March 14, REDHerring
Ukraine has stumbled from a revolution to a standoff with big neighbor Russia. But the country’s tech sector is looking up thanks to a hotbed of talent, and a willingness of that talent to hone its skills abroad. The giant nation of almost 46 million, Europe’s second largest by area, is home to a growing number of ventures, many of which are making good money.
The tech sector’s reaction to the ousting of President Victor Yanukovich has been, like the majority of the population, positive. “When Yanukovich came to power three years ago the widespread point of view among our fellow entrepreneurs has been set to: ‘We should think of moving our business outside Ukraine to a more safe place’,” says Peter Bondarevskyi, co-founder of Coppertino, a Ukraine-based startup. “But now as the political climate has changed, Ukraine got worldwide recognition.”
Yevgeniy Shpika is CEO of TopTechPhoto in Kharkiv, one of Ukraine’s fastest-growing startups. His biggest fear is that investors will be unwilling to pump funds into ‘unstable’ Ukraine, although he says the impact of pro-Russian demonstrations in the east of the country is exaggerated. “Kharkiv is in its everyday routine.”
Protests have restricted the amount of work startups can get done amid a revolutionary spirit: “To be honest, the main problem is that all those events are taking us off from working on a product. But we can’t step aside when such things happen and we recognize the events happening right now as a major shift in the society that should be supported by us in any possible way.”
“Some of us were participating in the clashes in Kiev and other cities. Most of whom I know were at least once on a march or a meeting in support of the revolution.”
Kiev, a metropolis of almost three million people and by far Ukraine’s biggest city, is home to 44 percent of startups, according to data compiled by Forbes. Both of the tech sector’s largest conferences, IDCEE and iForum, are based in the capital. E-Commerce is big in Kiev. In fact almost a third – 32 percent – of all startups are e-commerce ventures. The next most popular is online services with 23 percent, and software at 21 percent.
Gaming comes fourth on the list, with 14 percent of all companies working in the field. Siege Hero, a Viking-themed Angry Birds facsimile, was created by WarSpark, a tiny studio in the eastern city of Zaporizhia. It has over 100,000 reviews on the App Store. Room8, headquartered in Kiev, built the award-winner Riot Runners, before turning to Cyto, a plasmic puzzler that is garnering good reviews. Tatem, also in the capital, boasts a large selection of children’s games. Mokus, maker of the sublime Contre Jour, is based out of Lviv.
Shpika is buoyant about the skill of Ukrainian tech graduates – many of whom qualify with one of the country’s highly-regarded mathematics or engineering degrees. But he admits that funding, from government level, is scarce. “We have constant problems with financing and business development,” he says. “Our internal market is also pretty small. So our path is mostly alike Israeli startups – go global early, get seed in the motherland, start selling in U.S. as soon as possible.”
Bondarevskyi is also positive about the Ukrainian workforce, explaining a good developer or UX specialist can be hired for $3,000-$4,000 per month. He estimates a seed investment of $300,000 in Ukraine is equal to $1.5 million funding in Silicon Valley.
There are more reasons to be cheerful: 61 percent of tech companies in Ukraine are turning a profit. Meanwhile, 47 percent already have 20 to 50 employees and are “growing fast.” Sysoyev values the entire Ukrainian tech sector at $1 billion currently, but predicts that it will grow to $2-3 billion in three years, and $5 billion in five to seven.
Whether that will happen given the difficult events of the past few months is debatable. It’s hard to see many top-level investors piling cash into a nation that seems on the brink of civil war. But for now, Ukraine’s tech pros can feel proud of a vibrant scene they’ve created almost entirely on their own.