Israel has been dubbed a “startup nation,” something Ukraine is also aspiring to.
But the gap between the nations’ information technology sectors is still substantial: in 2019, Israel was ranked the world’s fifth most innovative country by the Bloomberg Innovation Index. Ukraine is 53rd.
Luckily for Ukraine, however, there is a chance to learn from the Israelis, one of the world’s most technologically literate populations, for they are coming here to set up businesses. According to the Israeli Embassy in Ukraine, their high-tech firms employ as many as 15,000 local tech people, from software engineers to code writers and developers.
Yael Group has just recently become one of them. The company has acquired Ukrainian software outsourcing firm Acceptic, making its first investment into the local IT sector, but hoping to invest “a few million dollars more” in the future.
“We would like to have Ukraine as our main development hub,” Dror Marom, a chief financial officer at Yael Group, told the Kyiv Post. “This is just an initial investment, we need to see how it works here before investing further.”
Although he’s a newcomer to the local action, Marom is sure that combined Ukraine and Israel can contribute a lot to the world’s IT.
“Together we are much stronger as a startup nation than just Israel by itself,” he said.
Marom thinks Israel has already outgrown its tech capacity and now it must expand to other countries. There is a lot of investment coming into Israel’s tech sector, but the nation’s problem is now to digest it and scale up, according to him. Growing, Israeli IT firms need to find talented tech people, and Ukraine has plenty.
“Ukraine is about a mix of skill sets; the breadth and depth of development skills that can be found here,” he said.
“Convenient geography” and the ability to travel fast between Israel and Ukraine is another advantage for Marom. There are four direct 3-hour flights every day between Kyiv and Tel Aviv.
Besides, Marom sees that IT is becoming important for both nations: they invest more in IT, in technical universities.
“IT has much to offer to both countries. And it also means that we — Israelis and Ukrainians — have a shared future,” Marom said.
Not scared by Russia
Considering investment in Ukraine, Yael Group wasn’t put off by Russia’s war against Ukraine in the country’s eastern Donbas region.
“It was less of a concern to us,” Marom said. “Maybe it’s about our mentality, about our day-to-day life, which might be a bit similar to what you guys are going through in Ukraine.”
“And in Israel,” he went on, “sometimes we have some kind of uprising and military tension. It must be, we’re used to it and so less scared of (the war) than the other countries.”
Something else is more challenging than the war — understanding the processes and regulations, Marom said. Yael Group buys 2–3 companies every year, but it had never bought a Ukrainian company before. So naturally it took time to figure out the recruitment market, how to report financials, and transfer money, he said.
“So it wasn’t about fear, we were just learning the market. Once we felt comfortable, we invested.”
No chasing Israel
Another Israeli tech employer is Ignite, a “classic outsourcer.” With Israeli founder and CEO Aviram Eisenberg, this company has been working between Israel and Ukraine for 10 years.
Sergey Kravets, a spokesperson and head of sales at Ignite, says this Israeli-Ukrainian firm is a “symbiosis of Israeli experience and Ukrainian IT development expertise.”
The company employs 200 people across two offices: in Kyiv (70 percent) and in Zhytomyr (30 percent). Only four people work from Israel, where the company has a legal entity and a registered headquarters. But most of its clients are from Israel.
Kravets enjoys working with Israeli management for the speed of making decisions and the simplified business processes.
“A quick phone conversation is enough to make a decision for our Israeli management. And if it’s a deal, the next morning everybody is up and doing something. This is a good trait for business,” he said.
Kravets believes Ukraine has much to learn from Israel, especially on how to attract foreign capital into the country. Israeli tech startups raised $6 billion in 2018, while according to auditor Deloitte and local tech association UVCA, Ukrainian tech companies raised just $336 million.
The reason, according to him, is that Israel has managed to create favorable conditions for startups to appear by heavily investing state money into science.
Now it is paying dividends: Israel counts 140 scientists and technicians per 10,000 employees, one of the highest ratios in the world. In comparison, there are 85 per 10,000 in the United States and 83 per 10,000 in Japan.
But Kravets is sure there’s no point in chasing Israel.
“They are too advanced, comparing with Ukraine. Israel makes commodities that they sell the world over. Meanwhile, Ukraine is more of the maker of raw materials for the world,” he said. “We make very little of our own.”
He points that Israel has four times less population than Ukraine, only 8 million people, but this country has currently 6,000 tech startups — the world’s second by the number. And about 1,400 startups pop up in Israel every year.
“They rely on producing their own. We, so far, have been satisfied with crumbles,” he said. “But the two countries look into the direction of innovations and technologies. So it’s easy for us to work together and find common ground.”
Concrete steps for Ukraine would be trying to learn from Israel, Kravets added.
Kindred spirits
Ambassador of Israel to Ukraine Joel Lion has been working in Ukraine for almost one year. Over this time, he has noticed that Ukrainians and Israelis have a similar mentality, indeed.
“They are compatible — one understands what the other wants,” Lion told the Kyiv Post. He admits, however, that Israeli tech firms come for something more than kindred spirits — they come for skilled yet cheap labor. But he is still sure it’s a “win-win” scenario.
“Our people are coming here to find resources for (lower) salaries than they would have paid in Israel, and for the same quality of work,” he said. “Now for the Ukrainians, it gives an opportunity to work from home, not to leave your home to do the job that you want to do. And to have a better salary.”
Generally, Israelis see great potential in working together with Ukrainians in IT, according to Marom from Yael Group.
“The Israeli strength is investors’ money that is coming into our companies and a number of ideas that are being initiated. Ukraine’s strength, in turn, is an ability to scale up, supplying software developers,” Marom said.
“So we are complementing one another.”
The Kyiv Post’s technology coverage is sponsored by Ciklum and NIX Solutions. The content is independent of the donors.
