The coronavirus pandemic did not prevent the Ukrainian startup market from developing and even fostered it in some way. explains what changed in the market during 2021, how much investment was made, what new records can be expected and, in general, how successful the year was in general.
What achievements did the Ukrainian startup industry enter 2021 with?
The most complete and relevant research of the Ukrainian venture capital market is usually published in March by the investment fund AVentures Capital. This document, titled DealBook of Ukraine, contains basic data on the state of the industry—from the main recipients of investments to the analysis of each round and each stage of financing.
The 2020 report data suggests that it was more than successful for the Ukrainian startup segment. In general, more than $571 million were invested in Ukrainian startups, which is $27 million more than a year earlier. Another record in 2020 was funding in the early stages—more than $161 million were raised in the seed and A-rounds, which exceeds more than three times the figures in 2019. At the same time, the number of transactions increased sixfold. The main funds that invested in Ukrainian young projects were AVentures Capital, Genesis Investments, ICU, Dragon Capital, and Horizon Capital.
AVentures Capital's 2020 report mentions that three companies become "unicorns"—companies with a capitalization of more than $1 billion. These are Gitlab, the blockchain project Bitfury, and Grammarly.
One of the most accurate statistical reports on the Ukrainian technological ecosystem state is the 360 Tech Ecosystem Overview, a project of the Ministry of Digital Transformation. According to these data, there are 1,700 product and 533 service companies in Ukraine, 1,233 of which are located in Kyiv.
All these data are an empirical assessment of the Ukrainian startup market state in 2021. It can be assumed that the industry is doing just as well as in the previous year. This assumption will finally be confirmed or refuted as early as next year, when all the losses and achievements of Ukrainian startups will be analyzed. However, today we can say that the market is not just developing successfully—we can safely expect new record numbers.
High expert estimates in startup industry
The quality of the Ukrainian startup ecosystem is also confirmed by the independent assessments formulated by research companies.
For instance, the London research company RA Capital, together with the innovation park UNIT.City and the Ukrainian Startup Fund, studied the market by conducting a survey among the founders of 60 such projects. It turned out that more than 90% of the respondents are confident that the Ukrainian ecosystem is the best place for developing startups. All interviewees state that their development team lives in Ukraine. And 82% of the founders are personally in Ukraine.
Among the reasons for continuing work in Ukraine, the survey participants give the personnel high qualifications (36%) and the high quality and prospects of the Ukrainian startup ecosystem (33%). Additionally, they note that working in the United States does not provide advantages, but requires more operating costs. Vadym Kudruk, One of the founders of RA Capital, stresses that a few years ago Ukraine did not have such state and institutional support as it does now. And this research shows the explosive growth of the local startup ecosystem.
The prospects of the Ukrainian startup market are evidenced by a high position in the rating of startup ecosystems in StartupBlink’s Global Startup Ecosystem Index. The report cites Kyiv as an important hub for startups in software, data, marketing, and sales.
Major investments-2021 in Ukrainian startups
An important criterion for developing the startup ecosystem is the interest of venture capitalists in them. In the list of companies that raised the largest investments, we will not mention the major winners of the Ukrainian startup market in 2021—GitLab and Grammarly, which will be discussed below. They are confident winners of both the Ukrainian IT sector and the start-up market.
The first project became a public company—its shares began to be traded on the American stock exchange. The other project, thanks to the investments raised, became not even a "Unicorn" (this is how a company whose pre-public valuation exceeded $1 billion called), but a "Decacorn"—its last pre-public valuation exceeded $10 billion (the pre-public valuation is an empirical value calculated by venture capitalists investing in business, it is not as accurate as the valuation of a public company based on the value of its shares traded on public stock exchanges).
However, we will mention other winners of the Ukrainian startup market who raised the largest investments. In this list, we will also omit the company Revolut that can hardly be called Ukrainian. Here are the main winners of the Ukrainian startup competition:
- People.ai, a platform for improving business performance based on artificial intelligence, raised $100 million in investment in 2021;
- AirSlate, a SaaS-company for improving workflow, raised $90 million from investors;
- Preply, a platform for searching for tutors, managed to raise $35 million in 2021;
- SOC Prime, a cybersecurity solution, raised $11 million in investments;
- startup 3DLOOK engaged in scanning a human body from a photo raised an additional $3.5 million in investments in 2021;
- investors put more than $3 million into Let's Enhance, a developer of the image processing platform;
- investors appraised the prospects of Awesomic, a platform for designers, at $2 million in investments;
- Upswot, a tool for analyzing the business financial condition, raised $3.4 million in 2021;
- startup ComeBack Mobility, a developer of smart attachments for crutches, and Party.Space, a service for organizing online events, obtained $1 million from investors each.
In addition, it is worth mentioning the investments from the Ukrainian Startup Fund that determined the winners of the 21st and 22nd Pitch Days in the spring, granted $350,000 for the winners of the 30th and 31st Pitch Days in the fall, and another $425,000 at the end of the year—for the winners of the 34th and 35th Pitch Day. The activities of the Ukrainian Startup Fund, founded in 2018, are undoubtedly a positive phenomenon that will facilitate Ukrainian startup market development in the future.
High-profile startups and unicorns in Ukraine
On the one hand, companies like Grammarly, GitLab, or Rozetka are hardly startups in 2021. On the other hand, their successes this year deserve to be remembered alongside the successes of the startup industry in our country. These projects are a product of the Ukrainian market that proves on the example of real successful businesses: despite the fact that most of the money, investors, and ideas are concentrated in Silicon Valley, Ukraine can also boast of successful products that have gained international recognition.
Grammarly, the platform for analyzing English texts, presented several important updates during the year, including special features for business clients and a platform for developers. An important agreement that the Grammarly app will be integrated into Samsung's keyboard has further increased the popularity of Samsung's products. The most important result of this was a new round of investments for the company in the amount of $200 million, and the total value of Grammarly simultaneously grew to $13 billion. This ensured the inclusion of Max Lytvyn and Alex Shevchenko, the Grammarly founders, in the Forbes list of billionaires with a fortune of $4 billion. However, later the business founders denied this assessment.
The achievement of GitLab that created a tool for developers is no less significant. In October 2021, the company entered the public market—it conducted an initial public offering of its shares on the Nasdaq exchange. GitLab originally planned to become public in November 2020 but postponed this event for a year due to the pandemic. At first, the shares were to be placed on the stock exchange in the price range of $55—60. Then it was slightly increased to $66—69, but in fact, on the very first day of trading, the securities of this Ukrainian startup reached $77, and in general GitLab earned $801 million with a market capitalization of $11 billion. It is interesting that the startup reached such figures in just 7 years of its existence—GitLab was founded in 2014.
It is also difficult to call the Ukrainian marketplace Rozetka a startup in 2021, but its successes and events related to it are further proof that Ukrainian projects can become global products. Firstly, in 2021, Rozetka announced plans to create its own payment system, and secondly, the company entered the Uzbek market. In November, it became known that the Kazakh fintech company Kaspi was interested in purchasing Rozetka. As of today, it ended up with rumors and the first stages of negotiations. But already at the end of December, Vladyslav Chechotkin, the company’s founder and head, stated during one of his speeches that one of the options for developing his company is going to an IPO.
The plans of Ajax Systems, a developer of security systems, also include conducting an initial public offering (IPO), which it announced back in January 2021. These plans raise hopes that in the near future there will be more high-profile news from Ukrainian startups.
These successes of the most famous Ukrainian projects are a kind of indicator for young entrepreneurs who prove that even in a difficult economic situation, in conditions of war and other problems, Ukrainians are able to create successful projects that become known all over the world. And the situation on the startup market in 2021 suggests that new Grammarly or GitLab may appear in the near future.