional intelligence, conversations with people and teamwork. These are not exactly things that can be learned from books. Coming to an event and entering a new community, establishing and maintaining contact in a random situation, on a train or in an elevator, in such a way that people feel positive, is certainly a valuable skill that can bring many benefits. Perhaps thanks to it, in such a random situation, you will meet someone who will prove helpful in your businesses. I have just such good experiences.

Why does no bank try to specialize in any innovative branch of the economy in order to understand these businesses and be able to become a leader in financing, for example, gaming or mobile application solutions, which can grow into really large enterprises, which can also ultimately be a large customer of the bank for many, many years.

Zbigniew Jagiełło: This is a simple asymmetry of knowledge. If we have a new industry, such as gaming, which has been around for just over 10 years, then on the side of financing institutions, (probably with a few exceptions), on the side of the credit process, there has not been a segment specializing in financing this part of the economy. Such companies did not need a loan at the beginning, but equity. This industry is an example of the fact that as Poles we have a certain skill regarding broadly understood information technologies. I am a "non-practicing IT specialist" myself, about 35 years ago I graduated in computer science and management at the Wrocław University of Science and Technology.

However, something has changed in this banking in the last year or two, there are the first banks such as BNP Paribas or Santander, which have already started to create teams to cooperate with the technology and startup industries, so this will probably change step by step, but don't banks lose out on the fact that they do not react faster?

Zbigniew Jagiełło: The most important thing is that there is competition in this area. The fact that the first banks are interested in this is not enough. It is important whether they will make money on it. I don't feel like a specialist here, I don't know what the situation in the world looks like - whether there are banks that specialize in this area - when it comes to lending. Certainly, at the level of investment banking, there are special sections dedicated to these new technologies, which are scalable and can be quickly sold, listed on the stock exchange or vice versa.

Coming back to the European Union's strategy, you are young and you do not remember the European Union's Lisbon Strategy, which has not been implemented. Why? Because what is the most important thing in strategy? Execution! I will recommend you something that I invented a few years ago - "Jagiełło's product". What does it consist of? We multiply "strategy times execution". If we describe the strategy on a scale of one to ten, and the execution also on a scale of one to ten, we can have a maximum of 100 points. During execution, we must remember whether our intellectual and material resources can allow us to implement the strategy. And it is not always the case that a very good strategy can be implemented by the assets we have. It may turn out that we are unprepared to implement such a good strategy and we simply have to simplify it to make it feasible in our conditions. Because 10 X 1 is 10 and 5 X 5 is 25. However, the most important thing is execution. So what if the first factor is well prepared, if multiplication by zero is always zero. Therefore, each strategy should be prepared in terms of whether we can actually implement it.

From the perspective of the strategy, we will ask for predictions regarding the economic situation in such a horizon as one, two, three, because this is the maximum period in which startups are able to plan anything, taking into account interest rates, general economic growth or the availability of capital?

Zbigniew Jagiełło: We have elections at the end of this year, which is very important from the point of view of the Polish economy. This means that any talk about fighting inflation is pointless. No government, neither the current one nor any other government that will govern after the autumn elections, is able to change what is the actual state of affairs today in the short term. We have populist governments, spending related to social factors is enormous, the sooner we understand that this is not good for Poland, the better. There will also be a large impact of the external factor, especially in the long term - how and when the war in Ukraine will end, which is paradoxically both a threat and an opportunity for Poland, because we will have a chance to be a logistics and technological hub during the reconstruction of Ukraine if it ends up with an attempt to build a modern economy - just like Germany after World War II.

From an inflationary perspective, is there hope that the system of communicating vessels and a more responsible fiscal policy of the European Union, Germany and other large EU countries is somehow able to save us a little?

Zbigniew Jagiełło: No:) I would like to treat it more broadly. From the point of view of the Polish economy, we should operate in the area where decisions on climate changes and regulations are made. Let's do it at the right pace, not too fast, so as not to harm ourselves. Let's not be top performers - expensively and without impact, but let's also not act too slowly, so that we are not perceived as those who do not want to care about the climate. Let's also approach the topic personally - each of us should, to the best of our ability, contribute to the improvement in the environment in which we operate, when it comes to these climate issues or, more broadly, in the area of circular economy.

Recently, I was invited to a conference on financing decarbonization in Poland. And I read the document "Polish Energy Programme 2040". Nothing came out of it in terms of strategy. It states that PLN 750 billion will be spent on the production of electricity of various types, including renewable energy, with a nuclear component. A huge amount! However, in the coming years it will be 50 billion, and the rest only at the end of the entire plan. And this is, unfortunately, our Polish approach - today we don't have to do anything, tomorrow we will start thinking, and when the deadline is approaching, we will start nervously "running".

One more question in the area of managing the motivation of people and the team. You have a lot of experience in building large teams. We build smaller and larger teams in startups, and it is not always easy, especially in the area of sales motivation. What detailed advice do you have on how to motivate the team, especially salespeople, to work a little harder?

Zbigniew Jagiełło: Thank you for this question. I started my professional career with sales. I had to overcome my inner shame of opening up to another person. Of course, I'm not talking about the elements of conversation that are practiced in sales teams - allowing you to recognize the customer's needs and so on, but about opening up to start talking to a human. I was an explosive extrovert at the time. I had to learn to be calm, to listen to the other side. Even 20 years ago, when training bank employees, I used this metaphor: when a customer comes, you have to let him talk, because at home no one listens to him, at work no one listens to him, at least at the bank someone should listen to him. And it was a message to sellers not to be just senders. When we have small teams, such as five or ten people, the leaders have the need for them to decide about everything. However, you need to give your colleagues a chance to say their own line. Do not start the meeting with "I". When building teams, remember that people want to participate in decisions, they expect the right to their opinion, to have a voice. Give them a chance to make decisions, notice them, praise them.

I have already mentioned the emotional intelligence that characterizes you. It is needed to "read people" - what they need, what can be helped for them. We are social creatures, we need the attention of others. It is worth taking this into account when thinking about motivating teams.

Where would we be as entrepreneurs and where would our country be if there were no subsidies? Where will we be when these subsidies are no longer available, i.e. after 2027, when we will cease to be a beneficiary and start being a net payer. Where will the economy be then, where will we be then as entrepreneurs?

Zbigniew Jagiełło: We compete with each other in various ways. As I said, when subsidies are available, you have to use them. If we do not take them, we act to the detriment of our own company. We are part of the European Union, within which national economies also compete with each other. Then there is competition between economic blocs - the European Union, the United States, China. So, Poland must also fight for its interest – it must fight and strive for subsidies, taking no less than others. You always have to think in such categories. 

Referring to the question that we will be a net contributor in the EU, I would like to ask you who is in favor of us being net contributors in the EU? Because I don't mind! 😊 "We should remember that those whose GDP is higher than average pay. Politicians also do not understand this mechanism, I had the opportunity to find out about it.

Przemysław Kamiński, SLS

The debate took place on April 19, 2023 in Warsaw, during a conference on new subsidy programs, organized by WP2 Investments for portfolio companies.

Zbigniew Jagiełło - a legend of Polish banking, the creator of the market position and transformation of PKO BP. For 2 years after leaving the bank, he has been supporting the strategic largest Polish companies by sitting on the supervisory boards of companies such as Asseco, MCI, Blik and Ekoenergetyka. Recently, he has also been actively involved in supporting the Ukrainian banking system. He also operates on the startup market, where he supports companies as a Business Angel. One of his investments is Sportigio, in which WP2 Investments is also a co-investor.

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Don't waste your time on the Vistula, but push into the world!

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  • Main paragraph: Scaling technology on the Polish market is like squeezing water out of stone. Don't do it! – warns Marcin Hejka, Partner at OTB Ventures.

Scaling technology on the Polish market is like squeezing water out of stone. Don't do it! – warns Marcin Hejka, Partner at OTB Ventures.

The healthiest for success is the revenue generated by a given startup - sums up Andrzej Różycki, Managing Partner of Tar Heel Capital - You think too much about exits, rounds, valuations, and I have already seen many companies that have "drowned" in the money received from investors.

We invite you to read excerpts from a unique debate with the participation of two giants of the Polish venture capital market, managing funds with a capitalization of over one billion zlotys each. The debate was held as part of the December conference "International Business Scaling" - organized in Warsaw by WP2 Investments.

What is it like with the Polish market as a starting point for domestic startups? Is the fact that most of them are starting to develop from the domestic backyard an opportunity or more of a trap for these businesses?

Andrzej Różycki: It seems to me that this is always a very difficult, somewhat perverse question, because almost everyone wants to scale their business internationally. And first of all - not every business should scale internationally. Secondly - this business cannot always be scaled internationally. Thirdly, there are businesses, truly technological ones, that do not need international scaling. They create a technology that has been universal in the global perspective from the very beginning. In fact, from my perspective, these businesses should be divided into those that make real technology, which is in most cases universal. Of course, it fits into some regulatory framework and market and customary situations, and so, for example, Asians use the Internet differently than Europeans or Americans. This is where the example of Allegro comes to mind, which has been very successful in Poland and has recently written off 2.2 billion from its acquisition in the Czech Republic. It turns out that international scaling in this case turned out to be a complete distraction for business and value. To sum up, not every business, not every board is suitable for international scaling and actually not everyone should do it.

Marcin Hejka: I will only refer to the market of these real technologies, I do not know any other market and I am not interested in other investments. To clarify - Allegro is not technology, an app store is not technology, just like a scooter with an app or delivering purchases is not technology either. True technology is by definition global, or... is not technology. 

Coming back to the question, when it comes to the market of real technologies, their development on the Polish market does not make any sense. If someone has real technology and the idea that it will scale in Poland comes to mind, they should consider a cold shower or a long walk. It won't make sense. If we look at any real technology market, we will see that Poland and the entire region are the periphery of the periphery. Trying to develop anything here will only be a waste of time. You must not even try!

Why?

Marcin Hejka: First of all, if we look at the scale, where are the markets for technology consumption? Not in Poland! Let's take a closer look at a simple market, let's say enterprise software. 45 per cent of the global market in this area is one country - the United States. Western Europe accounts for about 30 per cent, Japan less than 10 per cent and the rest of the world accounts for about 15-20 per cent of the global market, including China, India, Russia, Africa and Latin America. The same principle applies to any real technology market. I would say more, the newer and younger the market, the greater the part of this market will be the United States. So developing a technology business on the Polish market is an attempt to squeeze water out of a stone. Why? Because the Polish market is not only damn small, but also quite poor, and the enterprise market consists largely of state-owned companies that will never be early adapters, because it is beyond their perception, or it is a market of foreign companies and their Polish branches will never be a center of innovation, because there technologies will come from above.  

What's more, even if some brilliant start-up comes up with a brilliant solution that will win over the 5 largest corporations as customers, it will still be worth nothing. Because having companies such as Azoty, Orlen or PKP as customers does not make any sense in international expansion, because as a reference it will have zero value.

Is Poland, by definition, also a bad place to test a technological product?

 Marcin Hejka: Yes. In general, I know American corporations quite well and unfortunately I have heard a little about how it works in Poland. The mentality of an employee of a foreign corporation operating in Poland or a Polish corporation is such that they have an advantage and such a corporation crawls and squeezes these startups. Trying to test with large companies in Poland, doing early implementations is therefore often pointless for startups. Even if you check that something works, it will not matter to anyone, it will be of no use later, and it will only be a way through torment. It will be a torture inflicted on oneself.

Why does it look different in the States?

Marcin Hejka: American corporations have a completely different mentality. What's more, they have it written in their DNA as a way of acting. It is completely normal there that we work with startups, that we try to help startups, and it is completely normal that such a corporation, product departments, business units have annual targets written down in their company, that they have to test 10, 15, 20 startup solutions in a given year, check if they work and help them at the same time. There is a completely different way of thinking, not that since I am a big company, I have to squeeze each of my suppliers to the last drop. The mentality there is rather this: "I have a budget for it, we will try whether it works out or not, and if it does, we will do a larger implementation, we will be a reference, we will pay fairly and we will not overdo it". This is ecosystem thinking.

American corporations understand that they, as corporations, are not innovative in themselves, and if they want to be competitive in this respect, they must cooperate with the startup market all the time. This is a bit of the other side of the coin, why most American corporations are creating their venture at this point. Because they understand that as corporations they have no chance to be innovative. American corporations have decided and praise them for the fact that making any innovation in a corporation will not work, because if a corporation gets down to something and starts doing something in accordance with procedures, etc., it will suddenly turn out that it costs 10 times as much as expected, and takes 10 times longer. And in the end, it is not created at all. Or it arises in the form of what was not intended at all.

If they understand that they are not able to do it, it is natural that they have to work with the startup environment, they have people to do it, it is in their strategy and they have budgets for it. And this is the mentality that allows you to scale up the easiest way in the US.

It is a nonsense and harmful myth that it is easiest to scale on a local market such as the Polish market.

Today, we are in an era of deep digitization. The question is, what defines business scaling today?

Andrzej Różycki: If you have technology in the way Marcin said, then it is global simply by definition. On the other hand, among startups, 95 percent of businesses, if not more, are businesses that are not purely technological businesses. Of course, this definition of technology is changing, of course. Something could have been a technology in the past, but today it is a complete commodity. In their case, we are talking about winning the market, customers, marketing, operational excellence. And not about technology development. Now, depending on what kind of company it is, the question is, is the market on which you operate sufficient and good? You have to ask yourself: why are you building your startup - some people do it for money, others do it for glory and others for something else. If you do it for money, you have to think about who you will sell it to one day? It is often the case, even sometimes from the point of view of a strategic investor, that if you are present on 5 markets with a low market share, it may be better if you were on 1 market, but had a large market share. So as if this does not mean that scaling is unambiguously good and always makes unambiguous sense.

Marcin Hejka: I think that a very good example is Israel, where there is practically no local market for technology consumption at all or it is so small that it does not make sense. The situation is similar in Poland. Only we live in the illusion that this is not the case with us at all. How does it work in Israel? In such a way that when a company is established and has two founders, on the first day one of them gets on a plane and flies to the States and starts talking to customers there, often selling on the basis of "trying to sell shit that doesn't exist". He tries to talk to these enterpis, push something on them, and at the same time try to build it. And this model works, and the engineering talent there is no better than in Poland.

Most of these engineering brains in Israel came from our part of the world. In fact, it could be said that Israel and Eastern Europe have similar technical DNA. And what are the results of the global from day one approach? If we compare the scale, the entire Polish VC market, with annual records combined with champagne opening, is roughly 10 weeks of VC market in Israel per year. When it comes to exits, it's even less and it shows a bit the way and effectiveness of that model.

What can be the "driver" of the exit?

Marcin Hejka: There are 3 exit drivers. There are only 3 reasons why a company can be bought, and these are the so-called 3Ts, i.e. Traction, Technology, or Team. Traction is market share and revenue - the buyer simply buys revenue or market share. This is often applicable and crucial in private equity transactions. From the point of view of technology companies, it is probably a few percent of the weight in exits, but probably more than 90 percent are the remaining T's, and the absolute majority is the value of the technology. Where is a company bought not because it has revenue, not because it has a market share, but because it has an important technological element that fits into some larger puzzle of a potential buyer, i.e. let's say, for example, a security software company that offers an antivirus and has 100 million customers, buys a startup with an additional feature, e.g. whether Internet links are safe, or we store some passwords additionally, and this is a simple decision - time to market and that,  what matters to them, not what revenues the purchased company has. What's more important is what revenue I, as a buyer, will have when I buy it, because if I add this element as a premium option for my existing subscribers and I charge $5 more for the top version next year, then if half of my customers buy it, then I will earn an additional $250 million. And that is why these multipliers on technological exits are often so high.

Andrzej Różycki: I look at it from a slightly different perspective. We had a company in our portfolio called RemoteMyApp, which was bought by INTEL a year ago. What did the company do? It streamed games installed in the cloud to your computer and a lot of such solutions appeared, although this business in a nutshell did not work out for anyone big and with today's technology costs and the cost of buying IP, it has no right to be profitable. And we have been building it for years and there was a buyer who, unlike his competitors, simply did not have it yet. From an investor perspective, when we talk about development, we can find ourselves in a trap that there will be no buyer for it. 

So what needs to change in Poland?

Andrzej Różycki: In my opinion, a whole generation must roll. Today's 40-50-year-olds are the generation that in the vast majority earned and still earns money for their first apartments. And this startup volatility, the entire ecosystem, funding, etc. is so capricious that only people who enter the labor market have enough imagination and ease to do these things effectively. 

Marcin Hejka: I thought that this process was happening very quickly. We see what is needed to "surprise" it. Let's pay attention to the fact that in every country of our region, sometimes a company will come out with one shot, an example is the Romanian UiPath, which was a revelation. An example is also the Estonian Skype - it generated a group of people who knew "this is how it's done".

Andrzej Różycki: A lot of people made money on it.

Marcin Hejka: And then it started to spin and suddenly Estonia looks like Israel. And a similar situation is in Romania, a country that previously dealt with the development of software houses and bodyleasing, after they got UiPath and suddenly the rash began. The problem is that we have not seen anything like this on a similar scale before. Why is a country that is the largest in the region, which has wise people, behind others? The Czech Republic, which had more unicorns, and even Belarus or Ukraine, which already have several unicorns.

Andrzej Różycki: That's true. This cannot be explained by volatility. 

Marcin Hejka: And why? Because local startups often live under the illusion that they will scale something locally here. We have to start from the same assumption as in Estonia or Israel, that our market is too small, and we will not be able to scale anything effectively here. I am convinced that great technologies can be created in Poland and I have evidence for this. But I am also convinced that no technological business can be scaled up here. This is currently impossible.

Andrzej Różycki: Or maybe this is not a generational issue, but we need one or two successes, and we will also have a flood of such companies. This is how it worked in Romania or Estonia and today they are in a different place. 

Marcin Hejka: I once asked one of the Romanian founders: "What made you decide to start this company?" and he replied: "I know Daniel Dines, the founder of UiPath, and he's not smarter than me." And this is a great approach! Such healthy greed, healthy business hunger. Unfortunately, we have such Daniel Dines "as few as possible".

What are the non-measurable criteria that make you want to invest in a given market or company?

Marcin Hejka: We don't look at geographic markets at all, but at technology and what it looks like on the global market, which comes down to the fact that we analyze the American, Western European, Japanese-Singapore-Asian markets. Of course, we verify the technology - whether it really fits into a certain evolution of market development. So it is known that timing also matters whether a given segment has not already become a "commodity", and on the other hand, whether it is not too late for a venture investment. Contrary to appearances, a very common reason for failure in deeptech investors is that the market will not develop enough for the life of the fund to generate any exit. So it is a matter of evaluating the technology and the market. When it comes to the team, technological competences are crucial. Generally, the earlier you invest, the less you can verify objectively, so probably at the earliest stage the only thing you can do as an investor doing due diligence is to look the founder in the eye and ask yourself if "these guys are able to do it". Later, of course, when this company already has customers, revenue, product, you have to verify it, talk to customers. But there is still this element of trust - do I have it, that the founder has enough competence to fight, that he is able to effectively use our support. These are not just numbers, it is sometimes intuition and the desire to trust. 

How it all looks from the perspective of the exit - as a fund, you have to think about it when investing. How do you look for some kind of compliance, what is most important to you when planning an exit?

Marcin Hejka: In general, we do various types of exit simulations. We try to identify potential development paths, but in fact you have to implement a product plan, a plan for building a business, sometimes it helps that the company is on someone's radar, that it is mentioned in market reports, that a nice customer wins - and getting a few reference customers can make a huge difference. As long as the company is not noticed, it will never be considered a target for potential acquisition. Corporations that scan the market for potential acquisition will take the company into account when a good investor, a decent customer appears, or when the company appears in a decent report.

Andrzej Różycki: It's good to be recognizable and visible, because then it's easier to catch the timing. You never know what, when, who will need it and who will come up with the idea to buy something. But once it buys your competition, it won't buy you! The more motivated the buyer, the better the exit, the more expensive you sell. If you have two or three predefined buyers - you will probably get a worse price, but more certainly that you will get it at all. It all depends on the type of investment. Most people think too much about exit, about rounds, about valuations, about raising money and do not deal with what really builds the company's value - product management and customers. There is no better money than that generated from real revenues from core operations. They validate the business and give more actual, business value. I have already seen a lot of companies that have "drowned" in the money received from investors.

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