Will Kyiv become a unicorn factory?
A bit more than two weeks ago, four fellow P9ers and I visited Kyiv (AKA Kiev¹) as part of our recently launched #P9EUTour. The idea behind the #P9EUTour is that we organize a series of events in different cities, usually with a specific theme. Our first stop was Berlin, where our portfolio companies and a number of guests spent an evening discussing all things “Talent” with outstanding HR leaders like Alison Eastaway (Head of Talent at Sqreen) and Alexa McWilliam (Global Recruiting Manager at Contentful). Last week the #P9EUTour returned to Berlin for our B2B Marketplace conference, and our next stop will be Paris, where we’re going to hold a CTO meetup on June 11, the day before SaaStr Europa.
But back to our event in Kyiv. Based on the feedback we got from people in the local ecosystem, we chose “Raising money from international investors” as the theme of the meetup. We had a great time discussing this and many other topics with some of the best Ukrainian entrepreneurs and investors at our event as well as the 42 Investment Summit, which took place on the next day. In this post, we’d like to share some impressions and thoughts about the startup scene in Kyiv — and take a shot at answering the question asked in the headline. :-)
If you hear about Ukraine in international media, unfortunately it is usually not about tech startups but about the annexation of Crimea by Russia and the horrible war in Donbass, which might obscure the fact the country is a software engineering powerhouse. I must admit that I didn’t know much about the country’s tech scene before our stay in Kyiv, and it was a surprise to hear that there are several companies in Kyiv that employ 1000 or more software developers!
Back home I tried to find some stats to get a sense for the size of the ecosystem. One analysis that I thought was interesting is based on the location listings of developers on GitHub. According to this analysis, there are around 10,000 GitHub profiles with the location listing Kyiv, which puts the city into the same league as places like Austin, Boston, Sydney, or Atlanta. The total number of developers in Ukraine is much higher since most GitHub users don’t list a location in their profile. According to this website, there are around 150,000 developers in Ukraine, which puts the country on the European Top 10 in terms of professional developer populations. And it’s not just the quantity of developers that is impressive: According to data from SkillValue and Hacker Rank, Ukraine scores #8 on a worldwide ranking of developer quality, ahead of Germany, the UK, the US, and China. Вітаю!
Relative to the large number of developers, the number of Ukrainian startups seems fairly low. According to this startup map, there are less than 400 startups in all of Ukraine², compared to which implies that the vast majority of developers works for large companies and outsourcing firms. That means that if you’re a startup in Kyiv, you have a large pool of highly-trained developers and relatively little competition from other startups. Based on what I’ve heard, developer salaries have gone up substantially in the last years so it has become more expensive to build an engineering team in Ukraine, but the salary levels are still much lower than in Western Europe or the US. This is one of the reasons that make Kyiv so attractive as a startup location.
So, will Kyiv become a unicorn factory?
Well, first of all, there are some unicorns with Ukrainian roots already (WhatsApp, Gitlab), and a few other ones look like unicorns in-the-making (Grammarly, Preply). So the real question is (a) will there be a lot more future unicorns that were started by Ukrainian founders; and (b) will they be able to build and scale their businesses primarily in Ukraine (as opposed to moving to the US or Western Europe). (a) feels like a very safe bet to make. No-brainer. The answer to (b) is less obvious.
It is, of course, hard to compare Kyiv to more mature ecosystems like Berlin, Paris, or London, let alone the Bay area, which has been the epicenter of startups and technology for the last fifty years, but (unless the political situation gets worse) I don’t see a reason why Kyiv won’t be able to become as successful as, say, Tallinn (home of e.g. Skype, Pipedrive, Transferwise, Taxify) or Stockholm (home of e.g. Spotify, Klarna, iZettle). The biggest challenge for founders in young ecosystems is recruiting experienced people in non-technical areas that have been trained at world-class companies, so hopefully companies like Grammarly, PDFfiller, Wix, Ring, or People.ai (and eventually Preply), who all have dozens or hundreds of people in Kyiv, will become great pools of experienced people who at some point want to move back to an earlier-stage startup or start their own companies. Another challenge is access to capital, but that can be fixed relatively easily since capital follows great ideas and great fairly quickly. We’re trying to do our part and will back soon, to hopefully have a chance to meet some of those future unicorns while they are still small!
PS: A big thank-you to everyone who joined us for the meetup, and a special thanks to Kirill and everyone at Preply, who kindly hosted us and helped us with everything from inviting guests to the logistics of the event. In case you haven’t heard about Preply yet, Preply is a successful global marketplace for language learning — a huge success story in the making, made in Kyiv.
¹ I used to use “Kiev” or “Kiew” but have learned that most Ukrainians prefer “Kyiv”, the transliteration of the Ukrainian name Київ, over “Kiev”, which is the transliteration of the Russian Киев.
² It’s hard to find comparable number for other countries since there is no consistent definition of “startup”, but according to this KfW report, there were about 12,500 tech startups in Germany in 2017.