Why We Are Undervaluing Ukraine's Tech Scene

Why We Are Undervaluing Ukraine's Tech Scene
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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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By Tewfik Cassis

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