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The startup ecosystem of Ukraine

The startup ecosystem of Ukraine

13 Dec 2019

Despite numerous troubles in the economy, the industry of innovative entrepreneurship develops dynamically in Ukraine. In the last few years, several unicorns appeared in the country, and some projects are about to become unicorns. Since 2015, the Ukrainian market of information technology has grown twice, and what’s important, the growth tempo is not slowing down. According to the results of 2018, the IT sector in Ukraine grew by 19% and till the end of 2019 experts predict the growth by 30%! Amazing, isn’t it? Let's see why the startup ecosystem of Ukraine is so remarkable.

Startup Jedi

We talk to startups and investors, you get the value.

Problems and achievements

According to the East-west digital news data, news and research agency, at the beginning of 2018, Ukraine still belonged to countries with an emerging startup ecosystem. In comparison, Russia, Poland and Hungary were considered countries with the already formed startup ecosystems, Belarus — with an actively developing ecosystem. However, during 2018–2019, the situation has changed and that saying a lot. A demonstrative example: in Spring 2019, Kyiv was ranked 34 among more than a thousand cities in the world startup-cities rating, created by StartupBlink researching company. In addition, Ukraine was ranked 31 in the startup countries rating from the same company.

Ukraine is ranked 4th in the world by the number of certified programmers. At the beginning of 2019, about 184,000 people in 4,000 IT companies worked in the IT sector in Ukraine. The IT sector in this country is growing on average by 20% per year, for comparison in Europe, this figure is 6%.

According to the catalog of the IT-market, more than 100 companies, that are included in the Fortune 500 rating, use the services of the Ukrainian developers. Referring to the information from the same source, Ukraine ranks 24th in the rating of the most attractive countries for software development.

The country has managed to maintain a strong scientific base, there are many qualified programmers, however, if we talk about launching and developing startups, the founders face several problems. Many Ukrainian startups are forced to focus on the West and look for funding abroad because the opportunities to attract funding to the project in the country are not yet as great as in the West. In addition, many Ukrainian programmers find work abroad and try to launch and develop their projects there, only a few people decide to do this in their motherland. However, even here there are exceptions and vivid stories of returning to the country, this should not be forgotten.

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Startups

According to the data of StartupRanking, in 2018, Ukraine took 43d place in the rating of countries by the number of startups, back then it was 258 startups. And in the first half of 2019 there were functioning more than 320 startups. The dynamics are incredible. What kind of startups are being developed in Ukraine?

Let’s have a look at the most successful and interesting projects.

Grammarly

One of the most famous Ukrainian startups — an online AI-based service checking literacy of the English texts. The company was founded by Max Lytvyn, Alex Shevchenko and Dmytro Lider in 2009, and became profitable in 2011. The system corrects context orthographic mistakes, corrects typical grammar mistakes, offers more relevant lexical variants, offers a range of common phrases and proverbs.

Now, there are 4 million registered users, and the company’s products cover about a 2 billion audience — those are native speakers and people who are learning English.

The project attracted $110 million in 2017, and $90 million more in 2019. The value of the company now is more than $1 billion, and it means that it has officially become a unicorn.

GitLab

The project founded by the Kharkiv citizen Dmytro Zaporozhec. The startup attracted about $400 million investments, among its investors are Khosla Ventures, Google Ventures, Y Combinator, Goldman Sachs. This is an online service for developers, that helps them to work with code and its versions jointly from various places around the world. About 100 000 organizations use the system. Currently, the project’s value is estimated at $2.7 billion.

Genesis

A Ukrainian project created by Vladimir Mnogoletniy with the headquarters in Kyiv. It is a large Internet product company that operates in fast-growing markets in Africa and Asia. Genesis combines many services and sites: a dating site in Central Asia, news websites in Nigeria, Kenya, Ghana and South Africa, a sports application BetterMe.

The project presents itself as one of the most fast-growing IT-businesses in Ukraine, about 150–200 million unique users from around the world visit the service’s resources monthly.

People.ai

A service that analyzes the work of sales managers based on emails, calls, CRM’s, messengers and helps them to work more effectively. A program, having studied the work of a specific manager, creates individual recommendations on how to find new clients and make more deals.

The startup attracted $450 000 from business angels, $7 million from GGV Capital (so to say, it is the main investor of such world-known services as Airbnb, Alibaba) and Lightspeed Venture partners (the first investor of Snapchat) in 2017. The project attracted $30 million more in October 2018 and some more $60 million in May 2019. As of May 2019, the startup value was estimated at $500 million.

The startup founder is a Ukrainian citizen of Dnipro — Oleg Rogynskyy.

PetCube

One of the most famous Ukrainian startups that was founded in 2012. Petcube is a camera with a laser pointer, thanks to which you can remotely play with your pet via the Internet (for example, if neighbors complain about the dog barking while you are not at home). This was the original idea. Today it is a brand that offers users several types of devices, a social platform, and develops an algorithm for analyzing animal behavior with elements of artificial intelligence.

During the period of its existence, the company attracted more than $ 14 million in investments and sold more than 100,000 devices in 18 countries.

Looksery

A startup from Odessa. It’s a service for face image transformation in real-time, founded by Victor Shaburov. Looksery’s filters track the form and expression of the face and allow you to adjust the video image: to change your eye color, nose size, face shape, and the like.

In 2015, the startup raised more than $ 46,000 on Kickstarter. The company received the bulk of its revenue from licensing its technology, with a turnover of $1 million per month.

In September, the startup was acquired by the American company Snapchat for $150 million.

In December 2019, Victor Shaburov sold his other AI Factory startup to Snap (which owns Snapchat) for $166 million.

Nimses

The project was launched as a geolocation social network with its own currency, which in perspective had to be converted into real money. The idea of creating an application appeared in the framework of research on the influence of the Internet and social networks on a person from the view of neurochemistry, sociology and psychology. The project became viral in 2017.he application became one of the leaders in the number of downloads on the App Store and Google Play in Russia and Ukraine in just four days after the launch. However, after several months, the popularity, unfortunately, began to ebb.

The application can be downloaded even now, however, now its rating is not that high. In September 2019, information about financial difficulties in one of the most hyped Ukrainian startups began to appear in the media.

After registration, each lived minute of a user is converted into one Nim — unique application’s currency. Having accumulated a sufficient number of Nims, you can post your own content, evaluate someone else’s, develop your brand, community, media.

Hushme

The startup product is a device, which makes your phone calls soundless for others: with the headset turned on, your conversation will not be heard even by those who are a meter away from you.

In October 2018 appeared information that the startup raised $8 million in equivalent on a Japanese crowdfunding platform CAMPFIRE. Earlier, it has raised $70 000 and $50 000 on other similar platforms.

Nevertheless, in July 2019 the startup team made an announcement about the technical problems preventing the start of the shipping (in particular, disconnecting Bluetooth when charging, and calibrating the internal and external microphones). For this very reason, they had to postpone the shipping date to September 2019. But since then there are no updates from the team about the compliance to that plan.

Cardiomo

Another one smart device, developed by Ukrainians, that tracks the heart performance. This gadget monitors the human condition in the real-time mode. A small device is mounted in the area of the heart, and constantly records and processes the electrocardiogram. If the device sees a deviation from the norm, the user receives a notification that he needs to have some rest or seek medical help.

The founders of the project are a Ukrainian couple of Ksenia and Roman Belkins. In December 2019 this medtech project joined the Netherlands accelerator Rockstart Health and moved to the Netherlands. The accelerator invested 95 000 euro in the startup in the beginning and will invest 300 000 euro more during the acceleration program which will last for 1 year.

PassivDom

A self-contained house, some elements of which are printed on a 3D printer. The developers note that the house is 100% independent of the availability of electricity and gas: all of its systems operate exclusively from solar energy. Sewerage and water can also be autonomous — as a separate option. On the project’s website, the basic version of such a house costs $ 54,000.

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Venture investors in Ukraine

Despite the fact that due to the legal problems of copyright and property rights protection in Ukraine, founders often register their companies abroad, venture capital investments have been present on the Ukrainian market for several years.

Let’s see which are the most famous venture investors in Ukraine.

U.Ventures

A venture fund that was founded in Kyiv in 2017. The initial capital size was $5 million. The fund invested in such startups like YouTeam (a startup from Lviv, it is a marketplace for hiring software developers for projects of the medium and long perspectives); 3DLook (this startup masterminded a technology for scanning a human body from a photo, which helps customers to choose clothes of the right size on online platforms); Pufetto (a startup that helps to sell furniture, the service immediately calculates the prices, taking into account the selected upholstery, sizes, mechanisms).

Ukrainian National Startup Fund

A governmental investment fund for startups. The initial size — 50 million hryvnias ($2 million).

AVentures Capital

A venture fund that was founded in 2012. It is both an investment fund and a consulting company for mergers and acquisitions. The fund manages $30 million. It invests in seed-stage startups and is focused on such areas as software, e-commerce, cloud services, mobile technologies, IoT, IT outsourcing. Among the projects that the fund has invested in, there is the Petcube startup — a gadget that plays with the pet while the owner is not at home. The device is equipped with a camera, speakers, microphone, laser. You can remotely take a photo of the animal, control the laser.

UFuture

A Holding company of the Ukrainian entrepreneur Vasyl Khmelnytsky, which combines his investment, business projects and social initiatives under a single brand.

The company has a diversified portfolio of assets in real estate, infrastructure, industry, renewable energy, pharmaceuticals, and IT. Currently, UFuture’s assets are estimated at $550 million, and the total capitalization of the businesses it invested in is more than $1 billion.

Magnetic One Ventures

A Ukrainian venture fund that was founded in 2016. It invests in technological companies at the early stages. The fund searches for young innovative companies and entrepreneurs with Ukrainian roots. Also, it invests in startups that develop their products in such industries as information technologies, internet projects, innovative and high technologies.

Noosphere Ventures

A venture fund that was founded in 2014. The headquarters is located in the USA but the company also works in Ukraine. The fund invests in projects in such industries as space and satellites, big data, fintech, social and mobile games, advertising and marketing, mobile technologies, social networks and e-commerce.

TA Ventures

A venture company, that invests in projects from CIS and Western Europe, and also, from the USA. It manages the venture fund TA Ventures, whose primary capital was $50 million. The company invests in innovative startups in the sphere of web-technology 2.0, it is also interested in projects from e-commerce, online-tourism, financial online services and mobile applications.

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Startup infrastructure of Ukraine

Different kinds of incubators and accelerators in Ukraine started to emerge only in the last few years. This is due to the development of the startup ecosystem, interest in the field of innovative entrepreneurship in the country, as well as the initiative of civil society and many commercial and non-profit organizations. Here are some of the most famous platforms for the projects’ development in Ukraine.

1991 Open Data Incubator — a non-profit incubator. It was founded in 2016. The incubator programs help to make new business connections in the entrepreneurship environment, as well as in the public sector. The incubator held more than a dozen successful programs in partnership with government authorities, international organizations, business community. More than 150 projects graduated from the incubator. In total, they attracted more than $1 mln investments.

A Unit.City innovative park was founded in Kyiv in 2017. The park works with startups from such industries as AI, machine learning, IoT, augmented and virtual realities, SaaS, cybersecurity. The aim of Unit.City is to become one of the largest centers of innovation in the region and an entrance point to Ukraine for companies from all around the world.

SectorX is an accelerator, that was launched with the support of Unit.City and UFuture investment company. SectorX helps Ukrainian startups enter European and Ukrainian markets. Even startups without a product can participate in the program. The areas that are interesting for the accelerator are AR, VR, AI, computer vision, big data, robotics, IoT, blockchain.

Startup Ukraine is an educational center for entrepreneurs in Ukraine, that started operating in 2012. Since that time, more than 17000 people have taken part in the center’s events and programs. Graduate projects are WOW Detox (a program for weight loss and recovery), Drommel Furniture (its product is furniture in a minimalistic style).

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Conclusion

The startup ecosystem of Ukraine has started to develop actively in the last few years. Now Ukraine has launched a huge number of unique startup initiatives, many of which have been successful, and some have even become unicorns. Currently, the country is one of the world leaders in the number of people working in the field of IT and shows annual growth in the field of information technology.

Many investors in the country are ready to invest in innovative projects at the initial stages of their development.

In recent years, the first accelerators and incubators appeared in Ukraine, many graduate projects were able to not only launch their own products but also attract investments and enter the world market.

13 Dec 2019

 

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