More than a year of Russia’s illegal invasion of Ukraine has passed, and the eyes of the world are still on the situation in the region. There’s no doubt that the conflict has caused significant devastation and loss of life, but its impact also extends beyond the immediate humanitarian crisis.
The economy, the Ukrainian startup ecosystem, was once thriving and attracting significant investment and has also been affected by the devaluation caused by the war. And Ukrainian startups have lost value in the past year, regardless of their business success. They are simply riskier. However, despite the challenges, Ukrainian startups have displayed remarkable resilience, and support from the global tech community and other countries, especially the closest ones such as Poland or Czechia, has offered hope for the future.
The Pre-War Ukrainian Startup Ecosystem
Before the war, Ukraine’s startup ecosystem was making great progress, with impressive numbers in terms of funding and the number of venture capital firms operating in the country. In 2021 alone, Ukrainian startups raised $832 million in VC funding, indicating a growing regional investor interest. The tech industry in Ukraine boasted approximately 228,000 members, with major tech hubs located in Kyiv, Lviv, Kharkiv, Dnipro, and Odesa.
Ukraine can now be proud of at least six startups with more than $1 billion valuation, some of which are well-known to a broad audience worldwide. There are brands such as GitLab, Grammarly, Genesis, Bitfury, People.ai, and Firefly Aerospace on the list. These success stories demonstrate the potential of Ukrainian startups and contribute to the overall growth and reputation of the country’s tech ecosystem. What it also brings is that the existence of these companies puts a spotlight on the Ukrainian startup scene and makes it easier to get funding to make it survive the current crisis.
Challenges Faced and Resilience Demonstrated
The ongoing war has obviously resulted in significant challenges for Ukrainian startups. The conflict has forced many entrepreneurs and tech professionals to relocate abroad, with approximately 57,000 individuals seeking safety in other countries. Furthermore, around 7,000 tech workers have joined the Armed Forces, or Territorial Defense ranks, displaying their dedication to defending their country against the aggressor.
The Polish-Ukrainian Startup Bridge conducted a report on the impact of Russian aggression on Ukrainian startups, shedding light on their challenges.
According to the report’s findings, the war in Ukraine has significantly impacted the activities of startups and the way they operate. Regarding competence development of employees, 82% of respondents found certain forms of competence development effective. However, the conflict has caused disruptions, with casualties among employees being reported by 96% of companies. Tragically, some companies have experienced the loss of team members who were involved in defending the country.
Regarding the location of startup headquarters, the majority (61%) did not change their location after the war began. However, around 25% of companies had to relocate temporarily, and 16% reported more frequent changes in their place of operation. Relocating poses significant challenges for these startups, including reorganizing workplaces, ensuring access to technology, maintaining a stable internet connection, and providing office space for employees. Nevertheless, 10% of the surveyed companies relocated to safer regions within Ukraine to continue their operations.
As a result of the conflict and the need for safety, almost 70% of the analyzed startups now work remotely. This decentralization of operations is a response to the challenges faced by the companies, with some remaining in at-risk regions, some moving to safer locations within Ukraine, and others relocating abroad.
So it may be concluded that Ukrainian startups have demonstrated remarkable resilience despite the hardships. Many companies have kept at least a part of their operations or team within Ukraine, and more than half continue to operate exclusively from the country. These startups’ determination and perseverance highlight the spirit of innovation that remains strong in Ukraine, even in adversity.
Support from the Global Tech Community
It is worth noting that many startups have received support from their foreign contractors and partners during this challenging period. The wider tech industry has rallied around Ukraine in the past year, providing support and resources to help startups survive and thrive. For example, Google granted funds to 25 Ukrainian startups to enable them to continue their operations and growth. The European Union, as part of Horizon Europe, allocated targeted support for Ukraine out of a substantial research and innovation budget, providing further opportunities for Ukrainian startups.
Opportunities for Other Countries
The devaluation caused by the Russian invasion has created a unique opportunity for other countries to benefit from Ukraine’s talented tech workforce and innovative startup ecosystem.
Let’s take the example of the Czech Republic, with its proximity to Ukraine and a thriving tech industry. It can offer a supportive environment for Ukrainian startups looking to relocate or establish a presence abroad. Czech companies have recognized the potential of collaborating with the Ukrainian startup scene, driven by a business-oriented mindset rather than charity. Despite the risks associated with investing in Ukraine, Czechs believe the advantages outweigh the uncertainties. Ukrainian technologies have proven more robust than expected, opening up unique opportunities for Czech companies to engage in fruitful partnerships.
Mentioning after CzechCrunch, there are at least several great examples of Czech entities working closely with the Ukrainian startup scene.
Aspichi – a Czech startup that specializes in virtual reality technology. The company has found new applications for its technology in Ukraine, including capturing cultural heritage sites and using VR for psychological trauma treatment and medical training.
ZLD – is another Czech company that develops software for information protection, asset security, and personal security. ZLD has presented its technology in Ukraine and has gained contacts and potential project opportunities.
On the capital side, Nation 1 is a Czech venture capital fund. While it was focused on projects in Western regions, Nation 1 also has started conversations with Ukrainian startups and is considering investments in Ukraine.
Such collaboration between Ukrainian and Czech tech communities fosters knowledge exchange, investment opportunities, and economic growth for both countries. But what is even more significant, it may have a good impact on regional partnerships positioning CEE well on a global startup scene.
Make Startups, Not War
The Russian invasion of Ukraine has undoubtedly caused significant damage and hardship for the country and its startup ecosystem. However, Ukrainian startups have shown remarkable resilience and have received support from the global tech community. The devaluation caused by the war has created opportunities for other countries, such as Czechia or Poland, to benefit from Ukraine’s talented tech workforce and innovative startups. The war caused the relations between Ukrainian and European neighbors to become much closer. It also means that besides political, military, or humanitarian aid, countries like Poland and Czechia may contribute to the growth and success of the Ukrainian startup ecosystem while reaping the benefits of this emerging tech hub.
