Ukraine’s Tech Sector Is Booming but Needs Awareness and Confidence

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Read the Outlook on Ukraine special report

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Stepan Chernovetskyi

About Stepan Chernovetskyi

Stepan Chernovetskyi is the founder and CEO of Chernovetskyi Investment Group, a venture capital firm specialising in funding promising technology businesses based in the CIS region. He began his career at Pravex Bank, where he was finally appointed the Senior Vice President. After that, he became Head of the Supervisory Board of PJSC, a company specialising in real estate investment and construction. Stepan also runs a charity which helps orphans, large families and elderly people in Georgia.

Despite several turbulent years, Ukraine’s economy is now showing real promise. The country recently received its latest tranche of IMF funding and is making a huge effort to stamp out corruption. With a large base of highly skilled technology professionals and a highly-developed information technology sector, Ukraine’s economy has all the ingredients required to create Europe’s next big technology hub.

Technology is certainly one of the main industries driving Ukraine’s economic growth. The country has a huge number of skilled technology professionals and is already one of Europe’s top outsourcing hubs. Ukraine is home to over 4,100 firms that outsource skills to other countries and it exports approximately $2 billion in software development and service each year. Its sophisticated IT sector offers the highly skilled workforce that is required to create a successful technology hub.

Ukraine also has a burgeoning e-commerce sector. E-commerce Europe (the European association representing e-commerce businesses) states that the country’s online shopping market is worth approximately €1 billion; with a typical annual spend, per shopper, averaging at €286. With a wide consumer base that is willing to spend money online, Ukraine has the market for e-commerce and consumer tech businesses.

The final ingredient that is required to create a successful technology hub is innovation. From my experience of working with businesses in the Ukrainian tech sector, this is something which exists in abundance in Ukraine. It is well-known that programmers who are educated in Ukraine receive world-class teaching and, after graduating, have access to jobs where they can develop their programming skills in the outsourcing sector. With so much talent being nurtured in the technology sector in Ukraine, innovation is available in abundance. Unfortunately, however, domestic opportunities for these entrepreneurs are currently lacking.

Today, we are losing our brightest tech talent to more developed tech start-up markets, including Silicon Valley, London and Tel Aviv. Investor confidence in the Ukrainian market is fragile to say the least, so technology entrepreneurs seek instead to turn their ideas into businesses elsewhere in the world.

So, how should Ukraine encourage and retain its most promising technology entrepreneurs?

The solution is two-fold: increase investor confidence in the Ukrainian technology sector and create awareness of the investment opportunities for Ukrainian entrepreneurs who are running their businesses from Ukraine.

As concerns investment, increasing confidence in Ukraine’s technology market is the key. It is important for the government to highlight Ukraine’s openness to new technology ventures. A great example of this is the recent Twitter exchange between Ukraine’s Prime Minister and Elon Musk which received global attention. This exchange told the world that Ukraine is open for business.

As investors gain confidence in the market, they may choose to embrace the opportunities to invest in low-cost / high yield Ukrainian technology businesses. After all, it is much cheaper to scale a technology business based in Ukraine compared to a business in one of the better-known technology hubs.

Education is hugely important, to increase awareness of the investment opportunities for entrepreneurs in Ukraine, We must ensure that the most promising Ukrainian talent is aware that there are ways to create successful businesses in their own country.

As a venture capitalist, it is my responsibility to consciously invest in businesses with commercial potential but also in businesses that have the potential to change society. It is for this reason that I am so passionate about transforming Ukraine into Europe’s next technology hub.

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The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.

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