Ukrainian Venture Capital and Private Equity Market Outlook

The Ukrainian investment market keeps growing. In 2018, venture investments in the IT sector totally reached $333.9 million, which is 1.5 up year-on-year. The number of agreements concluded considerably increased – from 89 in 2017 to 115 in 2018. Among them were seven M&A agreements for $25.2. For the most part, we observe particular interest the companies take in the so-called disruptive M&A, which bespeaks the interest of business in changes and implementation of innovations.

“The volume of investments attracted to Ukraine by venture funds keeps growing in line with the private equity market, irrespective of some political uncertainty. This signifies that the IT and innovations sector is least exposed to political risks. The research results only substantiate the competitiveness of Ukrainian startups in the international market, the professionalism of Ukrainian specialists and the quality of Ukraine-produced goods. We are convinced that improvement of the geopolitical situation in the country will also boost investments in other sectors,” noted Volodymyr Yumashev, Tax & Legal partner at Deloitte Ukraine, during the presentation.

The event included a panel discussion with the participation of Andrii Kolodiuk, co-founder and Managing Partner of the AVentures Capital venture fund, Oleksandr Sopronenkov, Director of Financial Advisory at Deloitte Ukraine, Olha Afanasiieva, Executive Director at Ukrainian Venture Capital and Private Equity Association (UVCA), and Iryna Cherniavska, Editor-in-Chief at Investory News, as moderator.

During the panel discussion, Oleksandr Sopronenkov pointed out, “Increased number and cost of venture investments in 2018 is definitely a positive signal in terms of further development of the IT sector in Ukraine. From experience with our clients, we can see that foreign strategic and portfolio investors are taking greater interest in this sector”.

Andrii Kolodiuk voiced his opinion that the venture investment market is now undercapitalized. The majority of agreements barely exceed $100 thousand. Olha Afanasiieva is convinced that this relates to the fact that the better part of new startups are at their development stage. Importantly, it is not enough to develop a product, it is essential to be capable of selling it.

It is the improvement of marketing and communication capabilities of startup owners that can significantly strengthen the promotion of Ukrainian products and talent in the international arena. The Ukrainians should be ambassadors of their success stories so that foreign investors can form their opinion about the country not only on the basis of political publications in the media.

Odessa, Dnipro and Lviv are among the regions of Ukraine where the number of startups is expected to increase. However, many more cities have good chances to get under the radar of investors if they enhance their marketing activities.

According to Andriy Kolodiuk, in a 2-3 year perspective, Kyiv has every chance to get into the three cities of startups, and Ukraine may witness the emergence of five “unicorns” in 2-2,5 years. Artificial intelligence, blockchain, and big data analytics were flagged by the speakers as popular investment areas.

Volodymyr Yumashev encouraged business and the Ukrainians to use this kind of reports by Deloitte, UVCA, and other reputable international companies to disseminate objective and relevant data among investors and other stakeholders. “Deloitte's mission is to make an impact that matters. Such initiatives help potential investors and other market players gain an insight into the real picture of developments in the sector. Ukraine does have a claim to fame! This is precisely what our next Ukrainian venture capital and private equity market report is about,” said Volodymyr.