What makes Ukrainian hi-tech attractive to investors?

In his recently published research, Yevgen Sysoyev, AVentures Capital managing partner, in collaboration with his colleagues provided analysis of 250 transactions, which over the last three years, had involved more than 1000 Ukrainian startups. Having posted this Herculean project in English, the entrepreneur expects to demonstrate high intellectual potential of Ukraine to the world community.

The venture capital market in Ukraine is just emerging: some five years ago it didn’t even exist, but it actually grew rapidly in the years 2012-2013. The ecosystem today keeps growing; new members range from new local investors, startups, industrial associations of various kinds to educational and media initiatives. Both western investors and numerous local funds have an increased focus on Ukrainian entrepreneurs.

The takeover of the Ukrainian cloud service Semantria.com by American Lexalytics was the major M&A transaction on the Ukrainian market within the first ten months of 2014 (the research limits itself to this period). Semantria.com specializes in providing services of semantic texts analysis for the small and medium-sized businesses. The transaction amount might allegedly have come up to $10 mln. The amount of funds attracted on several other deals of the outgoing year exceeded the symbolic mark of $1 mln. Startups Advice Wallet (Settle), Gillbus, Keen Systems, Podorozhniki, Starwind Software, Topmall, UkrGerman have been specifically mentioned. Part of the deals traditionally remains beyond the scope of public field.

What is the reason behind the investors’ steady interest in Ukrainian IT-projects? Forbes suggests that the opinions of the leading venture funds representatives might give some clues.

High level of education

Александр Галицкий, учредитель и управляющий партнер Almaz CapitalAlexander Galitsky, Almaz Capital founder and managing partner

In virtue of a number of factors Ukraine really has formidable hi-tech sector. One of the reasons for this is high level of education, particularly in the sphere of exact sciences, which may be largely viewed as a Soviet educational system legacy.

Proprietary unique technologies

Кирилл Цеховал, директор Intel Capital в России и СНГKirill Cehoval, Intel Capital Director in Russia and the CIS

Intel Capital is one of the major global investors in hi-tech companies, which spends $300-500 mln annually with roughly half of this sum outside of the USA. We have been working in the CIS since 2000 and consider Ukraine one of the most attractive IT-hubs in the world. […]. Within the last 10-15 years Ukraine has changed from the outsourcing platform for major corporations to a much more diversified market capable of creating proprietary technologies.

Profitability

Бахром Ибрагимов, технологический инвестор в регионе CEEMEA в EBRDBakhrom Ibragimov, technological investor in CEEMEA region in EBRD

I consider Ukraine attractive for venture capitalists. […] The cost value of business start-up and further operating activity is very competitive and young quick-growing companies, which demonstrate impressive efficiency results, may serve as a good example.

Global ambitions

Роман Симонов, управляющий директор Siguler GuffRoman Simonov, Siguler Guff Managing Director

An enormous number of engineers, who are engaged in international projects, predetermine the emergence of Ukrainian companies with global ambitions. We are currently negotiating with several such companies and plan to close a couple of deals this year.

Existence of successful businesses

Василе Тофан, директор Horizon CapitalVasile Tofan, Horizon Capital Director

Our investments range from Datagroup, a leading telecommunication operator, to Ciklum, one of the leading IT-outsourcing companies. Since our investments amount usually comes up to $15-40 mln, we are geared to developed successful companies which need capital for further growth. It is comforting to know that in Ukraine the number of hi-tech companies, which need investments of such scale, is increasing.

Source: forbes.ua

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