Startup: Who will receive government funding for business development?

New Ukrainian entrepreneurs have the opportunity to receive $85,000 from the state to develop their businesses. In this article, we'll explain who exactly can count on such generous financial support from the budget and how the Ukrainian Startup Fund works.

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How many startups are there in Ukraine?

On June 18, 2021, the Ukrainian Internet Forum, iForum-2021 (hereinafter referred to as the Forum), was held in Kyiv. Live communication between representatives of the internet community was organized in compliance with all quarantine requirements.

Photo on iforum

Interesting reports on several topics were presented on two stages of the NSC “Olympic”:

• advertising and promotion;
• Internet technologies;
• Digital FUN;
• future; 
• startups.

Photo on iforum

One of the Forum's speakers was Oleksandr Bornyakov, Deputy Minister of Digital Transformation (Ministry of Digital Development, Communications and Mass Media), who provided information on domestic startups. According to him, there are no more than 4,000 startups in Ukraine.

For comparison:

The expert explained that the main problem is that our country lacks a structured startup ecosystem. There's only a "gap between the early stages and the stage when venture capital firms are ready to invest" (the so-called "valley of death").

Ukrainian Startup Fund

A specially created organization, the Ukrainian Startup Fund, is working to address this issue. The project aims to support the interests of Ukrainian entrepreneurs, first and foremost.

The fund's mission is to facilitate the creation and development of technology startups, supporting them in the early stages (pre-seed and seed) to increase their global competitiveness.

Promising founders of their own businesses who operate outside the country but are ready to return and develop their business in Ukraine can also count on its assistance.

Who can compete for a grant in Ukraine?

In order for a startup to receive a grant from the state, it must participate in a competition.

A sole proprietor or company registered in Ukraine may enter the competition to receive state support.

The goal of a startup should be to make a profit and achieve a social impact by bringing new technologies, solutions, and products to the market.

The activities of a company or sole proprietorship must be globally oriented and based on scaling the business model.

The maximum possible investment amount is $300 thousand (for all time)

The total income for the previous year of business activity is no more than $300 thousand.

Image by geralt from Pixabay

According to the expert, the Ukrainian Startup Fund is the largest domestic angel investor today, with participants eligible to receive $85,000 in government funding for development.

"That's why we've created special conditions for startups at Diia City," assured Alexander Bornyakov.

Ukrainian startups can submit a grant application to the Fund at any time. This can be done on the official website by following this link.

The Foundation's Acceleration Program

Promising startups can also receive a special grant to participate in training programs at renowned domestic and international accelerators. We will discuss this area of ​​the Foundation's work in more detail in one of our future articles.

Special offers for startups from Diia City

Дія City— a special legal regime for domestic technology companies.

The purpose of his work:

• stimulate the development of the digital economy;
• creation of Ukrainian innovative products;
• development of domestic IT education.

The project aims to provide startups with the best tax conditions in Eastern Europe. Furthermore, it plans to gradually introduce the most popular global support practices for aspiring entrepreneurs.

State aid to participants of Diia City 

On July 15, 2021, the Verkhovna Rada of Ukraine adopted Law No. 4303, which regulates the operating conditions of Diia City.

IMPORTANT!

Resident companies will be able to pay less taxes

Entrepreneurs will be able to choose the tax rate:

• on profit (18%)

• on withdrawn capital (9%)

The law has passed its second reading. For Diia City to fully launch, the Ukrainian parliament (also in its second reading) must vote on bill No. 5376 amending the Tax Code. A reconsideration is scheduled for the fall.

After this, people will be able to apply to participate in Diia City and become its residents. The project will run for 25 years.

Who can become a resident of Diia City:

• software or computer game developers
• companies from related fields (robotics, cybersecurity, etc.)

The Cabinet of Ministers will add more areas over time.

Who cannot participate in Diia City:

• those involved in developing gambling games 

Participation in Diia City is an opportunity to pay:

• 5% personal income tax
• minimum unified social contribution (currently it is 1320 UAH per month)
• military tax of 1.5%

Now companies that work with full-time employees pay0.415

Resident companies of Diia City can employ:

• Sole proprietor
• workers on a contract basis

What innovations await us?

Gig contracts

The law introduces the concept of "gig contracts"—labor agreements that a resident company can enter into with an individual to perform specific tasks.

Attracting venture capital investment

The state intends to adapt many structures that are the “standard for venture capital investment in the world” to the realities of Ukrainian business.

According to Bornyakov, the use of a special regime will stimulate the arrival of venture capital funds in Ukraine.

"This will happen in Ukraine, and you won't have to go anywhere," says the Deputy Minister of Digital Transformation for IT Development.

Less taxes

Freelancers and entrepreneurs in the creative economy will be offered special, more lenient, taxation mechanisms.

So, if you intend to start your own business, you can do so with government support.