Investing in Ukrainian startups

Thousands of new companies emerge in Ukraine every year. Many businesses get off to a successful start thanks to investors and participation in accelerator programs. Early-stage support helps avoid mistakes and accelerate startup growth.

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Early stage investing 

Dividing investments into stages is convenient for investors and startups themselves: it makes it easier for them to find each other, focus on the segment of interest, and not waste time on those who are not suitable for them.

There are three early stages of attracting investment:

• Pre-seed (pre-sowing stage);
• Seed stage (sowing stage);
• Round A.

Pre-seed— pre-seed or initial stage of investment. Financing at the product idea stage.

Seed-round(Seed stage) — financing of an already tested business model hypothesis.

Round A(Revenue) - investments that allow for the global scaling of a product for the mass market.

How much was invested in startups in 2021?

According to research by venture capital fund AVentures Capital, in 2021, domestic startups attracted a record $832 million in investments.

$242 million of which was raised at early stages, from Pre-seed to Round A.

Among the most active investors providing funding to young businesses in the early stages of their development are the Ukrainian funds Flyer One Ventures, ICU Ventures, and U. Capital.

The following IT industry representatives made the Forbes.ua TOP-10 for 2021, including Ukrainian unicorn startups.

Unicorn startups

Until 2018, there was not a single “unicorn” startup in Ukraine, i.e., a company whose market capitalization exceeded $1 billion.

But over the past four years, the nation's tech sector has more than doubled in export volume and grown by more than 50% in employment.

In 2021, domestic IT exports reached a record $7 billion, which undoubtedly contributed to investment.

Today, there are already several Unicors in Ukraine. These include tech companies People.ai, Genesis, Grammarly, and Gitlab.

Last week, the Ukrainian business automation startup AirSlate (formerly PDFfiller) joined the list of unicorns.

Investment assistance 

According to a March survey by the Ukrainian Startup Fund (USF), 99% of startups require financial support due to the full-scale war unleashed by Russia. Who is helping Ukrainian startups during this difficult time for the country and businesses?

• The state program for financing IT startups, as well as the investment initiative of the European Innovation Council (more details -Here). 
• A European project allocates funds to support Ukrainian entrepreneurs.EU4Business. 
• Ukrainian food company Jooble has launched a program to support the creation of new business projects.Product Innovationsand intends to invest from $100 thousand to $2 million.
• Google has created a $5 million fund to support Ukrainian businesses.Google for Startups Ukraine Support FundThe Polish accelerator Huge Thing is responsible for this. It plans to finance 50 Ukrainian startups in 2022.
• Denis Dovgopoly, founder of the startup incubator GrowthUp, with support from UCU Business, has created a grant fund with an initial budget of $2 million and plans to raise at least another $5-10 million. The startup's early investment target is $50,000.

Mastercard's acceleration program for Ukrainian startups

Mastercard announced the opportunity for Ukrainian startups to participate in the Start Path acceleration program. This collaboration was made possible thanks to support from the National Bank of Ukraine and the Ministry of Digital Transformation. The program is scheduled to launch this fall, but applications will be accepted this summer.

What is Start Path?

Start Path is a global support program for tech startups. Its goal is to help established new businesses scale quickly.

This is made possible by access to Mastercard Inc. technology, the involvement of expertise, and the use of the capabilities of the partner network of a powerful financial corporation.

More than 300 startups worldwide have already received support from Start Path. Among the program's most notable alumni are successful fintech startups:

• CNote, a women-led investment platform;
• Doconomy mobile banking, which promotes an environmentally responsible lifestyle;
• Revolut, a financial service that allows you to buy and sell cryptocurrency;
• Subaio application for automating credit scoring processes.

Now Ukrainian startups will also have a unique opportunity.

What kind of assistance will our fintech startups receive?

In the first stage, five Ukrainian startups will receive support in scaling and accelerating their business development.

Over the course of 6 months, they will be provided with several types of assistance:

• mentoring support;
• access to resources;
• Networking with leading Mastercard experts.

We will discuss the operating principle of accelerator programs in more detail in the next article.

Conclusion

Due to the full-scale war, Ukraine dropped 16 spots in the new Global Startup Ecosystem 2022 ranking, landing in 50th place. The war has negatively impacted the Ukrainian startup ecosystem.

It is important to encourage the emergence of significantly more entrepreneurs creating IT product companies in order to support the economy.

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