VC Profile: Kogito Ventures in the market with new early-stage fund, targets EUR 40m

The new Luxembourg-registered vehicle, to be called UPWIND VC, has secured approximately EUR 10m in commitments so far, Niesyto said. The fund is focusing on high-net-worth individuals and business angels, as Polish institutional investors have historically shown insufficient interest in VC investments and a new batch of public funding from the Polish Development Fund (PFR) is not yet available, he said.

The fund will have a first close at EUR 20m and hopes to start deploying capital in early 2024, he said.

The Polish VC sector has relied heavily on public financing in the past and the current funding shortage, likely to last until around mid-2024, has created a gap on the local start-up scene, Niesyto said. Under these conditions, the market is undergoing a cleansing after the excesses of the past three years, with cheap liquidity, exuberant risk appetite and unhealthy valuations gone, he said.

Nonetheless, launching a fundraise now will give UPWIND VC a chance to get the first pick at the most interesting Polish start-ups, while facing limited local competition, Niesyto said.

Companies with the strongest and the most determined founders are still in the market searching for VC financing, although everyone is again focused on disciplined spending and gradually de-risking their business, Niesyto said. Poland, with its strong economy, a large talent pool and the first signs of an emerging "tech mafia effect," could be at an inflection point for the local VC ecosystem, he said. Historically, post-crisis vintages have outperformed the rest, making this the best time to start building a portfolio, he added.

The UPWIND VC vehicle will be deploying up to EUR 300,000 into individual companies and is targeting stakes of 8%-10%, Niesyto said, adding that it may make follow-on investments of up to EUR 1m. It is aiming to deploy equity in up to 60 different companies, as exposure to a large number of start-ups will maximize its chances for good returns, he added.

According to Niesyto, half of the capital raised will be allocated towards stake-building in the best-performing portfolio companies. "We are aiming for a handful of outliers that will carry the entire portfolio," he said.

UPWIND VC will focus on companies based in Poland or those established by members of the Polish diaspora, Niesyto said. The vehicle will be sector agnostic, but with a stronger focus on areas where Kogito Ventures has past experience, such as Industry 4.0, B2B marketplaces and digitalization of business processes. The team will rule out projects where it feels it has no competence to evaluate the business or technology risk, for example R&D-heavy life sciences, he added.

Kogito Ventures is well established in the Polish VC/start-up ecosystem and sources much of its deal pipeline from the network of business angels it knows from past investments, Niesyto said. The team will be supported in its search for targets by a large group of venture partners, i.e. experienced founders, Niesyto said. These will be financially incentivized to bring opportunities to the table, but will also co-invest with the fund in order to have skin in the game, he said.

Credentials of UPWIND VC's core investment team, consisting of Niesyto and fellow partners Łukasz Obuchowicz and Maciej Kowalczyk, include prior stints at UBS Investment Bank, Aviva, Enterprise Investors, Corvus Ventures and Haitong Bank (formerly Espirito Santo).

Initial fund

KV's first fund, established in 2017, raised PLN 30m (EUR 7m at historical FX rates) from the Polish Development Fund. It made 18 investments, co-investing 50/50 with local business angels and buying percentage stakes ranging from the single digits to the low teens in Polish start-ups in areas such as Industry 4.0, digital services, B2B marketplaces, proptech, insurtech and e-commerce tools. The fund is closed to new projects, but has some dry powder left for follow-on rounds at its most successful portfolio companies, Niesyto said.

Thus far, the initial fund has sold its stakes in direct-to-consumer fresh dog food business PsiBufet and food delivery platform Lunching.pl to trade buyers, Niesyto said. Further exits are not expected for another two to three years as the remaining portfolio companies, minus four write-offs, are still in growth mode or, in some cases, trying to gain traction in their commercialization efforts, he said.

Like UPWIND VC, the first fund has a 10-year life, Niesyto said.

Its most promising portfolio companies are Jutro Medical, a chain of heavily digitized clinics offering primary medical care; Surveily, a provider of automated work safety monitoring solution; and smartwatch-based employee communications platform Weartech Solutions (cWatch), Niesyto said.

Other companies that stand out from the pack include Simpl.Rent, a tenant assessment and rental property insurance firm; Juo.io, a provider of software toolkits for subscription-based e-commerce operators; and ZEME, a Software-as-a-Service (SaaS) marketplace digitizing industrial waste management, he said.

Before raising the initial fund, the KV team made seven investments alongside business angel syndicates, the most successful being its seed-round purchase of a minority stake in Polish customized packaging maker Packhelp, which was subsequently exited at a 34x Multiple on Invested Capital (MOIC).

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