Regional Startups Venture

Capital Still Flows To Ukrainian-Staffed Startups, Though Founders Are Mostly Expats 

As a data company we’ve long faced challenges tracking investment in Ukraine-based and Ukrainian-led startups. 

It’s not due to a shortage of founders and skilled techies in the country. Ukraine is well-known for its tech-savvy workforce, with IT services ranking as the country’s largest service export.

No, the difficulties in tabulating funding arise because Ukrainian founders of venture-backed startups tend to headquarter outside the country. It’s not uncommon to see a company with a Ukrainian founder and a majority of employees in Ukraine make its headquarters in New York, London or San Francisco.

This isn’t a recent phenomenon, said Vadim Rogovskiy, the Ukrainian co-founder of seed investor Geek Ventures and startup 3DLook, who currently lives in New York City. Even before the war, Ukrainian startups targeting global markets tended to headquarter abroad. In the two years since Russia’s invasion, however, Ukraine’s digital diaspora has grown larger, and more connected. 

“Now, when you talk about Ukrainian founders, it means digital nomads, people anywhere,” from neighboring Poland to far-away Silicon Valley, he said.

That said, wherever they may be headquartered, many Ukrainian-born founders retain strong ties to their country of origin. Commonly, most employees at their startups are also still in Ukraine, often working from home or local co-working spaces.

Working amid war

By the numbers, tech work in Ukraine hasn’t contracted too sharply since the war began. Last year, the IT industry reportedly generated $6.7 billion in revenue for the Ukrainian economy. Although that’s down from 2022, the industry still represents more than 40% of the country’s service exports.

It’s coming from what looks like a smaller workforce. Over roughly the past two years, millions of Ukrainians have left the country, most settling in Europe, and Poland in particular. Those with tech jobs that can be performed remotely are highly represented among the expat population.

Most, however, have stayed. This includes startup workers.

This was the case, for example, at Vidby, a Swiss-based AI translation startup with a largely Ukraine-based staff.

Vidby’s Ukrainian founder, Alexander Konovalov, said the company’s largely Kyiv- and Lviv-based staff has mostly stayed put. For most, it’s not practical or feasible to relocate. 

Nor has staying appeared to have hampered productivity. Working and living conditions have normalized some since the start of the war, Konovalov observed. Electricity, heat and other critical infrastructure function without disruption. While loud alarms are now essentially a daily occurrence, they’ve mostly receded into the background of daily life.

At Rogovskiy’s company, 3DLook, a provider of mobile body scanning technology, roughly 40% of the Silicon Valley-headquartered company’s staff is based in Ukraine. Most have stayed put — a track record that Rogovskiy attributes in part to the fact that most are in the Odessa area. The Black Sea port city known for its rich history, beaches, and nightlife, is a tough place to leave behind.

High profile players in Ukraine’s tech scene

In addition to early stage startups, Ukraine also continues to serve as an employment base for a prominent group of Ukrainian-founded unicorns and public tech companies. 

One of the more famous names is Grammarly, which has raised $400 million in funding to date for its AI writing assistant. In addition to having Ukrainian co-founders, it has a large team based in Ukraine and a history of support for the country’s defense effort.

Another is GitLab, the open source tools provider co-founded by Ukrainian developer Dmytriy Zaporozhets. The San Francisco-headquartered company, which has an all-remote workforce including many in Ukraine, is now a $9 billion public company.

Funding continues to flow

At seed and early stage, funding continues to flow to startups with Ukrainian founders and largely Ukraine-based staff.

Rogovskiy’s portfolio at Geek Ventures, for instance, includes 10 startups with Ukrainian founders. Although all the founders are outside the country, they all have teams inside Ukraine, he said, with the highest concentration of workers in Kyiv.

One standout, per Rogovskiy, is NewHomesMate, a marketplace for U.S. new construction homes that raised a $5.5 million round last summer. Another is Comptera, a provider of AI-enabled tools for online retailers and brands to set optimal prices in real-time, which picked up a $3 million seed round in January.

Outside the portfolio, one of the bigger fundraisers last year was Preply, a Ukrainian-founded online tutoring platform with offices in New York, Barcelona, and Kyiv that has raised $170 million to date. Another that Rogoviskiy is watching is DressX, a Ukrainian-founded, Los Angeles-based digital fashion startup that picked up $15 million in Series A funding last year. 

Data-collecting in a diaspora

Perhaps a day will come when Kyiv will serve as both a popular headquarters location and employment hub for tech startups. For now, however, Ukraine’s most fundable founders are still largely based abroad, even as they continue to hire talent in their home country.

As a result, it’s difficult to accurately track overall funding to Ukraine-connected private companies. Anecdotally, however, it’s clear that even amid a global venture funding downturn, startup backers still see much to like about Ukraine’s talented and globally dispersed startup networks. 

Photo by Marcel Eberle on Unsplash

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