Ukraine, not even the war has stopped startups

Ukraine, not even the war has stopped startups


Oleksandr Kosovan distinctly remembers the morning he left home for work not knowing if he would find her when he returned. When at four in the morning he was awakened by the sound of rockets hitting Kyiv, his first thought was: “I'll probably never go back to my house. Mentally I said goodbye to all my stuff. And then I went to the office ”. It was February 25, 2022, the day after the start of the invasion of Ukraine by Russian forces, which marked a tragic quantum leap in a conflict that had begun to simmer after Russia's annexation of Crimea in 2014.

Kosovan moved towards the center of Kyvv, near the Olympic sports complex. His destination was the office of his software company, MacPaw, which has been around for fifteen years and makes applications for Macs and iPhones. As CEO of the company, he had urged some of his 500 employees to leave the city as the threat of war intensified. Nonetheless, hundreds of people had decided to stay in the city. His first task that day was to turn the office into a temporary haven for MacPaw employees.

"I didn't think my body was able to go four or five days without sleep and without real food , but he was fueling himself with adrenaline and pure rage,” he recounts those early days of the war. A year later, MacPaw remained open and the Kosovan house still stands. Instead of dispersing them, the enormous hardships of the war united the company's employees, who even managed to maintain a sense of normality by exchanging Ukrainian memes via Twitter and Telegram and keeping morale high.

Kosovan isn't the only founder of a Ukrainian startup to be able to tell stories of resilience and unexpected wartime productivity over the past year. While working from underground fallout shelters and during blackouts, many programmers and entrepreneurs continued to push out software updates. However, the future of Ukraine is still uncertain, and the conflict adds unprecedented risks to those inherent in managing a startup.

In the dark

I met Julia Petryk by chance last June, after traveling fifteen hours by train from Kyiv to Poland and taking an international flight to attend Apple's WWDC conference in Cupertino, California. We talked outside Apple's elegant glass-walled cafeteria in the sunlight, an idyllic scene in stark contrast to the war-torn parts of Ukraine. I have kept in contact with Petryk ever since and recently got to talking or writing to several founders and employees of Ukrainian tech companies, asking them about life in the country's startup sector over the past year.

Petryk manages communications for MacPaw and is a co-founder of the Ukrainian PR Army, a group of Ukrainian PR and marketing professionals that seeks to combat Russian propaganda by sending pro-Ukrainian communications to journalists and governments. The one described by Petryk is a year characterized by serious hardships. She worked from fallout shelters and mess halls powered by emergency generators and found herself walking to her home in Kyiv in the pitch dark wearing reflective clothing. a bit depressing. But people keep adapting – says Petryk –. There is no other way out than to work and fight for the future".

On October 10, Petryk told me sent an email from a fallout shelter in Kyiv: “The Russians fired dozens of missiles at Ukraine this morning. Again civilians were killed.”

Before that, she and I had talked about a Slack plugin made by MacPaw engineers, called TogetherApp , that allows colleagues in a company to quickly send information and share their location.

Thousands of Ukrainian tech workers have moved to neighboring Poland or Portugal, which granted temporary permits to Ukrainian refugees in the early days of the war. However, many others remained in the country.

In the days following the invasion, Alyona Mysko, founder and CEO of an accounting startup called Fuelfinance, temporarily relocated her company's headquarters from Kyiv to a bomb shelter in the western Ukrainian city of Lviv, also known as Lviv, about 500 kilometers from the capital, encouraging remote working. However, many did not want to leave Ukraine: "We are all aware of the fact that, by remaining in this country, the economy is supported – explains Mysko -, and many members of our team have families and homes here".

By October, Fuelfinance had already abandoned remote working and returned to office life, establishing its headquarters in a co-working space in Kyiv called Lift99. Mysko had made the same journey as Petryk in June, traveling fifteen hours by train to Poland before catching a flight to a technology conference in California, where news reached her that Russia had launched a massive attack on the electricity grid. Ukraine , which had caused widespread blackouts .

“ It was impossible to contact my family – he says -, but in the office we had alternative energy sources and Starlink, so we were able to connect to work. This made us realize how important it was to have backup generators, which has hastened the end of remote working for us.”

All the tech entrepreneurs who spoke to US pointed out that today emergency power generators and SpaceX's Starlink satellite internet service are critical to their operations. Some had the foresight to buy the generators before the invasion.

Others, like Sofiia Shvets and Vlad Pranskevičius, who founded an image editing startup using artificial intelligence, Let's Enhance, have moved quickly after the conflict began, purchasing several large power banks for their employees scattered across Ukraine for around 550 euros apiece. Each of them can guarantee six to seven hours of energy for personal devices, but they are not enough for household appliances.

" Sometimes everything is very strange – says Shvets, who now lives in San Francisco -. We have a video call with one of our product managers who has Starlink internet, so he can participate, but he is in total darkness, surrounded by candles, because he has no electricity ”.

Since the spring of 2022, Ukraine has heavy reliance on Starlink satellite internet terminals, tens of thousands of which have been donated by SpaceX, with US government backing SpaceX CEO Elon Musk said in October that the company would no longer fund the service in Ukraine and asked the Department of Defense to shoulder more of the costs, before backtracking with a tweet.

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"Many people here and around the world have become angry at some of his posts – reports Pranskevičius, who lives in Kyiv -. But what we have seen is that Starlink has continued to work. It has been extremely valuable to most people and also to those on the front lines, where there may be no connectivity.”

Uncertain future

Let's Enhance has continued to grow, despite the difficulties faced by the founders and staff of the startup. One person left the company to go and fight on the front lines, while another enlisted to be able to work on military technologies, joining the approximately seven thousand professionals of the tech sector who have joined the Armed Forces of Ukraine. A year ago, the company had 27 employees: now it says it has over 40.

But Let's Enhance is the exception. According to a 2022 report by TechUkraine, an organization that supports startups in the country, companies have come under pressure from the conflict.While 43 percent of the teams surveyed kept it the same size, 37 percent of founders say they had to downsize. L' organic. And more than 90 percent of Ukrainian startups said they needed more financial support to survive the war.

Data from research firm PitchBook shows that in 2022, early-stage Ukrainian startups raised a total of 17 million in seed or Series A financing, compared to $14.1 million in 2021. This year's seed funding – including the $1 million recently raised by Fuelfinance – has already surpassed that of the previous year. last quarter of 2022 .

But despite the promising signs, the broader outlook for Ukrainian businesses is bleaker. In September, The Wall Street Journal reported that while Ukrainian firms raised a total of $832 million in venture capital and private equity in 2021, according to data from an analyst in 2022 the number of venture capital deals in Ukraine it decreased by at least 50 percent .

With the latest round of funding, in October 2021, Let's Enhance raised three million dollars, which the founders of the startup made enough for everything 2022, focusing on a new product. This year, they may try to get more funding, but in addition to the instability of the war, they will have to deal with the difficult macroeconomic environment, which has slowed down investment in startups.

Shvets remains optimistic however. Several funds have sprung up to support Ukrainian technology companies, both in the private sector and by governments. Last year the European Commission pledged twenty million euros to support Ukrainian technology companies. Some private investors are reassured by the fact that many startups in the country sell their software in the United States.

" I would say that the narrative has definitely changed from last year. When the war started, we were all in shock and so were our investors – says Shvets – They wondered: 'What will happen to Ukraine?' But we haven't had any production issues and I feel like I have a lot of support now."

Dmitry Dontov, CEO and founder of data protection firm Spin Technology, also says investors seem willing to continue working with startups with a strong Ukrainian presence. Shortly after the invasion, Dontov, who is Moldovan but works in Silicon Valley, shipped generators to his Ukrainian R&D team and set up a shelter for them in Koncha-Zaspa, a hamlet about 33 kilometers from Kiev, transferring a third of the staff to an office in Portugal. " Investors were initially concerned. They wondered, 'How many lines of code were written last month?' – explains Dontov –. But over time, I think they saw that we were taking all necessary measures to maintain our results. "

Not all startups have done so well. Oleksandr Kosovan, co-founder of MacPaw, also invests in other startups through a fund called Smrk. Last week, he invested $1.5 million in a Ukrainian robotics startup, but says at least two of the fund's portfolio companies have closed their doors in the past year. One of them was Seadora Seafood, a fish founded in 2019 based in Kyiv. The company transported some of its cargo by airplane but could no longer operate in Ukrainian airspace. Another casualwear startup is still active, but struggling; Kosovan says that as soon as the war started "the demand for these things dropped to almost zero".

In the context of a war, the needs become more apparent. So are boundaries, connections with colleagues, and plans for the future, even if they take the form of a candlelit Zoom meeting or the glow from reflective clothing on a dark city street.

This article originally appeared on US.

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