Because of the complex political and economic situation in the country, made even more complicated by the military actions in the eastern part of the country, investment in Ukrainian startups fell in 2014. According to Yevgen Sysoyev, managing partner of AVentures Capital, the total volume of investment in Ukrainian projects this year has been significantly lower than the volume reached last year, which was equal to $80 million.
However, many Ukrainian VCs remain surprisingly positive about the local investment opportunities. Interviewed by investment platform Startup.ua, they provided their opinion on the current market trends and prospects and explained their own strategies in these troubled times. Ukraine Digital News is offering the most significant excerpts from these interviews.
CIG focuses its investment interest exclusively on the IT and Internet sectors, in particular cloud computing, SaaS and other software, mobile apps, B2B and B2C service (including Internet services), data management and storage systems, CRM systems and electronic payments.
The situation in the country has undoubtedly had a negative effect on the economy, and investors and entrepreneurs in general. But we are convinced that times of crisis are also times of great opportunity for market participants and for the country. It is possible that the current crisis will help the government see the potential in high-tech and IT entrepreneurship in the country, as well as motivate local startup teams to create globally oriented projects and earn money there.
Our investment potential allows us to make investments in times of prosperity and times of crisis, since we sincerely believe in the success of the Ukrainian IT market.
Editor’s note: A few weeks ago, CIG injected $2.5 million in Zakaz.ua, a major Ukrainan e-commerce site.
Our priority is the IT sector, because of the possibilities it provides to create a global company.
The political and economic situation in Ukraine, of course, has had a negative impact on all sectors – except IT. When we [AVentures Capital] began in 2001, we were trailblazers in Ukrainian investing. Today, there are more than 30 large investors and investment companies in our country and the quality of investors is increasing as well as their quantity.
Although the outlook is not very optimistic for the investment sphere as a whole, IT remains a locomotive in the investment sector. Forecasts for the development of IT in Ukraine are exclusively positive because Ukraine has plenty of talent and ideas.
Editor’s note: One of AVentures Capital’s latest investments went to Coppertino, a Los Angeles-based startup with Ukrainian origins. Its main product, VOX, is a minimalist and free music player for Mac capable of handling any audio format.
These are not the best times today for the real sector in Ukraine. The deplorable situation not only has its origins in the Yanukovich [former Ukrainian president] administration, but in the outwardly almost prosperous times even before that. So many systemic errors built up and management was so corrupt that I am amazed that anything at all has survived into our days.
While the traditional sectors are in crisis, IT is undoubtedly the most promising field for the investor, and there are a number of reasons for that: the thieving officials don’t understand the sector and don’t know how to steal from it. Risk is reduced because of the geographic and organizational dispersal of projects. The average age in the sector is under 30, and that means progressive thinking, ambition, constant striving to raise the bar, high IQ and, therefore, a high-value product.
Thus, the IT sphere has proven to be the most stress-resistant and protected from shock because of its “virtual” nature.
Not only that, high-tech projects are in demand all over the world. They have high liquidity and they’re cosmopolitan, not tied down territorially. Innovations in any branch of high tech will soon be as real as electricity and radio became in the 20th century. There will be high demand and developments in these spheres will always be in demand.
I believe the ongoing crisis will cause minimal losses for IT startups – which cannot be said for the real sector. That sector is now hostage to a multitude of factors: internal political processes, Russian-Ukrainian relations, the crisis in the eastern part of the country, the country’s prospects for European integration, geopolitics, games being played by officials inside Ukraine and much more. So I don’t envy investors who put their money in Ukrainian industry and agriculture.
In these traditional sectors, the future depends in large part on whether and how the government’s new Strategy 2020 reform program will be implemented.
The IT sector is an investment priority for me now. The first reason for that is a project’s potential for high growth in a short timespan in the sector. Second, I personally have a good understanding of IT (the Internet, telecoms, information technology) and so it is easier for me to understand what a project is about, easier to assess it, easier to make decisions.
On the other hand, projects in the real sector can produce results today. Because of that, I tried to maintain a balance between what will bring in money tomorrow (IT) and what I can make money on now.
The situation in the country, of course, influences the investment sphere. [In 2014], investment activity in the country plummeted. Investors’ interest in deeply Ukrainian projects has sunk.
In my view, the investment situation for the next several years will depend on how fast the new parliament begins to implement reforms. The second important factor is the situation in Eastern Ukraine. If military action is resumed, it will put off investment demand for an indeterminate period.