Startups in Ukraine: More than just a war zone or outsourcing hub
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Majdan Niezaleznosci, Kiev / Image source:

My interview with Andrey Kolodyuk from Aventures Capital, a leading VC fund in Ukraine

I spent a few weeks in Ukraine this summer, attending tech conferences, visiting cool software houses, and outsourcing firms. Along the way, I was lucky enough to meet with great business people and investors. Ukraine is a great country full of amazing and talented people.

During my travels there, I caught up with Andrey Kolodyuk from Aventures Capital, a leading VC fund in Ukraine for a short interview where he shared some valuable insights about his country’s ecosystem.

Pavel Curda: Which companies from Ukraine do you find the most promising and why?

Andrey Kolodyuk: Today there are more than 2000 startups in Ukraine. Of course all of them cannot be promising and successful. But such a quantity shows big Ukrainian potential, especially in the IT sector. The situation is changing day by day, and every week a new Success Story is burned. In my opinion today PetCube and PaymentWall are the most promising.

Paymentwall, is a payment platform for games, virtual goods, and web services available in 200 countries [and territories] with $2 billion in revenue. It started out from a cooperation of the American Honor Gunday and the Ukrainian Vladimir Kovalyov. Now it faces a prospect of pursuing an IPO within 3-5 years.

Petcube, the company that keeps people connected with their pets, offers a free mobile app for iOS and Android devices as well as a Petcube Camera — their interactive pet monitor. The Petcube Camera is the first product that allows pet owners to watch, talk and play with their pet from their smartphone, no matter where they are. Petcube was funded on Kickstarter and became one of the most successful crowdfunding pet products in history. Some people may think that the Petcube idea is too extravagant, but the worldwide sales show that people like the product.

What does Ukraine need to do to improve its startup ecosystem?

Ukraine needs more investors on all stages, as well as new accelerators and incubators. We have enough projects for local and international investors. Investors look at the startups very pragmatically. If they see the picture of a war zone on their TV somewhere in San Francisco, they will hardly believe that everything is not as bad as it seems. If they see these [descriptions of the violence] on TV and believe it, then they won’t send a dime towards a startup in such country.

We need to show them the real situation is that only 1/5 of Ukraine’s territory, which is 700 km south of Kiev, is affected by the fighting.  The rest of the country remains in the same steady pace of life. People go to work, companies provide services and produce products, banks issue loans, people travel around the country and abroad, they go to the restaurants and bars. Life actually goes on pretty well here.

By the way, 10 new investors entered the Ukrainian market in 2014. In this list we can find such names as Torben Majgaard, who is the founder of Ciklum, Digital Future Fund, SMRK, Almaz Capital, the venture capital firm Life.SREDA, the Sikorsky Challenge innovation park as well as a number of other venture investors.

What are Ukraine’s strengths as a startup scene?

We have over 2,000 startups, about 100 global R&D centers, more than 500 outsourcing firms, and 100 e-commerce companies. All told, as of late 2014 the total value of this ecosystem succeeded in surpassing the $5 billion mark. Of course, the figure could have grown higher if it wasn’t for the general economic downturn last year. The nature of Ukrainians is that they are really hard working people. They see new opportunities and challenges, and they are not afraid to spend the capital they have in order to build an idea into a profitable business.

Ukraine is rapidly developing. Most of the Ukrainian IT projects are targeting the global market, which I believe increases their luck in finding investments. Today for many Ukrainian projects there is only one investor, their client. That`s why the focus of the Ukrainian market is customer oriented products from the first day. From this perspective, there is no time to work for an investor since we studied to work for our customers.

Which underreported stories from Ukraine’s startup scene do you think the media needs to know and why?

Our main problem is an information vacuum, especially in the business and political press. There are only a few resources where we can find Success Stories from the IT sector. There are hundreds of small projects in Ukraine that deserve greater attention. I believe that the way to success is to fill in the information field, because it is necessary to write about the present and future heroes.

It is a pity, but now most of the success stories never make it into the mainstream. The media likes to report on cases of investment with billions of dollars, while the others are often overlooked. But we must understand that such projects as Skype and WhatsApp also started with small investments of $200-300k. By the way, it`s an unknown fact in Ukraine that WhatsApp is the success story of our compatriot Ian Kum.

I’ll give you a fresh example. The popular messaging app Snapchat recently bought Looksery, a 2-year-old startup that lets you Photoshop your face while you video chat. The deal is said to have cost Snapchat $150 million.

Also very few people know about Viewdle that was bought by Google back in 2012. Viewdle is a mobile-focused visual analysis company creating computer vision and recognition technologies for consumer products.

How has the political climate affected Ukrainian entrepreneurs?

IT specialists today are active in the political life of the country. This parliament includes 10 representatives from this sphere, as well as another six people entered into the government in the Cabinet of Ministers and other executive authorities.

Despite the EuroMaidan revolution, the annexation of Crimea and the start of the war in the east of the country, the Ukrainian IT and Start up community industry has still managed to get 60 new venture deals signed. There were over 30 deals made so far in 2015, at a pace of at least one deal per week, and we expect $100,000 investments in the projects on all stages to continue through to the end of the year.

The EuroMaidan revolution ended over a year ago, and now Ukraine is a dynamic developing country. This is the spirit that is present in the air. It is carried by talented and educated people, who were being robbed for way too long when opportunities are scarce, are now ready to create opportunities for themselves.

Everyone can feel it, visiting Ukraine. Because it’s easy to determine passionate, open-minded and freedom-loving people. And for young Ukrainian entrepreneurs, building a global tech company is a chance to prove to the world that they are up to the challenge.  

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  • Mikronos

    Any photoshopping program to remove those garish advertising ‘juggernauts’ from the buildings in downtown Kyiv? They’re an eyesore.

  • Dave Thomas

    Great article! Thanks very much, Pavel!