How Ukraine’s Small But Growing Tech Industry Is Responding To The Russian Assault

As Russia invaded neighboring Ukraine on Wednesday, it sent shockwaves around the world and threatened to undo decades of relative peace and stability in Europe. Ukraine’s fragile economy and small technology startup scene are also threatened by the turmoil.

Ukraine’s startup industry is small, though a number of notable companies and entrepreneurs hail from the former Soviet nation. Ukrainian venture-backed startups saw $33.8 million in investment last year, per Crunchbase data.

Given its comparatively low cost of living, Ukraine has also emerged as a hub for tech companies around the world to source cheap talent. The country is home to an estimated 200,000 tech workers and has talent outposts for U.S. companies including Lyft. Many of those companies on Thursday were rushing to evacuate employees or provide other assistance, The Information reported.

Grammarly, a writing tools platform now valued at $1.6 billion, was founded in Ukraine. Though it now counts San Francisco as its headquarters, the company still has staff in the Eastern European nation. On Wednesday, CEO Brad Hoover said in a post on LinkedIn that the company “remains committed to Ukraine” and continues to hire for various roles on the team.

“In times like these, and always, we prioritize the safety and well-being of our team members. While we hope for the best, we have also prepared for the worst,” he wrote. “That includes having contingency plans for various scenarios, along with financial and logistical assistance to better support our team members and their families in getting to safety. It also includes business continuity plans to ensure Grammarly’s services will not be disrupted.”

Cristobal Alonso, CEO of Startup Wise Guys, an Estonian accelerator with five team members based in Ukraine and several dozen portfolio investments in the country, told Pitchbook that while the accelerator’s staff had already evacuated Ukraine last week, many of the employees at its portfolio companies had not.

“A number of [startup] employees are going to fight and they want to go to the front, and of course, we have to respect that,” he said.

Other founders and investors also shared the sentiment that they’re standing their ground.

“Some of our startups moved out to parts of Western Ukraine, but I know a lot of people who stayed in Kyiv because we are not afraid of invasion,” Andriy Dovzhenko, a co-founder and managing partner of SMRK, an IT-focused Ukrainian venture fund, told Pitchbook. “We will continue to provide support to our startups to help cool down emotions, and we hope that our government will guide us through this time.”

Denys Zhadanov, managing director of Readdle, a startup based in Odessa, told Techcrunch via text message the company had already had continuity plans in place before the Russian assault and that for now its business is up and running.

“Ukraine is home to the finest engineers, designers, and other tech professionals,” he said. “I know that many tech CEOs have made a conscious decision to stay in Ukraine. Many of them are helping and donating to help the county and its people.”

The U.S. government and its allies on Thursday announced stiff economic penalties against Russia in response to the assault, which President Joe Biden described as an unprovoked and premeditated attack on a sovereign nation. Those penalties include the West’s severest economic sanctions against Russia yet, targeting the country’s banks, wealthy elite—though notably, not Russian President Vladimir Putin himself—and access to key technology.

The U.S. will levy new technology export controls onto Russia, he said, though didn’t add further details. Biden administration officials have said that could include key components for semiconductors, which are crucial for a lot of hardware and manufacturing applications.

It’s unclear at this point what the impact of those sanctions and controls would be on the Russian tech ecosystem or foreign venture investors who do business in the country.

Dovzhenko told Pitchbook that despite the turmoil, he remains optimistic and continues to raise capital for his fund.

“Foreign investors may halt their investments for a couple of weeks or months until the situation calms down, but I expect strong support, especially from Europe and the U.S. Our fund is looking for investments, and we are positive in our fundraising prospects,” he said.

Photo: A city block in Kiev, Ukraine, on February 24, 2022, following a Russian missile attack. Photo by Arrikel via Wikimedia Commons.

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