Just getting started: how Ukraine’s startup scene is weathering the war

Ukraine has been physically and socially decimated and 5 million citizens have fled. Amidst the turmoil, some up-and-coming Ukrainian entrepreneurs are refusing to budge. With war raging on, can Ukraine’s previously flourishing startup ecosystem survive?

Ukraine’s Ministry of Economy predicts the nation has lost between USD $564 billion and $600 billion. That’s 4 times the country’s annual GDP.

Against impossible odds, Ukrainian citizens hold their heads high. Over 16,000 IT graduates joined the Ukrainian workforce in 2021 – double the UK’s numbers despite its smaller population. It now has a massive surplus of tech workers, many of whom have tragically been forced to put down laptops and take up arms.

Putin’s invasion of Ukraine came suddenly and without warning. Within hours, fledgling Ukrainian startups found themselves at an impasse: hurriedly relocate their ventures to other countries, cease operations, or keep calm and carry on.

A fledgling tech haven

Before the war, Ukraine was home to over 400 startups. Gitlab, Grammarly, and Preply hit rockstar levels in the international tech scene. Over 120,000 IT professionals and a favourable price-to-quality ratio made Ukraine a haven for tech conglomerates like Microsoft, Siemens, and Samsung.

The average monthly salary of an IT professional in Ukraine is USD $845. However, most Ukrainians average out at USD $398. It’s no wonder Ukrainians are flocking to the IT field. More money, more opportunities, and a chance to make an impact in the startup ecosystem.

Ukraine’s capital city Kyiv has been the national highway for tech professionals to jumpstart their careers. LIFT99 Kyiv Hub Community Builder Inna Shylova said in 2020, “Kyiv in particular has the potential to turn the Ukrainian startup scene into one that’s as vibrant and buzzing as Berlin or Tel Aviv, if not more.”

With countless hackathons, team workshops, and conferences, Kyiv ended up as a haven for IT professionals looking to network and expand their career opportunities.

Startups aren’t stopping

Since the Russian-Ukrainian war began, investment rates have dropped by 37%. Startups had to take alternative routes to operate their business during wartime activities. Some decided to relocate their day-to-day operations to different countries. While others, like fintech Ukrainian IT, opted to stay in Ukraine and work in safer cities.

But why? In a fit of defiance against Putin’s Russia, Awesomic co-founder Stacy Pavlyshyna gives the response: “Army wins the battles, but we need to win with the economy.”

Many IT employees are finding ways to work despite the horrors of war. Outcrowd co-founder Natalia Alimaskina reports her colleagues worked from their cars while fleeing. A few tech companies go as far as to work at the office, despite sporadic air raid sirens filling the air every now and then. And when bombing hits? Off to the basement to chug out code.

Dr. John Salmon, an American pathologist and partner of mobile and web dev startup Cleveroad, said: “They actually picked up speed. I mean, I approve every line of code, as it’s written, so I can see how fast they are working, in real time. They’ve worked harder. The project manager told me: ‘We have to do this. This is how we fight.’”

Startup diaspora

Remote work, relocation services, and financial incentives are helping keep things afloat.

Defiance is admirable, but for a lot of Ukrainian companies, safety comes first. With bombs dropping, troops invading, and all-around chaos in many major cities, startups have planned for the worst.

Vista Vice President Vadim Nekhai has prioritized team safety above profits: “For each team member who is currently located in Ukraine, we are providing financial aid to assist with increased expenses during this time, including temporary relocation within Ukraine or abroad if that is someone’s personal choice.”

Unfortunately, many US-based companies are struggling to help their Ukrainian employees.

Ukraine has 285,000 IT professionals in the workforce in 2021. Due to heavy supply and demand, many US-based companies employ Ukrainian workers for their day-to-day operations. And their US-based CEOs are doing as much as humanly possible to keep them safe.

US-based Grammarly was founded by three Ukrainian students wanting to improve language communication in 2009. Today, it’s valued at USD $13 billion. After headquartering Grammarly in San Francisco, the co-founders promised to donate all revenue earned from Russia and Belarus to Ukrainian causes. They have also promised a year of paid leave to Grammarly employees joining the Ukrainian Armed Forces.

Ukraine’s entrepreneurial past

Ukrainian entrepreneurs got to work soon after the dissolution of the Soviet Union in 1991. It was a brave new world after a dark period of censorship, state ownership, and constant shortages of goods. New opportunities opened themselves up for any man or woman wanting to change the world.

In 2020, the total venture capital and private equity investment into Ukrainian startups was USD $571 million. Now, when they should be leading the country onto the entrepreneurial world stage, businesses are having to use their skills to support the war effort by buying bulletproof vests for troops, coordinating routes for aid convoys, and helping to feed their fellow citizens.

Russia’s invasion of Ukraine has been the biggest disruptor of world peace since the end of the Cold War. But when hostilities cease, there will be opportunity.

Following the necessary infrastructural rebuilding, Ukraine will be able to start again, bigger, better, more agile, and more competitive. The country just needs its 5 million refugee workers to return, rather than stay and deploy their brain power in neighbouring countries.

Thankfully, the “overwhelming majority” plan to.

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