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🇺🇦 Ukrainian Tech in review
Good evening Upscalers’ followers.
It’s now time to bring you the 19th edition of our weekly journal. This week, we’ll talk about the Ukrainian Tech ecosystem 🇺🇦.
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🇺🇦 Ukrainian Tech in review
Ukraine 🇺🇦 has really been under the spotlight this week… for reasons you’re all well aware of.
These few lines are a way to show support to the country. I don’t want to make this newsletter overly political, but I do believe that past years in Ukrainian Tech hold promises for a bright future. I do understand the gravity of the situation, but I hope these promises won’t vanish away despite this week’s events. The international investors community shouldn’t overlook local founders and startups over there, because they have a lot of potential.
And if you don’t believe me, please read the tribune Lyubov Guk (Ukrainian VC based in London) published on Sifted this week.
Here we go ⬇️
1. Everything’s “Techable” with Ukraine
The Ukrainian startup ecosystem is truly inspiring. The country has been going through economic difficulties for several years but still manages to create technology that is both scalable and global.
Ukraine is the 34th Tech ecosystem, says StartupBlink
Kyiv is the highest ranking city in Ukraine (48th), maintaining its position in the global top 50
The Tech industry creates between 3-5 percent of the country’s GDP.
There are more than 1,700 startups and scaleups which were founded in Ukraine. According to Dealroom, these startups have collected $1.47B in venture capital investments between 2015 and 2021, which ranks Ukraine as the 4th largest Eastern European VC market after Estonia, Romania and Poland.
Together with PE investments, Ukrainian startups are said to have raised a total $571M in 2020.
As of today, Ukraine has 5 unicorns: Grammarly, GitLab (which recently IPOed), BitFury, Ring and People.ai (since 2021) which took on average 7 years to reach $1B valuation ⬇️
Some of the companies I see becoming potential future unicorns (💫) are:
💫 Airslate, workflow automation platform, which is currently valued between $160M and $240M by Dealroom
💫 Creatio, a workflow and CRM automation platform, valued between $272 and $408M
💫 Restream, multistreaming platform for video content, valued between $200 and $300M.
However, Ukraine still lags behind most European countries in terms of VC funding per capita (around $35 per capita in 2021).
Ukraine has around 240К tech talents working in the IT sector. By 2024, this number is expected to top 450K talents. It is is the #1 country in Europe for the number of tech graduates thanks to its 181 tech schools.
It is also one of the most popular countries in the world when it comes to relocating or outsourcing R&D. Many outsourcing companies working with clients abroad are located in UNIT.City which is the largest innovation park in Eastern Europe, home of around 140 businesses.
Ukraine has its own version of a public fund, which is called the Ukrainian startup fund and was created back in 2019.
Its mission is “to promote the creation and growth of technology startups in Ukraine at an early stage of development in order to increase their global competitiveness”.
As of today, the Ukrainian startup fund has funded around 229 startups with a combined $6M of grants (non-equity).
Beyond public investment and innovation structures, here is a list of the most active investment companies and funds in Ukraine by number of deals
2. 2021 - a great year in review
2021 was a booming year for the Ukrainian Tech ecosystem (and for Eastern Europe as a whole). In fact, it was a year of firsts:
Grammarly (auto-editing tool for writing) became the first Ukrainian decacorn after raising a $200M funding round, putting its post-money valuation at $13B.
GitLab (open source end-to-end software development platform) took over the Nasdaq with a mega-IPO at a $15B+ valuation (making it the largest Ukrainian IPO ever)
People.ai (revenue operations and intelligence (ROI) platform) joined the Ukrainian unicorn club after reaching a $1.1B post-money valuation with a $100M funding round in August 2021.
Vlad Yatsenko (co-founder and CTO @Revolut) reportedly became the first Ukrainian Tech billionaire after Revolut’s $800M Series E round in August.
Several international giants entered Ukraine, opened an R&D or representative office: Apple, Amazon, Glovo, BlaBlaCar, Lyft, Revolut, Thales, Solarisbank, CognitOps, Nets A/S, Velory, Bringg, AIBY, TangoMe, Roku, JCB (Japan Credit Bureau), Seafai…
Ukraine held its first ever national pavillon at Web Summit.
3. Living with instability
The war with Russia will undeniably have long-lasting impact on the capacity of Ukrainian startups to hire top talents and raise money to grow their business. Some startup founders already report that “it is nearly impossible to raise capital for pre-seed and seed-stage startups operating out of Ukraine at the moment”.
However, warfare and instability is not new to Ukraine. Prior to the aggression, it was already reporded that Ukraine was losing $2-3bn every month due to war threats. Since 2014, the Russian aggression has cost Ukraine 19.9% of its pre-conflict GDP annually.
The country has been dealing with political and economic instability for years now. The entire Ukrainian Tech ecosystem was structured in this context, and proved its ability to contribute to the global tech ecosystem well beyond its estimated potential.
In fact, lagging geopolitical instability combined with complicated taxes and bureaucracy, have always made it difficult for Ukrainian entrepreneurs to establish a company in the country. As a matter of fact, Ukrainian-born startups are almost forced to have global ambitions from day one. For most, this means relocating their HQ very soon in the process, while keeping R&D offices in Ukraine to leverage access to the local tech talent pool. Though this is something to be witnessed in most Eastern European ecosystems, Ukrainian-born startups (among those >€1M funded) are by far the most likely in Europe to have done so over the course of their business (and that was true before this week).
It is very likely that the war with Russia will accentuate this phenomenon. The government will lack resources to: (1) support the local startup ecosystem, (2) to build adequate infrastructures and (3) to improve quality of life to retain its most talented entrepreneurs. Foreign investors have all the reasons in the world to be scared away from investing in Ukraine-based companies.
But they shouldn’t be scared of investing in Ukranian founders, who’ve proved very successful in exporting their talent and building successful companies abroad. Proof is, the number of (wanabee) unicorns in the country.
Thanks again for reading guys
See you next week 👋