Ukrainian Venture Capital and Private Equity Market Outlook

Artificial intelligence, big data, Internet of things, blockchain… The whole world is fascinated with new technologies and waiting for what happens next. Could we imagine even half a decade ago that the future would come into our lives THAT fast? And that in these days the countries would race for leadership in Artificial Intelligence and launch national long-term programs to monitor data globally? A growing number of investors are becoming interested in startups in these areas.

Although still unfledged, the Ukrainian venture capital market has already passed its nascent stage and is growing rapidly, which contributes to the improvement of Ukraine’s image in the world. Augmented Pixels, Depositphotos, Looksery, Readdle – these are just few of the many one-of-a-kind products and technology solutions developed in Ukraine.

The Ukrainian Venture Capital and Private Equity Association (UVCA) has been building up Ukraine’s positive image in the world and promoting Ukrainian startups since 2014. More than 50 UVCA members include private equity and venture funds, accelerators, incubators, and non-profit institutions.

In 2018, UVCA researched the Ukrainian venture capital and private equity market jointly with Deloitte. The latter focused on the analysis of investments raised by Ukrainian startups in 2017 and actively participated in the preparation of survey for funds and investors. Furthermore, Deloitte team assisted with design concept development and data visualization in the report.   

The overview shows 2017 to be a banner year for Ukrainian venture business with US$258.6 million raised by startups (which three times exceeded 2016). It is a testament to the fact that Ukrainian startups create highly competitive products that are capable of catering the needs of consumers around the globe. A striking example is the Grammarly application, an online grammar checker that raised US$110 million.

Another positive sign for investors: 16 exits in the venture capital market in 2017 vs. 6 exits in 2016.

The report contains an overview of initial coin offering (ICO) as a new fundraising tool for startups. With its own cryptographic school and a great number of highly qualified engineers and expert developers, Ukraine is one of the leaders in crypto-economy development. In 2017, 19 ICOs raised US$160 million.

Private equity market saw its rebirth in 2017: 14 closed deals worth US$126.7 million vs. 4 deals/year closed during the last three years. Still, the market remains closed.

In general, venture capital and private equity funds have positive expectations for increasing investments in Ukrainian startups and companies: they are confident that next year the market will continue to grow and new funds will emerge. Artificial intelligence, big data, and healthcare will be the most attractive and promising for investing.

“We are glad that our collaboration with UVCA starts with an Overview of Ukrainian Venture Capital and Private Equity Market and believe that this year's review will enhance Ukraine’s investment attractiveness for venture funds and other international investors,” says Volodymyr Yumashev, Partner at Deloitte Tax&Legal, Ukraine.