A war-torn country might not be a natural choice for many investors. Ukraine says its thriving tech sector should be an exception.
The Ukrainian tech sector is showing extraordinary resilience amid war and geopolitical turmoil, maintaining operations and growth even as the nation’s overall economy shrinks due to Russia’s ongoing invasion and attacks on its cities and critical infrastructure.
Daria Yaniieva is an investment director at Sigma Software Labs, a Kyiv-based startup hub focused on supporting new businesses and investments in Ukraine’s tech sector. It is one of the nine companies and organizations that showcased Ukraine’s tech potential at this year’s London Tech Week.
“Despite all the challenges, our startups continue to grow, but they need support and global opportunities,” Yaniieva said.
According to Oleg Bilozor, founder and CEO of Reply.io, an AI sales engagement platform and another attendee of the London trade show, the Ukrainian tech products demonstrated “inspiring” sustainability and resilience.
“Ukrainian tech companies aim to mitigate the risks associated with fluctuations in the domestic market. Their focus on global expansion demonstrates a strategic mindset,” Bilozor said.
Ukraine is on the brink of what is expected to be the largest economic transformation in Europe since the end of World War II – and is hoping that the benefits of taking a front seat in this process will outweigh concerns among investors.
“When the war is over and we have secured our victory, everyone will want to invest. That is why you should reserve your spot now,” Yaniieva said, noting that Ukrainians “continue to meet deadlines despite the missile attacks.”
Ukraine’s tech sector grows despite war
Despite the war, Ukrainian IT companies managed to maintain 95% of their contracts and continued to increase exports. In fact, it was the country’s only growing export industry last year, according to the National Bank of Ukraine. Ukraine’s buoyant tech sector is a bright spot in the country’s economy, which shrunk by almost 30% last year. According to its government data:
- Ukraine tech sector's exports amounted to $7.35 billion in 2022.
- It has recorded 5.8% growth compared to 2021.
- Ukrainian startups and tech companies raised almost $350 million in the first months of 2022.
- Ukraine's tech industry continues to employ nearly 300,000 developers.
In addition to bringing in taxes that can be used to prop up Ukraine’s other industries, particularly defense, the tech sector’s success is an important morale booster for a nation at war.
“Despite the fact that the Russians were attacking our electricity grid, our infrastructure, the industry was growing and working. They failed not only on the battlefield, but they also failed to disrupt the economy,” Oleksandr Gryban, Ukraine’s deputy economy minister, said at the panel discussion at the London Tech Week.
Russia’s full-scale invasion of Ukraine last year also led to a new crop of startups focusing on emerging technologies such as AI, which could play an important role in increasing operational efficiency, saving money, time, and resources, in addition to countering disinformation.
“[The war] is a huge challenge, but it's also a big opportunity for us,” Gryban said.
The tech sector will play a “really strong” part in rebuilding Ukraine, according to Danae Dholakia, the British special envoy at this year’s Ukraine Recovery Conference, which the UK will jointly host with Ukraine in London this week.
“It’s the biggest thing we’re doing in 2023 apart from the coronation,” Dholakia said, speaking alongside Gryban. The conference will see delegations from 61 countries discuss in “very practical and granular terms” Ukraine’s path towards recovery and reconstruction, she said.
The annual event started as the Ukraine Reform Conference in 2017, also in the UK, and was held in Denmark, Canada, and Lithuania for the following three editions before being rebranded last year in Switzerland to focus on Ukraine’s recovery.
“And the tech sector is a real illustration of precisely why Ukraine is going to survive and thrive and do fantastically well into the future,” Dholakia said, noting that now was the time for the rest of the world “to come and join this party.”
Ukraine has been taking steps to make sure reconstruction efforts are not derailed by ineffective public sector and corruption, two of the reasons that impeded its economic development over the past three decades.
The digitization of the state services led by the Ministry of Digital Transformation and the National Anti-Corruption Strategy adopted by the Ukrainian parliament last year are just two examples of Kyiv’s determination to transform Ukraine into one of Europe’s leading tech hubs.
While it ranks 116 out of the 180 countries in Transparency International’s Corruption Perceptions Index, Ukraine is “one of few significant improvers” in the ranking over the past decade, according to the organization. The war exacerbated corruption risks, but Ukraine “has taken important steps” to improve oversight and accountability, it said.
“I can't say that we've wasted 30 years, but to say the least we were not so active in the classic industrial development,” Gryban said, adding that “now we have a chance to use the technological trampoline to jump over whatever we missed and to be ahead.”
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