Scaling Up: Accelerating Ukraine’s Tech Sector” ecosystem report
Short overview
The report is commissioned by u.ventures, a venture fund established by Ukraine-Moldova American Enterprise Fund.
Civitta, in partnership with u.ventures has prepared a comprehensive Ukraine’s tech ecosystem report “Scaling Up: Accelerating Ukraine’s Tech Sector”. The main goal of the report is to provide an overview of the Ukrainian startup and tech ecosystem, highlight its potential, identify gaps and outline key measures to strengthen it, as well as identify opportunities for investors.
The information in this report was gathered from public and private sources and was prepared solely for educational purposes. We understand the limitations of accuracy of data gathered, particularly from public sources and therefore we encourage readers of this presentation to share any remarks with us via email [email protected]
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, such as Grammarly, GitLab, Creatio, etc. At least 10 startups are approaching that status.
Since the large-scale invasion of Russia in Ukraine, almost half of the representatives of the IT sector have faced difficulties, and a tenth of them had to pause operations. However, despite the negative impact of the war, the Ukrainian tech industry quickly adapts to new conditions and sees opportunities for development and job creation. In particular, Ukraine has become the world’s leading hub for the development of 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 development of the Ukrainian startup ecosystem and undermines startups’ tech competitiveness. In the early stages of development, they are mostly 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 at the early stage of startup development. However, investments are not enough at the startup scaling stage and next periods of development.
There is a lack of knowledge of 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, many offering one-time off generic programs. At the same time, startups need high-quality ideatons 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.
