Ukrainian startups have an immense potential to succeed in the global IT-arena, but they need mentoring and financial support
ICU Group. Last week, 11 Ukrainian startups battled for a $10,000 prize during Odesa Demo Day, the third event under the 2019 Ukrainian Financial Forum umbrella.
Startups pitched their ideas to a jury of renowned venture capitalists from Ukraine and abroad. The rules to win a substantial reward were simple: five minutes to pitch and five minutes for Q&A. But for many startups, money is not the main driver.
“Startups need not only funding but also mentoring and advice from professionals who have been in the business a long time,” said Roman Nikitov, co-head of ICU Ventures, ICU’s venture capital arm.
Odesa Demo Day featured startups from various companies involved in biotechnology, blockchain, business analytics and e-sports to name a few.
For example, StudyDive startup is working on creating a platform similar to Booking.com but for educational events. EcoTyre has created an eco-friendly car tire recycling method based on the electromagnetic field. Myhelix offers personalized nutrition and lifestyle recommendations through DNA tests.
“There are talented programmers and IT entrepreneurs in Ukraine. According to experts, Ukraine is one of the top five IT-outsourcing destinations in the world and holds the top spots in terms of cost-effectiveness. The talent is here, but we need to create an ecosystem where they can develop their strengths and deliver successful products. We are working on exactly on that,” says Makar Paseniuk, founding partner at ICU.
Since its founding in 2018, ICU ventures have already invested in seven startups including some well-regarded names such as Petcube, Apostera and 3Dlook. Most of the companies ICU look to invest in are companies with Ukrainian roots. ICU plans to add a few new startups to its portfolio by the end of 2019.
“$500K per company is a comfortable investment for us. In general, we want our portfolio to consist of 20-25 companies, 70% of which would be related to Ukraine,” commented Roman Nikitov.
The Ukrainian venture market is still at a nascent stage. According to Crunchbase, global venture capital investments totaled more than $343 billion in 2018. Ukraine accounts for only a fraction of the total VC market with only $337 million, if you go by estimates from Ukrainian Venture and Private Equity Association.
“Our venture capital market is 1% of the global market. It’s a drop in the ocean. As one of the leaders of the financial market in Ukraine, we want to see more successful companies start their story here,” said Makar Paseniuk.
According to the financier, Ukrainian tech-entrepreneurs need assistance from established private players in the domestic market, alongside any governmental help they can get to create an eco-system in which they can flourish.
“ICU Ventures, aims to help Ukrainian startups create a community where they can establish contacts, seek investment and develop independently,” added Makar Paseniuk.
“We don’t just sign checks for startups. We give them strategic advice, we help with hiring as well as reaching other investors – both in Ukraine and abroad, in particular, Silicon Valley” commented Roman Nikitov.
According to ICU Ventures director, events like Odesa Demo Day is a great platform for startups to present themselves to investors.
“To get investor’s attention, you need to actively network and use word-of-mouth. It is necessary to reach out to the right people, present your product, communicate your ideas, ignite the venture community with your vision. There are many venture capitalists and angel investors in this room. We invite young startups to come and inspire this audience,” stated Roman Nikitov.
Getting on the investors’ radar is not an easy task for novice startups. ICU acknowledged that to select the seven investment projects, they had to analyze more than 200 companies as they were looking for a partnership and not just an easy investment.
The three main things that Ukrainian investors seek in a startup are the team, the product and the market.
The team must be ambitious, ready to disrupt, create new markets and see opportunities others have missed.
“A good example from our portfolio is Petcube. They have created a market for connected pet devices and remain the leaders in that space,” said Roman Nikitov.
ICU is looking for startups that offer customers an intuitive and easy-to-use product. As an example, the company mentions one of their investments, Smart Commerce – a service that provides users with information about any product and enables them to purchase it in one click directly from retailers.
“We do not believe that there are any right or wrong areas for venture capital investment. We invest in business sectors we understand,” said Roman Nikitov.
As for the markets, their portfolio startups have to conquer, ICU Ventures is ambitious.
“We are investing in ideas that have the potential to become global rather than function within one or several countries,” ICU Ventures stresses, adding that they do not impose their vision on startups, but are ready to share their 10+ years’ experience on investment services market.
According to Makar Paseniuk, ICU plans not only to invest in startups in the future, but also to attract other investors to its portfolio. This requires successful investment exits, which the company expects to have in the next few years.
“We will consider our investments successful if the capitalization of startups doubles in three years from the moment of investment. This is our minimum financial goal,” said Roman Nikitov.
“When you invest, you land in one boat with a startup. One of our portfolio companies – Hideez – took part in Odesa Demo Day. And our whole team felt as if we were on stage with the startup representative,” he added.
The winner of the startup battle was EcoTyre – inventor of the eco-friendly car tire recycling method.
“Such events are useful for startups at any stage of development. This is an opportunity to look at your project from the outside, get feedback and identify weaknesses that need to be explored. And this is an ideal place for networking and finding potential partners,” said Nazar Khalavka, co-founder of EcoTyre.
“In general, there is no lack of startup events in Ukraine, but Odesa Demo Day was different because of the participants and content. ICU made an interesting selection of startups from all over the country, and the quality of pitches and presentations was higher than I saw on average in Ukraine, ” – shared Vadim Rogovsky, CEO of 3Dlook startup, who was a guest at the event.
ICU venture team is convinced that all startups that visited Odessa Demo Day have won, because they have gained invaluable experience.
“The event in Odesa is the first of a series of such events that we plan to hold in different cities of Ukraine in the future,” ICU promised.
On the eve of Odesa Demo Day, it became public that spell-checking service Grammarly received $90 million in investments and became the first “unicorn” (a company valued at more than $1 billion) with Ukrainian roots. ICU Ventures believes that this is only the beginning of the startup history of Ukraine.
“Since 2014, we have been holding the Ukrainian Financial Forum annually. Every year, there is more and more buzz about the new economy, venture capital and the potential of Ukraine to create world-class products. Six years since we first launched the forum, we hosted a separate event dedicated exclusively to startups this year. Obviously, the market is moving forward. And we continue to work on creating the next Ukrainian success story”, concluded Makar Paseniuk.
