Last year, investment in Ukrainian startups skyrocketed.
Tech companies with Ukrainian roots attracted $571 million from local and foreign investors in 2020 — $27 million more than in 2019, when they raised $544 million, according to a recent report by the local investment fund AVentures Capital.
The report released on March 15 shows that nearly $354 million, or 62%, of investment raised in 2020 came to just four Ukraine-founded firms:
- GitLab, a Ukrainian “unicorn” valued at nearly $6 billion; it created a service to store and edit programming code.
- Creatio, a tech firm that made a service to simplify the development of mobile apps for business purposes.
- Restream, a video streaming startup used by Microsoft, Wargaming and Ubisoft.
- and AirSlate, a tech company that helps businesses manage documents online.
Experts from AVentures Capital said that, for the most part, the Ukrainian tech market remains unchanged. The majority of local startups set up their businesses in Europe or the U.S. — their biggest markets — and raise money from big investors there. Ukraine, in turn, is interesting for them as a place to open research and development centers and hire cheap labor.
Many Ukrainian investment funds also give money to local startups but usually at the beginning of their development.
Investors
According to the report, Ukrainian investors have less money than foreign funds, thus local techies flock abroad to attract money from big international companies like TMT Investments and Almaz Capital in the U.S., and the European Bank for Reconstruction and Development.
Ukrainian investors, including Genesis Investments, TA Ventures and Adventures Lab, invested less in 2020 because they’ve been waiting for profit from their previous deals, AVentures Capital concluded.
Apart from private investment companies that support Ukraine’s tech scene, the local government has also volunteered to help. It launched the state-financed Ukrainian Startup Fund that awards grants ranging from $25,000 to $50,000 to local tech entrepreneurs. To date, 85 Ukrainian startups have received a total of $3.15 million from the fund.
Local tech service Upswot, which allows banks to easily access information about a business’s financial condition, and job search platform Skyworker are among them.
Emerging ‘unicorns’
AVentures Capital said that Ukraine now has three confirmed “unicorn,” startups valued at more than $1 billion: GitLab, Ukraine-born blockchain platform Bitfury and Grammarly, a service that corrects spelling, punctuation and grammar online.
Over the past year, several other startups with Ukrainian roots showed rapid growth. Among them are product companies like People.ai, which develops artificial intelligence to help sales specialists, as well as wireless alarm system maker Ajax, tech firm Genesis and AirSlate.
Another rising star is Ukrainian tech firm SoftServe that employs over 8,000 people and earns nearly $200 million a year.
Ukraine’s most popular e-commerce platform, Rozetka, and mobile bank Monobank, which has over 3.3 million users, also have a chance to reach a $1 billion valuation, according to the report.
R&D hub
Ukraine remains a popular destination for the U.S., Asian and European behemoths like Google, Viber, Amazon and Samsung. They go to the country to open research and development centers, usually in Kyiv, and hire thousands of Ukrainian techies.
Now Ukraine has nearly 100 R&D centers, half of them set up by U.S. companies from a variety of industries, including telecom, gaming, e-commerce and software development.
According to AVentures Capital, international businesses profit when they enter Ukraine — a country with a pool of nearly 200,000 skilled techies and 16,000 tech students graduating from Ukrainian universities every year.
The salaries of Ukrainian programmers are 75% lower compared to the U.S. and they pay a low 5% tax on their work income if registered as private entrepreneurs. In comparison, tech specialists in Europe and the U.S. pay a 30-45% tax.
E-commerce boom
During the pandemic, people tended to buy food, clothes and even medicine online, so electronic commerce has experienced significant growth in Ukraine.
For example, local food chain supermarkets Silpo, Epicenter K and ATB started selling food online during the national lockdown.
Online pharmacies like Liki24 and Tabletki.ua became more popular among Ukrainians in 2020, as well as electronics and fashion marketplaces like Rozetka, Kasta and Lamoda, the report said.
