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2020 Recap for Venture in Ukraine

Tuesday, February 16, 2021

2020 was a year that will go down in history in every respect — COVID-19 pandemic was the top-news throughout the year. How it affected the Ukrainian venture capital market, helped or hindered the development of startups and what became the biggest factor for the industry development in the country — all this and even more in today’s article.

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The role of the government

In 2020, one very strong player has appeared in Ukraine, which has already changed the situation in the country’s venture capital market. And if you think that we’re again talking about the pandemic, you are wrong. We will pay attention to the USF — Ukrainian Startup Fund, which was launched back in 2019 under the auspices of the Ministry of Finance of Ukraine, but in 2020, it became the most active player at the Seed and Pre-seed stages, administering the allocation of grants from the Ukrainian state to develop innovative projects.

In January 2020, the first pitch day was held, which is actually part of the funding allocation process for startups, and a year later, in January 2021, the 20th anniversary pitch day was held. During 19 pitch days, 192 teams presented their ideas to the tender committee, and 81 of them received grants for more than $3M. Perhaps, this has become the most active financial investment in Ukrainian startups at the early investment stage. It is quite clear why the Ukrainian Startup Fund USF received the Impact of the Year award from the Ukrainian IT Awards.

The second significant event was the launch of the 360 Tech Ecosystem Overview project by the Ministry of Digital Transformation of Ukraine together with leading players in the venture capital market, such as Ukrainian Bridge and Ukrainian Internet Association. The online platform created within the framework of the project is supposed to become the Ukrainian analogue of Crunchbase and Dealroom rolled into one, providing information on two dozen verticals — from DeepTech to Media, and from HealthTech to EdTech.

Now the project has been launched, so to speak, in beta version, because it only provides information on product and service companies, while investors, accelerators, universities and techno hubs are still waiting their turn to appear on its pages. Time will tell whether the project will become a single entry point into the digital industry of Ukraine, as the founders would like it to be. For now, we can highlight the growing positive role of the state in the development of the industry.

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Investments

Investments

Undoubtedly, the $3M that were distributed by the Ukrainian Startup Fund in 2020 at the Seed and Pre-seed stages became an important impetus and signal for the local market. However, the main volume of investment in 2020 has attracted more mature projects.

In third place on the amount of investment raised is Preply, a platform for the selection of tutors, founded back in 2012 by Kirill Bigay, Sergey Lukyanov and Dmitry Voloshin, which raised an additional $10M in 2020 to develop the project in the United States, Canada, France, Britain and other countries. For the next amount from the fifth round of funding, the team intends to open a new office in Silicon Valley, in addition to offices in Kyiv and Barcelona.

The “silver medal” goes to a project, which is also connected to teaching, and precisely, to online teaching of gamers. Of course, we’re talking about Mobalytics. In 2020, Bogdan Suchik and Nikolai Lobanov managed to raise an additional $11.25M to expand the list of available training games, as well as improve machine learning and data analysis that are used to train “protein” gamers.

Finally, the winner of our mini-top is Restream, which raised $50M in 2020, and this result is a clean win. Andrey Surzhinsky and Alexander Khuda, along with their team, have developed a service for simultaneous streaming on 30 platforms: Youtube, Facebook, Periscope, Beam, Ustream, Twitch and others. During the quarantine and lockdown period, Restream’s user base grew to over 2M streamers, which launch about 8 million streams per month. And even the World Health Organization held its charity concert on this platform to cheer everyone up at the beginning of the COVID-19 pandemic.

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A deals

M&A deals

Mergers and acquisitions in the Ukrainian IT market in 2020 were quite scarce. We can only recall the December deal for the purchase of 100% of Volia by DataGroup. The amount of the deal, traditionally, wasn’t disclosed, but according to experts, it can be in the range of $50–100M.

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Exits

The year 2020 was also not rich in exits: both in Ukrainian markets and in World markets. In Ukraine we can only recall 2 exits:

  1. SMRK Fund sold its share in Preply, while raising the next round of funding we mentioned above. Oleksandr Dovzhenko, the managing partner of SMRK, has named the multiplicator of 3,2x as a “not bad” result for the fund;
  2. Before the New Year, there was a rumour that AVentures Capital investment fund has sold their share in Ciklum, which they entered in 2019 along with Dragon Capital.

All things considered, most of the exits planned for 2020 have been pushed back to 2021, which is likely to be more favorable for the venture capital industry.

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Our expectations and how they were(not) met

Our expectations and how they were(not) met

At the beginning of 2020, we tried to look into the future and predict the development of the Ukrainian venture ecosystem for this year. We must admit that we didn’t take into account the COVID-2019 pandemic and its impact on the whole world.

We were wrong that iForum (Ukrainian Forum of Internet Entrepreneurs) will take place in 2020 — who would have thought that in spring there would be a complete lockdown and even the subway in Kyiv wouldn’t work! And it is naturally that in the fall, new offline events didn’t happen either, although the IT Arena (conference for the Ukrainian IT industry — Startup Jedi) in Lviv was held in an online format. In general, the events of 2020 are about various online formats.

We almost guessed with the development of VR/AR technologies in 2020, and online event formats only pushed them to develop. At the same time, we didn’t take into account the trend of voice/appearance replacement, thanks to which Ukrainian startups Reface/Respeecher today have achieved worldwide success.

And, finally, we guessed right with the development of new communication formats — Neuralink made an impressive presentation on hiring new specialists, and in general there was a trend of direct communication between the human brain and the computer (brain-computer interface). Plus, 5G and IoT technologies really received an additional impetus in development.

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Afterword

Summing up the results of the year, we have to note that despite all the difficulties that 2020 brought to the world (and we aren’t only talking about the pandemic that played a role), it was one of the most successful years in the venture business.

New funds have accumulated enough capital to actively invest in new businesses, and entrepreneurs have probably gathered their thoughts to respond to all the new challenges facing humanity.

Although, it seems we are running a little ahead, because we will talk about forecasts for 2021, as it is seen at the beginning of this year, in our next article.

16 Feb 2021

 

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