The Evolution of the Venture Capital Industry in Transition Economies: The Case of Poland

Abstract

This article focuses on the evolution of the venture capital industry in emerging markets by examining the Polish experience between 1990 and 2003. Evidence is provided to demonstrate that the venture capital industry developed in three distinct phases (development, expansion and correction) and broadly followed a normal Western-type venture capital cycle. These stages differ from each other in terms of the amount of capital raised, the nature of investments (deal size, sectors of interest and stages of investment) and divestments. The study also concludes that there is no one typical venture capital firm operating in Poland, but rather different types; the study points to three different groups. Other conclusions are that there are strong advantages for early entrants into the industry, that venture capital funds with a strong local presence seem to achieve higher returns, and that venture capital firms become more specialised once the industry matures. The research is based on a survey of 78 venture capitalists (the response rate was 64%).