More than a year into the war, many European and global investors are still considering where and how they can support the Ukrainian startup ecosystem. A lot of progress has been made thanks to various grant programs launched by the government and private organizations, as well as special support programs for Ukrainian entrepreneurs.
Today we can already see the fruits of these efforts, but it would not be possible without the amazing resilience of the Ukrainians themselves. Even in the face of fires and power outages, they continue to make great things. Over the past year, our team has encountered many such talents. Some have moved, but most still have at least part of their operations and teams in Ukraine. Most Ukrainian startups (and the entire Startup Wise Guys portfolio) operate all over the world, serving foreign customers as a chance to survive the difficult domestic situation.
We definitely need to help Ukrainian companies through the crucible of war, but also consider ways to encourage the emergence and establishment of new early-stage startups to avoid a “demographic divide” in the ecosystem. need to do it. Addressing this issue requires consideration of emerging trends today.
Ukrainian ecosystem needs more early-stage startups
In the past few months alone, several high-profile funding rounds have been reported, including Finmap, an online financial accounting service for businesses, and Zeely, which develops AI applications for the development of small businesses, each raising €1 million. are procured. Ukrainian cryptocurrency startup Kolibr.io has secured his $2 million to develop a Web 3.0 service. Other well-known companies receiving investor attention and funding this year include Awesome, Fintech Farm, Gradual, DressX and Deus Robotics.
But most of the success is due to Ukrainian start-ups that had plans before the war began. Significantly more companies entered the market in 2019-2021, just before the outbreak of war, than in 2011-2018. Of the 83 companies surveyed, 57 were also founded during this period, according to a report by the Polish-Ukrainian Startup Bridge.
However, this positive trend was quickly halted by the armed conflict. In 2022, only 5 companies (under study) were established, 4 of which were established before the start of the war. Such results can be attributed, among other things, to the immigration of ambitious and tech-savvy entrepreneurs from Ukraine to different countries. Notably, Ukrainians have opened about 10,000 businesses in Poland since February 24, as data from Business Insider Polska reveal.
Many investors have stated that they are investing in Ukraine (Polish venture capitals are leading the way), but unfortunately most funds are too risky to invest in Ukrainian start-ups. and hopes to wait until the risk of war subsides. Statistically, unlike Western European VCs, VCs in the CEE region or countries bordering Russia are more active in funding startups for teams based in Ukraine.
On the other hand, start-ups that emerge during times of crisis often show remarkable resilience, assuming they can successfully navigate the challenges they face. In particular, these startups have demonstrated their ability to withstand the adversity of the past year by executing a bootstrapping strategy following significant funding cuts from venture capital firms.
This statistical evidence highlights their valuable viability. It is true that not all of these start-ups will ultimately succeed, but those that do will emerge as strong competitors within the market. Therefore, this presents an excellent opportunity for investors to take calculated risks and consider early-stage investments in Ukrainian start-ups.
Looking beyond military technology
The Russian invasion spurred the rapid development, renewal and export of new military (MilTech) and government (GovTech) technologies, inadvertently drawing global attention to Ukrainian products and their ingenuity. . MilTech producers are using this dispute to stress test their products. Estonia is already a world leader in GovTech and digital public services, using code for her Diia government service application in Ukraine. Other countries are expected to announce similar partnerships with Ukraine soon.
Currently, the Ukraine Startup Fund is working with the government to focus on projects in the field of defense and reconstruction. In one of its programs, he provides $35,000 in grants to start-ups in the defense, cybersecurity, healthcare, mental health, and education sectors. Another trend is the shift to alternative energy sources in both Ukraine and her EU, which has seen an alarming surge in the adoption of new clean energy technologies across solar power, grids, energy storage, batteries and electric vehicles. will lead to Startups in this space are expected to achieve great success.
The European Innovation Council (EIC) recently announced a significant investment of €20 million to boost innovation in Ukraine. Over 200 Ukrainian projects will receive support through the Seeds of Bravery initiative. Start-ups pursuing goals such as rebuilding Ukraine, fostering innovative entrepreneurship, providing innovative services, and commercializing scientific inventions (deep tech) will be eligible for these grants. Certain industries will receive more attention, but it is important to address the lack of funding for start-ups that do not fit into the aforementioned categories but contribute to job creation and tax payments.
Certain areas have been neglected during the war and need help to advance their business ideas. It is well known that Ukraine boasts a strong base in computer science and mathematics, which has led to the emergence of startups focused on artificial intelligence (AI) and machine learning (ML). Ukrainian start-ups are leveraging these technologies to develop innovative solutions for various industries such as healthcare, finance and e-commerce. The fintech sector is also growing rapidly in Ukraine, with a growing number of start-ups focused on payments, lending and personal financial management. Ukrainian fintech startups are leveraging blockchain technology to develop new financial products and services. Local agritech start-ups are developing solutions for precision agriculture, farm management and livestock monitoring.
These are just a few of the industries where supporting entrepreneurial efforts and encouraging new startups can have a meaningful effect. Therefore, it would be beneficial if venture capitalists could work with governments to recognize and fund the immense potential of these startups.
Work with seasoned founders
Veteran startup founders are highly regarded by VCs around the world. For example, there are several examples of highly successful companies and start-ups founded by ex-military personnel from Israel and the United States that have transformed various industries. Because of their psychological traits and discipline, veteran founders understand that they are responsible for people’s lives, so they can lead teams in high-stress situations and have a unique attitude towards leadership. take
Already in March, the Ukraine Veterans Fund began screening applicants for the #WorthDoingYourSelf fundraising program for veterans-owned businesses. The initiative was created to fund businesses run by the families of veterans and fallen defenders of Ukraine in the agricultural and agroindustrial sectors. We definitely need more effort and attention from foreign investors and those who want to support the Ukrainian startup ecosystem right now.
In addition to funding, we also need education and acceleration programs to teach entrepreneurship to such founders. The ability of the project team itself is also important for startup development. The most frequently cited deficiencies in sales and marketing competencies, competencies related to obtaining investment loans, and lack of business relations and language skills in some start-ups. A good example is his EIC initiative mentioned above, which not only provides grants but also promotion, guidance and access to foreign markets.
Women’s leadership became more prominent
As men serve in the Ukrainian military to protect the country, female founders and top executives are taking a more active role in running businesses, including startups. We are proud to include Akurateko, LetsData and Adminix among the startups in our recent investment portfolio. Both of these companies have female co-founders. It’s worth noting that some investors prefer founders who can travel internationally, even for short meetings. In this regard, female-led and diverse team startups have an advantage.
However, in Ukraine, women entrepreneurs are most likely to choose business areas related to the provision of services, such as opening kindergartens and schools, developing online and offline stores, providing beauty services, tailoring clothes, running confectionery shops, etc. many. According to Opendatabot, women most often run businesses in retail (43.6%), while computers only 4.9% of them run their businesses in programming and consulting. An increasing number of women are also opting for social entrepreneurship, such as creating jobs for people with disabilities. In addition, women-owned businesses create jobs for other women.
According to PricewaterhouseCoopers, 56% of Ukrainian women believe they lack knowledge in management, tax, marketing and other areas necessary to run a business. In addition, 52% of women reported a lack of confidence and 42% said they needed more funding sources for business development. A special mentoring and education program should be launched for Ukrainian women who want to develop startups to address these issues.
It is clear that women are stepping up their entrepreneurial spirit during times of crisis, holding leadership positions and starting new companies. This is a positive trend that highlights the resilience and capacity of women in entrepreneurship.
