Recently, there has been growing interest in investing in apps and tech companies from Ukraine. On one hand, Ukraine has a strong talent pool in IT and app development. The Ukrainian app developer community has created many successful global apps across different categories. Investing in Ukraine app companies allows access to top tech talents at lower costs compared to Silicon Valley. On the other hand, the Russia-Ukraine war has brought uncertainties to the economy and business environment. Investors need to assess both the opportunities and risks when investing in Ukraine app companies.
Ukraine has many successful app development companies and entrepreneurs
Ukraine has been known as a global hub for IT talents and app development capabilities. According to Ukraine Digital News, Ukrainian IT industry employs over 200,000 specialists and the number is growing rapidly. Ukraine app developers have worked with many leading global companies in app development. For example, Ukrainian app developer company INSART has created apps for Viber, Opera, Voximplant. Another company Sigma Software has clients including Google, eBay, Microsoft. Successful Ukraine-born entrepreneurs have also founded global tech/app companies. For instance, WhatsApp co-founder Jan Koum is from Ukraine. Grammarly, a writing enhancement app with 30 million users globally, was also founded by Ukrainians.
Investing early in Ukraine app startups allows access to talents at lower costs
The tech talent pool and app development capabilities present big opportunities for investors in Ukraine. According to data from Dealroom and Pitchbook, Ukraine has over 5,000 tech startups across different verticals. By investing early in Ukraine app startups and tech companies, venture capitalists can gain access to top quality talents and tech capabilities at much lower costs compared to Silicon Valley and Western Europe. Labor costs for app developers and software engineers are over 60% lower in Ukraine than EU countries. Furthermore, angel investors and venture capitalists can get much larger equity share in Ukraine for the same amount invested, compared to investing in Western startups.
However, Ukraine app investment also faces risks from economic downturn and uncertainties
While investing in Ukraine app companies can provide access to talents and innovations at attractive valuations, the ongoing Russia-Ukraine war has brought huge uncertainties to Ukraine’s economy and business environment. IMF forecasts Ukraine GDP to plunge 35% in 2022. Many tech companies in Ukraine are suffering from loss of workforce and infrastructures. Some companies have had to relocate part of their operations abroad. For investors, there are risks of economic sanctions affecting operations, difficulties in moving capital and profits abroad etc. Investors need to assess the financial viability of target companies, their resilience capability, contingency plans etc. when considering Ukraine app investments.
Conduct in-depth due diligence and seek local insights when investing in Ukraine apps
For investors interested in tapping into Ukraine’s software developer talent pool and startup ecosystem, conducting in-depth due diligence and seeking guidance from local partners are crucial. Risks need to be evaluated related to how sustainable the company’s business and operation are under economic adversity, stability of workforce, cybersecurity risks etc. Investors should also gain an updated understanding on the restrictions, laws and compliance requirements related to moving capital in and out of Ukraine. Partnering with credible local venture capital firms already familiar with the startup ecosystem can provide insider knowledge and assistance for due diligence.
Ukraine presents promising opportunities for app startup investments given the vast pool of proven development talents and innovative solutions at attractive valuations. However, investors need to be aware of the risks from economic uncertainties, and conduct rigorous due diligence focused on business viability, sustainability, and compliance.