If there's one sector in Ukraine that embodies resilience, it's the tech scene. It not only employs people, but drives innovation globally across a multitude of sectors, from AI in game development to smart building tech, materials innovation, and bionic prostheses.
Tech was the only sector to remain robustly operational over the last year in Ukraine (despite the challenges of displaced team members and military service).
But Ukraine's tech scene was thriving even before the invasion of Ukraine by Russia, the country's tech scene was thriving — Ukrainian startups raised $832 million in VC funding in 2021.
That said, four Ukrainian companies accounted for 62% of all 2022 funding: airSlate, Preply, Fintech Farm, and Spin.AI. (airSlate also reached unicorn status).
The country is also home to over 50 VC firms.
One of these companies is SID Venture Partners. In under two years, the fund has participated in 15 investments. I spoke to General Managing Partner, Dmytro Vartanian to learn more.
Founders investing in founders
What I like about SID is that this is a company of founders investing in founders.
For example, Dmytro Vartanian is also CFO at Sigma Software. Illia Polosukhin is co-founder of NEAR Protocol. Vlad Beck is the co-founder and CEO of Black Snow Games. Anton Vaisburd is CEO and co-founder of Datrics, and Veronica Korzh, co-founder of WOD Insight.
Vartanian describes the firm as "by IT geeks for IT geeks," investing in early-stage (pre-seed and seed) software companies.
From economic downturn comes opportunity
He shared his thoughts on the rapid growth of Ukraine's startup ecosystem:
"20 years ago, there were only 1000 developers in Ukraine. Nowadays, it's over 300,000 IT specialists in Ukraine, many of whom hone their skills on then create their own startups.
But we noticed that working in big IT companies doesn't always provide you with the skills and experience to grow a startup, develop new products or acquire new customers."
Today's Ukrainian startup ecosystem is global both in terms of location (for obvious reasons) and reach. For this reason, Vartanian stresses, "We invest in Ukrainian founders, not Ukrainian companies."
Globally, Q1 2023 proved to be another tough quarter for the VC industry, with funding the lowest in five years.
Vartanian shared how his team leveraged this to gain access to deals at better terms and scout even more successfully.
In Q1, it welcomed three new companies InputSoft, HAIQU and Propertymate.
"We remain confident in our ability to navigate these uncertain waters and are committed to keeping our shareholders informed of our progress."
Research by AVentures Capital reveals that despite the war, early-stage investment in Ukrainian companies remains higher than average.
The largest drop in Ukrainian investment volume was in growth and secondary deals, which usually constitute the majority of deal volume.
Advice for Startups and Scaleups
I asked Vartanian how he would advise startups (or scaleups) currently seeking to raise funds. He shared:
"I always tell startups to try to be on the break-even level. Even though a lot of VC funds, like our fund, are raising money, they will only spend it slowly, they will wait and expect regular updates from startups.
During this time, your money will be exhausted".
He offered blunt advice:
"One option is to fire everyone not political for your startup and try to survive the year. Because I believe the current situation will not last long."
He asserts that the next year's US Presidential election will stimulate the investment economy. Further, besides the usual preoccupation across investment with AI, Vartanian also suspects that web3 will return — and grow — along with AR.
Until then, most IT companies continued to see revenue growth, which is a testament to the sector's resilience.
Ukrainian Startups to watch
SID Ventures Partners' portfolio offers a great suite of Ukrainian software companies to watch. Some notables:
HAIQU
HAIQU builds software to enhance the performance of error-prone quantum processors, enabling them to perform computational tasks that, until recently, were impossible. The company raised $4 million in pre-seed funding in June this year.
Elai.io
Elai.io is a text-to-video platform that allows users to generate AI videos with real humans just from text. The whole process — from URL or text source — could take under 3 minutes, with videos later being used for learning and marketing purposes.
Awesomic
Design platform Awesomic offers a monthly subscription service that connects businesses worldwide with skilled designers and developers, predominantly from Ukraine.
It successfully gained an additional $800k in funding in March this year to double down on expansion and product lineup.
LIKI24
Kyiv-based Liki24 has created a B2C e-commerce pharmaceutical platform powered by a proprietary software system that integrates with pharmacy ERPs. It aggregates stock from thousands of pharmacies to resolve price variation, limited availability, and lack of home delivery.
In 2023, LIKI24 increased its EU business share to 15%+ after setting a strong foothold on its first Western European market, Italy.
NewHomesMate
NewHomes Mate (Formerly known as Propertymate) helps US homebuyers to search, compare, and buy new construction homes. It digitises and simplifies the new construction home-buying process by matching buyers with homes.
The company raised $5.5 million in funding in June this year.
Lead image: ThisisEngineering RAEng
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