Mala Academia Nauk

Ukraine is on the brink of a technological revolution, spurred by the intense pressures of the ongoing war with Russia. In this environment, innovation is accelerating at a remarkable pace, and new technologies are emerging far quicker than they might under normal circumstances. Ukrainian President Volodymyr Zelenskyy has emphasised that victory in the war may hinge on a significant technological leap – and that breakthrough is now becoming a reality.

Despite the potential for growth, Western investors have been hesitant to back Ukrainian startups. However, the Ukrainian government has taken bold steps to foster innovation, creating a defence technology cluster to finance cutting-edge projects.

In 2024, more than USD 35 million from the state budget will be allocated to this initiative, supporting a full-fledged industry that spans from idea generation to the creation of market-ready products.

This government-backed innovation could lead to a resurgence in venture capital investment. According to AVentures Capital, the volume of venture deals in Ukraine grew by a staggering 4.1 times in the first half of 2024 compared to the same period in 2023, increasing from USD 68 million to USD 283 million.

Ukraine’s technological advancements are set to gain international exposure. Later this year, 12 of the country’s top IT startups will be showcased at TechCrunch Disrupt, one of the world’s largest startup conferences, taking place from 28 to 30 October in San Francisco. The event is expected to draw 10,000 participants, including tech leaders, startup founders, and investors from around the globe.

A Pivotal Moment for Investment in Ukraine

While Ukraine’s government remains the primary customer for these innovations, the need for international investment is growing, especially from the EU and the United States. Roman Sulzhik, an investor and co-owner of the Resist.UA venture fund, warns that after the war, government-backed funding is likely to decrease dramatically, perhaps by as much as 10 to 20 times.

“It is essential that startups are structured properly and are attractive to both local and foreign investors,” Sulzhik said.

The post-war landscape will require a shift in financing strategies, and the success of Ukrainian startups will depend on their ability to secure private investment.

A Hub of Innovation and Creativity

Ukraine has become a hotbed of creativity and technological ingenuity, with potential for significant returns on investment. While military technology is a major focus, other sectors are also flourishing. For instance, the Ukrainian startup Beholder, which specialises in mineral exploration, recently secured a USD 940,000 investment from the European fund InnoEnergy. Major companies such as Filo Mining, GrupoHunosa, and Petroteq Energy are lining up to benefit from this innovation.

The breadth of Ukraine’s startup scene is impressive, extending across diverse fields such as robotics, app development, and healthcare. A notable example is OUTEX, a startup that uses artificial intelligence for sports and rehabilitation. It will represent Ukraine in the finals of the World Youth Entrepreneurship Challenge (WYEC) in New York on 21 November 2024.

“Ukrainian young developers participate in numerous international competitions, often winning gold and silver awards,” said Stanislav Dovgyi, president of the National Centre “Mala Academia Nauk” Junior Academy of Sciences of Ukraine). Dovgyi’s organisation plays a key role in nurturing young talent, operating a startup incubator called “Ukrainian Future” and helping innovators patent their ideas.

He continued, “The most important thing is not just winning, but showcasing Ukraine’s intellectual capabilities on the global stage. We’ve already caught the attention of Western investors, partly because of the war and the rapid development of military technologies. Just a year or two ago, who would have thought that Ukraine would lead in drone systems?”

Support from Global Tech Giants

Global technology companies are also recognising Ukraine’s potential. Recently, Google selected 24 Ukrainian startups to receive funding through its Google for Startups Ukraine Support Fund. The selected startups are not only creating jobs in traditional sectors, but also leveraging technology to address the unique challenges posed by Russia’s invasion.

“These Ukrainian entrepreneurs are showing extraordinary resilience in the face of adversity,” Google noted in a statement. “They are developing solutions that contribute to the protection and recovery of their country.”

Looking to the Future

Ukraine’s technological growth has accelerated at an unprecedented rate, driven by the exigencies of war. The country is now at a crucial juncture, where international investment could help sustain and expand this innovation ecosystem. With the backing of foreign investors, Ukraine’s tech sector could emerge as a significant player on the global stage, contributing to the country’s post-war recovery and long-term economic resilience.

The war may have thrust Ukraine into a challenging position, but it has also spurred a wave of creativity and ingenuity. As the country continues to innovate under pressure, opportunities for investors to capitalise on this growth are rapidly expanding. For those willing to take the plunge, the rewards could be substantial.