When I first moved to Poland about eight years ago from my native London I encountered a world different from the one where I had spent most of my life.
While Facebook and Skype were conquering the Western world, very few in Poland had heard of these companies. And when I described both companies to my new colleagues in Poland, the resounding response was “they will never take off in Poland, as we already have similar local social media and communication applications” – namely Nasza-Klasa and Gadu-Gadu – “we are too patriotic and resistant to want to use foreign technology.” (When it comes to producing its own technology, Poland loves to wave its own flag, a case in point being the fact that Poland collectively celebrates every time Hollywood actor Tom Hanks is photographed next to a Polski Fiat car).
Fast forward to the present day. Facebook has well in excess of 11 million users in Poland and holds a 74% market share in the 18-25 age group. Skype is now, by a country mile, the leading VoIP communication application in Poland. It’s fair to say that the international technology companies have a stranglehold on the Polish market, no doubt fueled by the waves of Polish emigrants to Western Europe that have been exposed to Western technology.
However, Polish companies are fighting back. In October of last year, the Polish online auction site Allegro (of recent Christmas advertising fame) was sold by its South African owners Naspers to a club of private equity funds for USD 3.25 billion. For a period of time, eBay and Alibaba were thought to be vying over acquiring the auction site, with the latter eventually announcing that it will enter the Polish market in its own right. Despite attempts to do so, eBay has failed to get ahold of the Polish market. It will be interesting to see if Alibaba will fare any better.
Aided by a more conservative government, the Polish technology market is seeing something of a boom. Companies such as CD Projekt and Vivid Games are taking the international computer games market by storm with The Witcher 3 (the last installment of CD Projekt’s series of Witcher games) winning just about every computer games award internationally.
Then there are companies such as G2A and LiveChat, not to mention software producers such as Asseco and Comarch. Last year the international press published a study undertaken by HackerRank showing which countries have the best developers. Poland placed third in the ranking only to be beaten by China (first) and Russia (second), with the US not even appearing in the top ten.
G2A is a prime example of the rise of Polish technology companies. The global digital marketplace for gaming products was established in 2010 in a small town over 100km east of Krakow by its two Polish founders. The company now boasts in excess of 700 employees, with its headquarters in Hong Kong and various offices throughout the world and in excess of 12 million visitors to its website. Commentators have noted that G2A’s rate of growth has been quicker than the equivalent first six years of both Facebook and eBay.
Nonetheless, the success of Polish technology companies on the international arena will largely depend on their ability to access capital, which isn’t abundantly available in Poland. With a floundering Warsaw Stock Exchange and a shortage of venture capital funds offering the amount of capital to give the market real punch, Polish technology companies will find themselves turning to foreign markets.
Last year our firm, Kochanski Zieba & Partners, undertook the first dual listing of a Polish company (Work Service – Eastern Europe’s largest company in the staffing and human resources sector) through depositary interests on the London Stock Exchange. Moreover, the transaction was the first ever in which a Polish law firm directly advised the issuer on a listing outside of Poland. Since then a number of Polish technology companies have openly and publicly stated that they wish to access capital through foreign exchanges, including London and Nasdaq.
In the same way that our larger US law firm cousins such as Cooley and Fenwick & West were there at the outset of the Silicon Valley bubble, achieving success through growing with their clients, Polish technology companies are loyally keeping with the Polish law firms that understood and continue to understand their businesses best, having worked with them hand-in-hand from the very beginning.
The immediate uncertainty following Brexit and US presidential elections resulted in Polish technology companies putting their international plans on hold. As the international market settles, and following a surge in transactions in the last quarter of 2016 that has carried through to the first months of this year, the race is back on to be the first Polish technology company to truly go global. Exciting times to be a Polish law firm.
By Adam Piwakowski, Partner, Kochanski Zieba & Partners
This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.