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Kydalov & Partners

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IT-startups in Ukraine: It’s Time to Start

Ukraine, as a potential country for doing business, is often discussed by foreign investors, despite the fact that the ratings of favorable legal environment of Ukraine is not too high. The main reason for the low ratings of favorable investment climate in Ukraine is corruption and overly regulated legal regulation of business.

In fact the risk of corruption in Ukraine really becomes smaller, although Ukraine is far from development European countries in this issue. Of course, much depends on the field, characteristics of a particular market segment/sector, because the associated risks are still high, where there is a subjective decision-making by state government officials. And these risks are high for Ukraine in the classic sectors ( such as construction, production of goods, agro-industry, mining, etc.), while in new areas, such as IT-sphere, sphere of services, the risk is smaller, and sometimes is non-existent. That’s why the IT – sphere remains one of the most promising areas for investing in Ukraine.

Nowadays the IT – sphere of the Ukrainian economy actively develop: in addition to the Internet and computer technology, there are more projects related, for example, with robotics, education, services, B2B and B2C – solutions. Taking into account the direction of the state government of Ukraine considerable effort to create electronic government, it is created a significant market for G2B – solutions (the online non-commercial interaction between local and central government and the commercial business sector with the purpose of providing businesses information). Also, the trend not only in Ukraine but all over the world, is continue to remain mobile applications, and the most popular are projects under the cooperation of IT – sphere and other areas, such as cryptocurrency, online payment services, IoT – solutions, etc.

Undoubtedly, the Ukrainian investment market is still risky and unpredictable in view of the current economic condition of the country and the processes taking place in Ukraine, including those associated with military operations in the east of Ukraine. But first, you need to understand that nowadays the objective conditions in Ukraine are not so bad as some people say, otherwise the investors would not invest into Ukraine in general any means. Secondly, Ukrainian ideological potential is very high, and can produce new products, as skills, knowledge and talent of Ukrainian specialists are very high and are recognized by many authoritative experts in the industry. And thirdly, the potential investments in IT – sphere are much more protected than in the classical industries, as any IT – project can be quickly withdrawn to any other country, because it is not connected firmly (physically) with the Ukrainian resources.

Also, the investors should take into account the aspect of the devaluation of the national currency of Ukraine (hryvnia). As a result of the devaluation of the hryvnia, Kiev, the capital of Ukraine with more than with 3 million inhabitants, is one of the cheapest cities in Europe, while Kiev has a very high level of infrastructure, good air communication with Europe, a sufficiently high quality of life, a significant number of qualified human resources, and accordingly – many opportunities to start and grow your business. Thus the creation of new start-ups in IT – sphere in Kiev will cost 5 or even 10 times cheaper than, for example, in the USA or Western Europe. Other economically development cities of Ukraine, such as Kharkov, Dnepropetrovsk, Lvov, may also be interesting for investors.

Based on the written above, that’s why the process of investing into the Ukrainian start-ups, in spite of the risks and complexity does not stop, and some large investors, such as the Open Society Foundations (OSF), are ready to invest into Ukraine more than 1 billion$.

Separately we want to say that the Ukrainian market is ready for a compromise terms of cooperation with potential investors, and a compromise is possible, and discussed not only with the owners of start-ups but also with the legal and consulting companies operating in the Ukrainian market. I think some of the legal and consulting companies are quite ready to discuss with investors rather not only a fixed fee for their work in the legal field or consulting on maintenance projects, but participation in their work and expertise in projects in return for a stake in such projects. This approach not only allows you to run start-ups with less initial investment but direct interest the legal and consulting companies in the ultimate success of the start-ups. In any case, the Ukrainian market is interesting enough and the sphere for possible forms of cooperation is large.

Author: Kydalov Igor


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Kydalov & Partners
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 3 reviews
by Bruce Weldon on Kydalov & Partners

Ukrainian programmers are very qualify and hard-working. And they can be used for distance work for example for outsourcing by Internet.

by Anna Novikova on Kydalov & Partners

I'm fully agree with you. Now it's time to start all from scratch there. And i think that government of Ukraine is inerested, so you can not be afraid to start a business in Ukraine, with the government's support.

by George on Kydalov & Partners

I agree that Ukrainian IT-sphere is very interesting and profitable but Ukrainian rules and laws are something incredible (in bad sense)

Publication Date: 04.05.2015
Views: 2.7K


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