6 reasons to invest in startups from Ukraine
For more than three months, Ukraine has been at war with Russia. That might look like a red flag from an investor’s perspective, but everything is not so black and white in the country’s tech sector. …
For more than three months, Ukraine has been engulfed in the flames of a war with Russia. That might look like a red flag from an investor’s point of view, but everything is not so black and white in the country’s tech sector.
Tech companies with Ukrainian roots and core markets in the U.S. and Europe continue to operate uninterrupted after making sure their teams and data are completely safe abroad or in the west of Ukraine. Also, foreign embassies are returning to Kyiv, indicating that Ukraine’s capital could soon be safe enough for companies to reopen offices.
IT companies have demonstrated their resilience and ability to deliver results amid the worst of challenges. It is one of many reasons that make Ukraine a successful hub for future unicorns.
Let’s look at six reasons to invest in tech startups that hail from Ukraine.
They have proven their ability to withstand a crisis
The Ukrainian IT sector has shown unprecedented resilience, flexibility and ability to withstand any conditions during these months of war. Having prepared emergency plans in advance, many tech companies quickly relocated their teams to safety during the first days of the war or even before the fighting broke out.
Currently, many companies have spread their teams between offices in the west of Ukraine and abroad to ensure operations continue uninterrupted. They have minimized risk while maintaining discipline and access to the talent pool.
The majority of Ukrainian tech startups are still hiring
Nearly 90% of IT specialists haven’t seen any changes to their job or workload since the war began, according to a survey by DOU. This indicates that Ukrainian IT companies have reliable cushions.
More importantly, they continue to hire talent both to support their business and help the economy. The IT sector is the third-largest attractor of foreign currency into the economy in the country, which makes the sector vital for economic stability.
As the development of the IT sector is integral to the maintenance of the country’s GDP, the government fully supports it. For example, during the war, safe regions in the west of Ukraine turned into new hubs for IT companies.
Ukraine has an immense talent pool
Ukraine is one of the most popular centers for the development of IT. It’s where EPAM, Luxoft and other outsourcing giants have gathered a significant number of software engineers, business analysts and other technical specialists.
The number of IT specialists has also increased steadily in the last 10 years. For example, in the first half of 2021, the 50 largest Ukrainian IT companies grew their headcounts by 10,000 professionals. It’s also home to tech startups that are leading in their respective sectors — Jiji, Taimi, Reface, MacPaw and Headway, to name a few.
Startups are integral for creating a new layer of tech firms in Ukraine
Ukrainians want to go back home, and some have already done so. Of the nearly 7 million Ukrainians who had crossed the border since the start of the war, 2 million have returned, and more are on the way back. These people are showing they are ready to work hard to rebuild the country.
Another thing to consider is that the world is supporting Ukraine economically, providing a necessary resource base for an economic rebound. Combine that with Ukrainians willing to do their best to live better in their country, and you get very promising prospects for post-war development.
Today’s startups will become a foundation for a new layer of technology companies that will add significant value to the Ukrainian economy.
Ukraine is cost-efficient for building tech firms
Ukraine is one of the best countries for running a tech business due to its cost-efficient tax regime for IT companies and cost of living, per research by Doing Business.
The country also has a strong educational infrastructure for the study of tech, mathematics, finance and economics. And due to the increased demand for IT specialists, many large companies are opening their own educational centers and organizing internships. These trends are only gaining momentum.
The entire world is supporting Ukraine
Ukraine has been an underdog in Europe for a long time, and it lacked access to the capital it needed to get on par with its more developed neighbors. As a result, an array of bootstrapped tech companies have been growing rapidly without external capital.
This has helped founders become disciplined when allocating funds or scaling operations for their customers in other countries. The combination of such discipline and export-oriented product development is a fail-proof mix for sustainable growth. It also offers a strong opportunity that can be accelerated with investment.
At the same time, Ukraine’s international partners are providing necessary resources for the country’s economic rebound, so companies will have even more potential for global growth. The EU is standing in full solidarity with Ukraine not only by providing its people with humanitarian, political and financial support, but also by setting up a Ukraine Solidarity Trust Fund for rebuilding Ukraine after the war.
The current inflow of international investments, a favorable tax regime and a strong talent foundation combined with the Ukrainian people’s desire to come back to their home makes Ukrainian companies desirable investment targets.