When Paladin expanded to Europe nearly a decade ago it was done with the notion that cybersecurity is a global matter and companies protecting people, organizations and institutions can come from anywhere and everywhere. Since then, we have invested across Europe from Sweden to Estonia to Switzerland to United Kingdom and, if everything goes as planned, to few more exciting countries by the end of the year.

Central and Eastern Europe (CEE) is emerging as vibrant hub for startups, poised to disrupt traditional industries and shape the future of innovation. With its rich tapestry of cultures, a pool of talented professionals, and good conditions for conducting business it has become an attractive destination for entrepreneurs and investors alike. Indeed, CEE has bred a range of globally renowned security companies such as NordVPN, Bitdefender and Avast coming from Lithuania, Romania and the Czech Republic, respectively, that have leveraged the immense cyber talent coming out of the region.

And within that region, Poland stands out being situated at the crossroads of Western and Eastern Europe, offering investors a prime entry point into the burgeoning Eastern European market. As one of the largest and most economically influential nations in CEE, Poland not only provides access to a market of nearly 40 million consumers but also serves as a springboard for reaching the over 100 million people who comprise the broader region.

As such it is no surprise that Poland has been leading the charge in building the best-in-breed deeptech companies attracting far more funding than its CEE counterparts. According to data by Invest Europe, Poland has attracted around €2.8B in aggregate funding through 2019-2022, with 2022 receiving almost 3x more funding than 2019 despite the global slowdown in venture markets.

We at Paladin have seen this as well with growing part of our deal flow coming from CEE and Poland. Companies like Nethone, Neptune, Spacelift and Silenteight are just few prominent firms building the next generation security companies in the country we are watching closely. And once you venture a bit further to the East, you’ll find Jetbrains in Czech, Axoflow in Hungary and Botguard in Estonia among many others. We already have a solid foothold in this ecosystem having supported two successful scaleups in Estonia already. Dashbird, a serverless monitoring platform, has been in the Paladin portfolio since April 2020, and Rangeforce, a cyber readiness platform since August 2018.

We began our foray into increasing our presence in CEE by spending three great days in Warsaw in October 2023 meeting entrepreneurs, investors, and other people in the ecosystem. From those anecdotal conversations we learnt many things, including that the Polish prefer to not blow their own trumpets. Such modesty requires investors such as Paladin to dig a little deeper to uncover and understand the achievements of Polish founders but it is worth the effort to do so. We unearthed some extraordinary achievements. While Polish founders have similar ambitions to their peers around the world, they do seem to prefer using the local market as a testing ground before expanding to foreign markets. While it is not an uncommon approach, it might be unnecessarily limiting: not only are their products exceptional, but if software is by nature globally scalable, why only focus on a narrow 40M person market? In contrast, it’s rare to see such differentiation between local and global markets being made by companies emanating from established startup hubs like San Francisco or London. That said, helping founders gain the confidence to look beyond their immediate borders is something that Paladin often assists with, having worked with global category-leading cyber firms for over 20 years.

Many of the software products we saw from early-stage Polish founders were as good as any we’ve seen while scanning for investment opportunities around the globe. Some would be completely indistinguishable in quality and innovation to successful platforms in other countries. We think this is reflective of the exceptional engineering talent that the region enjoys which simply needs to be brought to market with proper sales and marketing. We see this as a great opportunity, as Paladin has always focused on backing great software with the notion that these digital goods can be brought to international markets with our help.

Finally, it was evident that Poland enjoys a healthy and well-established venture ecosystem for seed and small Series A rounds, but with perhaps a sparseness of capital for rounds larger than €5M in size. The anecdotal evidence suggested that the funding landscape has developed tremendously over the last 10 years thanks to the government authorities such as Polish Development Fund (PFR), European Investment Fund (EIF) and European Bank for Reconstruction and Development (ERDB), who have spurred many new funds to fill the seed/late-seed gap. But based on our discussions with the local founders and investors companies looking to raise larger rounds might quickly find themselves lacking wallets capable enough to fill the books. This is certainly an area where a multi-stage investor such as Paladin could fit in, as we are comfortable investing in large venture and even scale-up rounds.

We finished our trip with a great event organized together with our friends at Expeditions Fund – a Warsaw-based venture fund focused on deeptech backed by notable Polish families. We saw roughly 30 founders, investors and ecosystem members for an evening full of good discussions and mingling.

Thanks to VentureFriends, OTB, ffvc, Rubicon Partners, Google for Startups, CyberMadeInPoland, Enterprise Ireland’s Warsaw branch, Polish Private Equity & Venture Capital Association (PSIK), Mergermarket, Sifted and, of course Expeditions Fund, who all welcomed us during our visit. We look forward to having more investment announcements to make in CEE in the not too distant future.