Ukrainian Tech Startups

I always return from my vacation in Ukraine with a few new books to read. There are many good book publishers nowadays, who provide a continuous stream of interesting books on Ukrainian language.

This time, among the books I’ve picked, there was one special. Not only it stood up on front of the others with an orange cover, but it also was about technological companies founded and now working in Ukraine.

Book name is “Стартап на мільйон. Як українці заробляють статки на технологіях”, which can be translated as “Startup for a million. How Ukrainians earn capital with technologies”.

Companies

It is about 14 Ukrainian companies that became successful based on technologies.

• Depositophotos
• Genesis
• Na’vi
• Grammarly
• Macpaw
• Prom.ua
• Rozetka.ua
• Jooble
• Viewdle
• Kodisoft
• Приватбанк
• Ecoisme
• Petcube
• Preply

Most of those companies are startups.

Findings

Before I started reading this book, I only knew 6 companies from this list, and had no idea that 2 of them are from Ukraine.

I decided to read the book during my flight back to Seattle. Soon I've realized that it was a right choice: such an interesting book to me that I’ve finished it by the moment I got to my destination. I always find flights a good place to read, but this time it was quite productive too. Lots of notes and highlights were left on the pages of the book and my notepad. Mostly related to 2 main topics: doing business in Ukraine and creating tech company.

Many years ago, I’ve heard that it is hard if even possible to create a successful IT business in Ukraine oriented on local market only: market is too small, local companies can’t offer competitive salary to software engineers or pay for software, and law is often too flexible to rely on it.
Companies described in the book prove this: with an exception of a couple companies, other’s have to work on external markets, which usually give a major income. Companies, like Genesis and Jooble, tried to create business oriented on local market, but that wasn’t enough for them. The only exception for this rule, is a couple of e-commerce companies: Rozetka.ua and Prom.ua (I don’t mention Приватбанк as it is a bank.)
Easy to make a conclusion that if you want to make a profitable start up oriented on Ukrainian market, it should be related to e-commerce. Not sure this conclusion is correct though.

Another finding is related to investments. Most of the companies accepted investments. Only few were financed by founders solely. Reason is obvious: not everyone had enough savings to invest into own company. Companies, who accepted external investments also received advices from investors on how to build a business.

There are 2 types of founders: serial entrepreneurs, who had already 1 or more companies behind their backs and professionals for whom that was a first company. Former benefited from existing connections, experience and capital. Later benefited from experience gained at previous work and also from investors suggestions.

Existing experience couldn’t be overestimated. Founders that had already created profitable business before, have higher chances to build a successful business.

Many companies are registered abroad (e.g. in USA) with a sister company in Ukraine, that does all the development. This helps to manage risks related to the IP and sometime unstable situation in Ukraine. HQ or development offices are mostly in Kyiv. Many founders emphasized numerous advantages of Kyiv among other capitals in Europe and world: good environment, low prices, lots of software engineers, reasonable salaries, close to EU etc.

There are always co-founders. Example with Rozetka.ua shows that wife could be a co-founder as well.

Connections are very important:

• useful to know suppliers like it was with founder of Rozetka.ua
• useful to have existing connections like it was with Grammarly
• useful to have friends who could introduce you to useful people like with Genesis
• useful to know the best around like it was with Na’vi

Each of those companies had a bad time at least once. Either there were no financing, or idea didn’t work or profits were too small etc. But all of them withstand raining days and are going to their next goal.

Lo and behold, companies with a focus on profit/success are the one that receive highest profits.

Highlights

I’ve made a lot of highlights, and want to share here only some of them:

• “Вони зазделегідь підготувалися і перед звільненням відкладали гроші, щоб прожити якийсь час без зарплати. За словами Палієнка, на момент старту Prom.ua партнери мали досить заощаджень на рік-півтора економного життя.”
• “Їсторії, коли людина стає успішною, виїхавши зі своєї культури вже дорослою, - вкрай рідкісні. Вони є, але в загальній масі статистично незначущі.”
• “Я не дуже розумію людей, які звідси їдуть. Київ - одне з найкращих місць для життя.”
• “Перші гроші Prom.ua заробив вже за кілька місяців після запуску - на рахунок компанії “впало” $5 завдяки реферальній програмі AdWords.”
• “У той час їхній проект заробляв досить скромні $500 на місяць, але навіть такі доходи давали чималий привід для оптимізму… тільки на рекламу за перший рік було витрачено $15-20 тис.”
• “Перший рік - це час дуже великої кількості експериментів, суть яких - адаптувати продукт під ринок. Головне - не впадати в зневіру й безупинно експериментувати, підганяючи продукт під ринок на базі тестувань, здорового глузду й того, що роблять конкуренти…”
• “система аналізу даних може підказати, що замовити з певною стравою, і вивести список найпопулярніших справ у цьому закладі на основі відгуків інших клієнтів.”
• “хребтом, на якому тримається тіло компанї, є стратегія.”
• “Стартапери часто забувають, заради чого все почалося. Вони відхиляються від необхідної стратегії і, впираючися у перепони, звертають у той бік, куди їм простіше рухатися. При цьому обрана спочатку мета може опинитися не попереду, а за спиною.”
• “Наступні два роки Чечоткін реінвестував до 90% прибутку в розвиток бізнесу.”

Conclusion

It is possible to create a tech startup in Ukraine. However, at this moment you might need to focus largely on external markets. You also might benefit from registering company in US or EU.

Kyiv is a great place for HQ. Cities like Kyiv, Lviv, Kharkiv and Odesa are great places for development and R&D office.

First years would be the hardest, but founders should not lose focus and work hard to achieve success.