Risks of foreign investments in Polish technology start-ups

publication date: September 30, 2021text updated on January 23, 2023

It is currently accepted that only 5% of start-ups in the technology industry are successful. This fact means that, in principle, the investor has as much as a 95% risk of losing money. However, if the investment turns out to work with no failure the investors may gain millions.

The more innovative the subject matter the bigger the risk

A good example of a risky investment is a highly discussed case of Elizabeth Holmes. She is the founder of  biotech start-up, Theranos. The main concept of her business was to create a blood-testing method which promises to detect a range of illnesses with just a prick on the fingertip. She based her business idea on her fear of needles. One device would replace professional laboratory machines. The technology was supposed to revolutionize the healthcare industry. As this idea seemed futuristic and  innovative it is no surprise that it seduced many high-profile investors that invested millions into this business.  Silicon Valley investors have poured more than $200 million into projects in the past years to build a device that analyzes blood – according to ‘Financial Times’. However, in 2015 it emerged the blood-testing devices did not work and Theranos was doing most of its testing on commercially available machines made by other manufacturers. The company shut down three years later. Numerous problems have arisen since then. The invention gave false results, resulted to undetected diseases. As it later turned out, it was not the machine that tested the samples, but a team of people appointed to do so. The machine was only an object of advertising and marketing. Now Ms. Holmes faces 12 fraud charges and she is accused of deceiving investors and patients with defrauding investors through a ‘sophisticated, multi-year fraud’.

The business obtained one of its first financings in 2004 from a well-known investor from Silicon Valley, Tim Draper. Theranos founder began collaboration with former senior U.S. government officials to serve on the board of directors. Among them were: George Shultz (former Secretary of Labor, Treasury, and State of the US government), Gen. James Mattis (US Secretary of Defense), Henry Kissinger (former Secretary of State), William Perry (former Secretary of Defense), Betsy DeVos (US Secretary of Education) and many other successful individuals.

It sounds surprising that highly respectable, influential people did not even ask Holmes for detailed financial analysis and accurate product information. They have lost millions of dollars because of being too superficial in their due diligence.  

Polish tech and software start-up scene

According to the previous research about the risk of start-ups in technology industry it is worth mentioning that Polish tech and software start-up scene is not as risky as the famous cradle of innovation – Silicon Valley. Objects of investment are not as futuristic and do not yield comparably high returns, while their risk is much lower. The largest foreign investors in Poland are German, French and American companies. A good example is ‘Orange Polska telecom’, which recorded the highest growth in capital expenditures among the largest listed companies. In February 2021, Poland was the third recipient of foreign direct investment in the world, after the U.S. and Spain, their value amounted to $1.2 billion, as reports fDi Intelligence portal.

How to protect interests?

As far as investments are concerned it is essential to mention the structure and elements of the investment agreement in accordance with Polish law. The main aim of the aforesaid agreement is to determine the manner of conducting the capital entry transaction into the company by the investor. It also sets the rules for the functioning of the company and contains provisions on mutual relations and rights of the parties. The agreement should reflect previous negotiations between the investor and the founder. Usually it also includes provisions regarding options of the withdrawal from the investment. Substantially it can be said to be an amalgamation of several types of contracts.

Due to the Polish law, investment agreement is an unnamed contract. We do not find its regulation in any Polish legal act. This agreement should be made in ordinary written form, so there is no need for the parties to use a notary in this regard.

Investment agreement in Poland

As the subject of an investment agreement is usually the trading of a large sum of money, it is very important for the agreement to be drawn up as precisely as possible and its content should contain all relevant information and provisions. The most important content elements are:

  • identification of the parties to the agreement – the investor may be a natural person as well as a legal person and an organizational unit without legal personality,
  • definition of the purpose and subject matter of the agreement – it sets forth what the investment process will consist of,  includes a termination date. It should be specified what the payment schedule will look like,
  • conditions of technology transfer – it contains information about mutual obligations – what a foreign investor receives in return for providing funds to a Polish company,
  • capitalization table – information on who will be the shareholder and the amount of their shares, information about the right to take over a company, buy it back, merger or liquidation,
  • clauses such as lock-up clause (protects a party in case that the other party wishes to dispose of its interest for at least a specified period) and the anti-dilution clause (intended to help shield investors from their investment potentially losing value).



2) Oto najwięksi inwestorzy zagraniczni w Polsce (

3) Investment in Poland | Edition 2021 – KPMG Poland (

4) raport_ib_2019.pdf (

5) Theranos, czyli historia największego przekrętu w branży start-upów –

6) Investors Talk Theranos Scandal as Elizabeth Holmes Trial Begins | Time

7) How Theranos’s Big Investors Were Taken (


9) Praktyczne porady, jak stworzyć korzystną umowę inwestycyjną –