Since February of this year, Ukraine has been fighting against Russian invasion. Amid the onslaught of bombings and atrocities, Europe’s wider startup community has been standing firm to support Ukraine, and to bolster what was a thriving ecosystem of innovation.
In 2019, Mariupol, a city now devastated by shelling, received two smart city awards – ‘Startup City’ and ‘Best City Transport Model’. Kharkiv is known to be the birthplace of Ukraine’s first unicorn, Gitlab. While Odesa is home to well-known startups like Looksery (now owned by Snapchat). Ukraine’s tech scene was thriving thanks to a highly-skilled workforce and a commitment to innovation. The country was also developing itself as a leader in fuelling the green energy transition with promising developments and innovation in climate and green tech. With a strong tradition in the energy industry, it was a nation pushing forward developments in renewables, electric vehicles and the use of hydrogen.
Earlier this year, we documented some of the major initiatives that startups across Europe took – finding this a great way to highlight the strength of solidarity and how we can rally together for progress. In June, a new initiative came forward – specifically to help Ukrainian deep tech startups, and it’s gotten support from the European Innovation Council.
Sparked by the CEO of Estonian supercapacitor startup, Skeleton Technologies, Taavi Madiberk, in his role as a board member of the European Innovation Council, a €20 million support fund has been launched.
The fund will support immediate organisations, such as startups, enterprise support centres, incubators, accelerators and so on that are established in Ukraine or that have had to relocate since Russia’s February invasion. It gives particular attention to supporting women-led companies working on innovative solutions that will help Ukraine rebuild and recover.
We chatted to Taavi as well as TechUkraine Director Nataly Veremeeva to find out more.
Before the war began, how would you have described Ukraine’s startup ecosystem?
Nataly: Before the war, Ukrainian tech sector was actively growing. IT Outsourcing segment was the 3rd biggest exporting segment of UA economy, we have 3 Unicorns and a vast number of successful international product companies. The number of startups was increasing, new and new investors were entering the market and high-risk seed and preseed financing was covered by the state Ukrainian Startup Fund. You can find the exact numbers here.
Taavi: Before February 24, 2022, Ukraine had – and still has – one of the fastest-growing startup ecosystems in Europe. As Nataly alluded to, in 2021 Ukrainian IT exports grew 36% year-on-year to a total USD 6.8 billion, representing 10% of the country’s total exports. This growth was set to accelerate further in 2022 until the full-scale war started.
Europeans don’t always realize but Kyiv alone is home to over 1,000 successful startups and product companies and has several startup clusters. One of them is UNIT.City, the biggest innovation park in Central and Eastern Europe. Ukraine’s IT growth was not only driven by Kyiv, though, but by other cities too. In 2019 Mariupol received two major international smart city awards: “Startup City” and “Best City Transport Model,” while Kharkiv is the birthplace of the first Ukrainian unicorn, GitLab. Lviv is also a top city for startups and IT specialists, hosting the Lviv IT Arena every year, one of the main IT events in CEE region. Many Ukrainian cities are startup cities, as you can see.
Besides the startup ecosystem, Ukraine has also been extremely innovative in terms of e-administration, much more than most countries that are members of the EU. In 2019, Ukraine began implementing the “Country in a Smartphone” program. Hundreds of public services were digitalized, just as Estonia also did. The “Diya“ smartphone application was central to these efforts and became the main personal ID for millions of Ukrainians.
It is important to note that the digital transformation of Ukraine also doesn’t rely on the purchase of imported solutions. Instead, it was based on the tailored work of Ukrainian IT engineers. This is only natural given the remarkable rise of the Ukrainian IT sector over the past few decades.
The Key Verticals
In Ukraine, the key tech verticals have traditionally been in fintech, business software, hardware, cybertech and martech. However, as noted by Taavi, energy tech and agritech have been thriving in recent years.
Taavi: I want to highlight the key role Ukraine can play in Europe’s energy transition.
Thanks to its tradition of industry and innovation, the production of equipment for renewable energy, batteries, electric vehicles, hydrogen and other solutions to get rid of dependence on fossil fuels will probably be a major focus of the revival of Ukrainian industry. Regarding AgriTech, there are very promising startups with excellent hardware developers, for instance offering drones to spray fields, or offering urban farming solutions. I have no doubt these verticals will boom in the near future.
The EIC Fund
Launching a €20 million fund to support startups and innovation in Ukraine is not only a concrete sign of support for the nation from the heart of Europe, but it is also symbolic of the promise the startup ecosystem there holds. It reflects the strength of the innovation and entrepreneurial community and shows a strong commitment to the long-term recovery of Ukraine.
Supporting over 200 Ukrainian deeptech startups, which are either still in Ukraine or have since relocated to the EU, the fund will help young companies continue operations and move closer to the EU tech sector.
The Key Aims
Taavi: More than 70% of Ukrainian start-ups are continuing to operate despite the war and they need support. It is critical that continuity is not broken. Ukraine had developed a great tech sector over the years, and this is particularly true with respect to deeptech. Deeptech requires strong cooperation between science, research, and business, and this has to remain. And deeptech strongly needs public backing, especially in the development phase. Last but not the least, it is important to integrate these companies into European markets, and the European innovation ecosystem. This will benefit Europe as a whole.
Investing in Ukrainian tech is investing in the European tech of the future.
The fund will give out grants of up to €60,000, to Ukrainian deeptech start-ups, as mentioned, in addition to providing business advice and matchmaking services.
We wanted to take a deeper look at the fund, finding out how it came about and the power behind it. So, what prompted Taavi to push for this initiative?
Taavi: When the full-scale Russian invasion of Ukraine started, I immediately realized that all kinds of support was going to be needed for Ukrainians to win this war, and that it was the responsibility of all Europeans and all European organizations. I couldn’t imagine doing business as usual. The discussion was initiated at the EIC Board meeting in Paris in early March and I am very glad that the European Commission moved quickly. The work done by Commissioner Gabriel has been impressive. We now need to make sure this money and support is delivered to the companies as soon as possible.
How does this fund represent the strength of Europe’s wider startup community?
Taavi: It shows Europe’s wider startup community truly considers Ukraine’s tech ecosystem to be a European ecosystem. Thus, Europe is willing to support it and boost and strengthen ties between the Ukrainian tech community and the rest of Europe.
There’s a strong will to help, using any and all means, and in most European countries, the startup community has been very much involved in supporting Ukraine. So this fund represents our strength: it is not only about putting financial resources, but also about providing business advice and cooperation between ecosystems.
Why is it so important that we keep investing in Ukraine? How can we convince VCs to keep doing it?
Nataly: First of all, most of the startups are alive. They are searching for investments and have interesting ideas, worth putting money into. Second, IT is the most flexible segment of economy, with no heavy infrastructure and with high flexibility. Usually, all that is needed is to relocate people from high-risk areas to lower risk – and the work goes on. Third, now is the unique time to test ideas in such areas as military tech, cyber security, logistics, healthcare, working with content – not in theory, but in real-life situations.
This is a unique opportunity to quickly shape the product, test it and make it ready for the market with minimal investment and in the shortest time.
Another aspect is the social one. We do need to maintain jobs in the sector and we look at UA Tech as one of the locomotives for the Ukrainian economy, its sustainability and quickest recovery. If you want to support Ukraine – invest in our startups and let’s establish win-win synergies
Taavi: The Ukrainian IT sector has shown unprecedented resilience, flexibility, and the ability to withstand incredibly difficult conditions during these months of war. Ukrainians are fighters, they are winners. Despite the war, Ukrainian startups are not giving up or closing their businesses. More than 70% of them stayed in Ukraine despite the war, continuing to operate and develop their products. Their determination is extraordinary. Most Ukraine-based IT specialists I have spoken to are working tremendously hard and tirelessly since February 24th, with the majority of Ukrainian tech companies even still hiring. They want to support their business and their economy.
The country has it all: an excellent education system, particularly in STEM; tech unicorns; the entrepreneurial mindset.
For European tech and innovation, Ukraine will soon be as important as France, Germany, or Poland. Once the conflict is over, Ukrainian innovators will bring the many tech solutions created during the war to global markets. International interest is likely to be intense.
After the war, the country will need modern solutions more than ever. Startup solutions are an opportunity for the Ukrainian economy to reopen. The economic battlefront is extremely important, that’s why it is so important to maintain Ukraine’s innovative potential, to protect what they have achieved.”
Beyond money, how else can we support Ukraine’s startup and tech community?
Nataly: There are currently numerous programs that are shaped to support Ukraine, it is all in process, everybody is shaping something. We at TechUkraine also need help in our activities. We serve as a connector and communicator about UA Tech abroad and are preparing a number of initiatives, including a more structured channel of communication with startups. We accept donations, you can do this here. For any other investments please contact us at [email protected] and we will direct you to the right initiative and organization.
Ukraine’s tech and startup community have been proven to be resilient and flexible and it clearly has the ability to withstand challenges and difficult conditions. Supporting the development of new innovations, encouraging entrepreneurship and promoting Ukrainian tech are some of the ways this country is continuing to show its strength and will help pave the road to recovery. It’s encouraging to see the support from Europe isn’t wavering – there’s strength in solidarity.
Taavi: We all need to ramp up our efforts to help Ukraine win this war, so I want to tell all Ukrainians that we will keep supporting them until their victory and beyond. I deeply admire all Ukrainian entrepreneurs who are still running their business despite the war. Their resilience and ability to deliver results amid the worst of challenges is one of many reasons that make Ukraine a successful hub for existing and future tech unicorns. I have no doubt that integrating Ukraine to the European tech ecosystem, is going to give a huge boost to Europe’s tech, research and deeptech.