Wednesday, August 3, 2016

Why We Are Undervaluing Ukraine’s Tech Scene

                                                                                                 By Tewfik Cassis

The Ukrainian startup scene is stronger than ever despite multiple 
currency devaluations, the loss of Crimea and the ongoing war in 
the east. 

According to the latest Ukraine Dealbook report by AVentures Capital 
and Ukraine Digital News total venture investment in Ukrainian 
startups increased 237% year-over-year from 2014-2015, after having 
dropped 56% between 2013-2014. Last year there were a number of 
notable deals involving Ukrainian startups, the most significant 
being the acquisition of Looksery by Snapchat for $150 million.


With over 400 universities and colleges, Ukraine graduates around 
15,000 IT professionals per year according to the recent 
IT Ukraine industry report. All large Ukrainian cities are home to 
coworking hubs and private IT schools that offer mentorship and 
courses taught by industry professionals.

Evgeniy Vyborov is a business mentor at one of the coworking hubs 
in Dnipro, Ukraine, and is a great illustration of the kind of leaders 
who are pushing the Ukrainian technology sector forward. Recently, 
Vyborov served as a technical mentor with Boston Techstars and became 
CTO of a US-based company - but he’s also the founder of WebiNerds 
(a Ukrainian software development company) and co-founder 
of the UA50 community that helps Ukrainian startups enter the US 
market. With such a broad range of experience, Vyborov is one of the 
emerging leaders who understand startups and remote software 
development from both the Ukrainian and US perspectives.

Over the past five years or so, according to Vyborov, Ukrainian 
outsourcing companies have developed a solid understanding of 
the US business environment and the US startup sector, and it’s 
paying off. Though the legal environment in Ukraine is still a challenge, 
many companies are taking legal concerns seriously and, as a result, 
are winning the confidence of western partners. Vyborov explains that 
during due diligence, the legal documents and business relationships 
of US startups are scrutinized heavily by potential investors and any red 
flags, especially related to violation of intellectual property, pose a severe 
risk to raising money during the next round.

Venture capitalists are understandably wary of startups working with 
remote teams, but that’s mainly due to concerns about intellectual 
property and valuation. If those concerns are allayed, then working 
with professional remote teams from Ukraine or elsewhere can offer benefits 
to a startup or small business, including access to a level of developer 
talent that’s hard for startups to attract (and afford) in the states.

Vyborov explains that over the past several years US companies 
have increasingly been looking to Ukraine not just for cost savings — as 
in the past — but for quality and expertise. Top Ukrainian software 
developers and specialists are constantly being recruited by top 
international firms. There are now over 100 research and development 
centers in Ukraine, many connected to well-known global players 
including Boeing, Huawei, and Siemens. This shift from cost to quality 
is a trend across the Ukrainian IT industry, and is a promising sign 
for a country looking to build a brighter future as a 
well-educated, technologically-driven society.

As Yevgen Sysoyev writes in the IT Ukraine industry report
“Technological advances born in Ukraine are having a profound impact 
both on the world’s tech scene and in the country’s own business, social, 
and political life.” The outsourcing industry in Ukraine is booming, 
accounting for at least $2.5 billion in export revenue in 2015. The fruits 
of this labor can be felt as far off as Boston and Silicon Valley, where 
startups as well as large corporations are entrusting critical projects 
to Ukrainian IT specialists. IT offers honest work and a middle-class life 
in a country where the average GDP per capita is still only $3,900, and 
where many workers make far less.

Ukraine still has work to do, but the future’s looking bright for Ukraine’s 
tech industry leaders. With thousands of new IT specialists entering the 
labor market each year, a Deep and Comprehensive Free Trade 
Agreement with the European Union, increasing fluency in English, 
and a booming outsourcing and R&D industry, Ukraine is bound 
to attract more investment with the promise of great returns for years 
to come.



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