“Scaling Up: Accelerating Ukraine’s Tech Sector” ecosystem report

The Ukrainian startup ecosystem has demonstrated steady and rapid growth over the past 10 years. From 2013 to 2023, the contribution of IT to GDP increased by 5.7 times. Ukrainian-born startups have reached unicorn status, including Grammarly, GitLab, and Creatio. At least 10 startups are approaching that status.

Since the large-scale invasion of Ukraine by Russia, almost half of the representatives of the IT sector have faced difficulties, and a tenth of them have had to pause operations. Despite the war’s negative impact, the Ukrainian tech industry has quickly adapted to new conditions and identified opportunities for development and job creation. In particular, Ukraine has become the world’s leading hub for developing DefTech solutions.

In general, the Ukrainian IT sector continues to play a crucial role in the development of the country’s economy and ranks second in the attractiveness rating for IT outsourcing in Central and Eastern Europe and 7th in the world in terms of IT competitiveness. In addition, the Ukrainian ecosystem is among the top 50 in the world and shows positive dynamics for the second year in a row.​

Investing in Ukrainian startups provides better value for money than in the US, with valuations of Ukrainian startups averaging six times lower. Ukrainian startups generate five times more revenue per dollar invested compared to US startups, despite US startups receiving much higher valuations.

Despite significant progress, several areas of the ecosystem still need support and modification. In particular, there are gaps in the legal protection of investors and intellectual property rights, and there is a lack of funding for startups. Low investment in R&D hinders the development of the Ukrainian startup ecosystem and undermines the tech competitiveness of startups. In the early stages of development, they are primarily funded by VC funds and grant programs.

At the same time, the ecosystem lacks qualified and experienced business angels, which limits access to smart money during the early stages of startup development. However, investments are insufficient during the startup scaling stage and in subsequent periods of development.

There is a lack of knowledge among startup founders in the field of business education, which leads to gaps in management, sales, and marketing. Local accelerators are struggling to find sustainable business models, with many offering one-time, generic programs. At the same time, startups need high-quality ideations and hackathons, incubation programs, and acceleration support in specific areas of knowledge.

As a result, Ukraine loses its best talents. At the same time, it is not attractive enough to specialists from other countries. In particular, in the Fragile State Index 2024 rating, Ukraine ranks 7th in the world in terms of “Human flight” and “Brain drain”.

In conclusion, the Ukrainian IT sector is actively developing and claims to be a global technological player. According to the Startup Genome methodology, the startup ecosystem of Ukraine is currently moving from the Late Activation phase to the Globalization phase. To reach the highest level, Ukraine should have more than 1000 experienced and professional startups that will generate income of more than $100 million.