BERLIN, Germany – Evatronix and TechLab 2000 are Polish small-tech success stories. Evatronix, spun out of the Silesian University of Technology in Gliwice in the early 1990s, began as a distributor of mechanical CAD systems. The founders, two former academics, eventually developed their own IP cores that speed time-to-market for SoC designs. Today, the cores are licensed to customers such as Pixelworks Inc and Microtune Inc.

In fact, Evatronix draws all of its $1.5 million in annual revenue outside the home market, said cofounder and president Wojciech Sakowski, who still finds time to deliver university lectures on high-level design methodologies.

TechLab 2000 is another company born at a university. Spun out of the Institute of Electron Technology in Warsaw in 1989, it eventually became a DSP developer for Texas Instruments Inc.

Today the company develops its own cryptographic ICs for telecom applications, such as mobile phones and ISDN equipment. It had revenues of €2.2 million (about $2.8 million) last year, said CEO Wiktor Kuncewicz.

In 2007, he expects to double revenues as Techlab takes its products to international markets through partner and major shareholder Comp S.A., a Polish IT systems company. Both companies are examples of Poland’s research community making the best of a bad situation.

When communism crumbled, it diminished or destroyed research institutes across Central and Eastern Europe and left a legacy of separation between academia and business.

However, the entrepreneurial Poles seem to have reoriented their research community to new realities, resulting in successful tech spinoffs that have taken their products across borders.

“[Poland’s] research institutes had to rethink the way they operated and some did quite well,” said George Tomka, international technology promoter at the UK’s Department of Trade and Industry. “UK companies are looking to collaborate with the growing number of tech startups and service companies in the electronics area.”

Research pockets are sprinkled around the country. Universities in the northern city of Gdansk are working on wireless technology with the intention of commercializing R&D through spinoff companies.

In Warsaw, the Institute of Electronic Materials Technology (ITME) conducts research into and production of compound substrate materials such as “nearly defect free” GaAs crystals, according to Tomka.

ITME spinoffs include Cemat Silicon, a maker of silicon wafers and Comsecore, which manufactures high-quality sensor-grade silicon for optoelectronics.

Moreover, the High Pressure Research Center has formed seven successful spinoff companies. One, TopGaN Ltd., produces substrate materials for the laser industry.

But small Polish tech companies face several hurdles. For example, raising capital is difficult. Evatronix, looking at capital sources for expansion, has found that investors want companies at the e3 million (about $4 million) revenue level. “Existing VC funds are oriented toward larger structures,” Sakowski said.

TechLab did not receive its first bank loan until 2006. Before that, it could not find credit because Poland’s banking industry is very conservative. “Startups have no fixed assets such as factories and equipment,” Kuncewicz said. “To a bank, knowhow means nothing.”

Kuncewicz said TechLab pioneered devices for encrypting HDDs on the fly in 1996, but couldn’t find money for manufacturing. “Now dozens of companies are making money from this type of encrypting,” he said. “There’s a very big limitation of capital in Poland and no chance to grow fast.”

Another challenge is labor related. Wages are increasing 10 percent to 15 percent annually due to competition with foreign companies for technically skilled people as electronics manufacturers pour into Poland, said Sakowski. (see Asian LCD investments boost Poland)

“Western companies are starting to offer higher salaries than before,” he said. “It’s necessary to grow at a faster pace to keep our engineers with us.”

He estimates Poland has several thousand small electronics companies with fewer than 10 employees. Most SMEs are developing embedded systems for various applications. A typical product consists of a microcontroller plus a subsystem and firmware.

As for academia, it has been shifting emphasis toward software due to lack of state funding, Sakowski added. Poland is more oriented toward software development, and foreign companies have already taken notice. Delphi, Motorola, Rockwell and Intel run software development houses in Poland, he said.