The IFC and EBRD are among a strong pack of investors who have joined up with Kyiv-based Horizon Capital to restart tech financing in Ukraine and Moldova.
One of the largest private equity firms in emerging Europe, Kyiv-based Horizon Capital, has given the Ukrainian IT sector a major boost by announcing the first close of a 250 million US dollars fund that it plans to use to back tech start-ups in the country and neighbouring Moldova.
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Ukraine’s IT industry remains a bright spot in an economy that has shed nearly five million jobs since February due to Russia’s invasion and subsequent war, but while the sector posted a record two billion US dollars in revenue in the first quarter of 2022, financing has all but dried up and mergers and acquisitions activity has come to a standstill.
The new fund therefore comes at a key moment and will help support Ukraine’s capital markets and the tech and private equity ecosystems.
“We are honoured to make history by launching the first fund for Ukraine and Moldova since February 24, and the first to back these countries since they achieved well-deserved and hard-won EU Candidate Status in June,” says Lenna Koszarny, Horizon Capital’s founding partner and CEO.
“We dedicate this fund to the people of Ukraine, who inspire the world with their bravery and tenacity in defending their homeland, thus ensuring a future where Ukraine assumes its rightful place among European nations.
“Ukraine needs investors who believe in the country, who stand shoulder-to-shoulder with its people, who are leading the way for others, and who leave no stone unturned to ensure that investment capital is available already now, and not only once the war ends. We are confident that this historic fund will be a resounding success, delivering both returns and impact in the years ahead.”
The fund’s first closing – at 125 million US dollars – was backed by the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), Deutsche Investitions und Entwicklungsgesellschaft, the Dutch Entrepreneurial Development Bank, the Swiss Investment Fund for Emerging Markets, the Western NIS Enterprise Fund, and the Zero Gap Fund, an impact investing collaboration between The Rockefeller Foundation and the John D. and Catherine T. MacArthur Foundation.
Ukraine’s president, Volodymyr Zelensky, joined the fund’s investors at the official signing ceremony from Ukraine via video link, commending the investors for backing Ukraine at a critical moment in its history and ensuring capital was available to support economic renewal and job creation.
“This investment is a testament to a new generation of visionary entrepreneurs in Ukraine leading high-potential businesses that will help Ukraine’s economy enhance its resilience,” says Makhtar Diop, managing director of the International Finance Corporation (IFC), which has invested 30 million US dollars in the fund, its first investment in Ukraine since the Russian invasion.
“Together with partners, we aim to inject much-needed capital into Ukraine’s IT sector, bolstering innovation, creating jobs, and encouraging investors to return to the market despite the ongoing war.”
Hassan El Khatib, managing director equity at the EBRD, which has pumped in 40 million US dollars, says that the fund will not only improve the resilience of private capital markets in the region by developing private equity as an alternative funding source but also boost inclusion by offering support to businesses affected by the war.
“[We] are effectively bridging a financing gap caused by adverse market conditions, by bringing in a private equity fund to add to the pool of financing available.”
Moldova the horizon
In addition to Ukraine, the fund will provide growth capital to technology and export-oriented medium-sized companies in neighbouring Moldova, which has also suffered from the war.
“I am proud of my fellow compatriots in Moldova for welcoming more Ukrainian refugees per capita than any other country, as well as their strength and resilience throughout,” adds Vasile Tofan, senior partner at Horizon Capital.
“This spirit of resilience is also demonstrated by technology companies throughout Moldova and especially in Ukraine, where the tech sector fuels a high pace of innovation and digitalisation, expanding 23 per cent year-on-year during the first half of 2022 and delivering record-high export revenues of 3.74 billion US dollars, with over eight billion US dollars forecast for 2022.
“The new fund will continue to focus on tech and export-oriented companies, led by visionary entrepreneurs with a proven track record of leveraging competitive platforms to succeed globally.”
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