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Ukraine startups remain resolute amid Russian invasion

As the world feels the shockwaves of Russia’s invasion of Ukraine, startups based in the country are determined to keep the lights on.

A Ukrainian military vehicle passes Independence Square in central Kyiv on Thursday.
(Daniel Leal/Getty Images)

Russia’s invasion of Ukraine sent shock waves throughout Europe’s VC ecosystem on Thursday, but the country’s startups are determined to keep the lights on.

“Some of our startups moved out to parts of western Ukraine, but I know a lot of people who stayed in Kyiv because we are not afraid of invasion,” said Andriy Dovzhenko, a co-founder and managing partner of SMRK, a Ukrainian fund that specializes in IT startups. “We will continue to provide support to our startups to help cool down emotions, and we hope that our government will guide us through this time.”

Ukraine’s startup scene is relatively small compared to other European countries—28 VC-backed companies headquartered in Ukraine collectively raised $10.4 million last year, according to PitchBook data—but it has a deep pool of tech talent that has produced unicorn founders and provides support to companies elsewhere in Europe and beyond. And many venture-backed companies abroad have a deep connection to the country: PitchBook lists some 126 startups that raised VC funding since the beginning of last year and have a primary or secondary office in Ukraine.

The US, UK and other Western nations have imposed a broad array of sanctions on Russia to punish Moscow for the invasion. These include blacklisting major Russian banks, banning trade in newly issued Russian sovereign debt, export blocks on technology and other actions, and are meant to isolate the country from the world economy, hurt the Russian military, and inflict pain on Russian President Vladimir Putin and other senior officials.

President Biden said other sanctions, such as disconnecting Russia from the SWIFT international payments system, could be imposed.

The effect of these sanctions on Ukraine’s startups and the broader Ukrainian economy is uncertain.

Cristobal Alonso is the CEO of Startup Wise Guys, an Estonian accelerator that has five team members based in Ukraine and around 36 portfolio investments in the country. He said the last of his team members left Ukraine a week ago, but many startups and their employees forwent an evacuation. Not all of them are staying just to work.

“A number of [startup] employees are going to fight and they want to go to the front, and of course, we have to respect that,” he said.

Some companies that are not headquartered in Ukraine but have offices there have already moved operations elsewhere. San Francisco-based Grammarly, a Ukrainian-founded startup that develops writing software, released a statement saying it had contingency plans to protect its staff but had temporarily transferred business operations out of the country.

“Ukrainians have suffered a lot over previous decades, and this is not the first aggression from the Russian side. Still, they remain strong and resistant,” said one Eastern Europe-focused VC who declined to be named. He added, “The good thing is that today almost everything is stored on the cloud, businesses have in-built resilience, and will hopefully be able to continue to serve their customers.”

For his part, SMRK’s Dovzhenko said he remains optimistic about the future.

“Foreign investors may halt their investments for a couple of weeks or months until the situation calms down, but I expect strong support, especially from Europe and the US. Our fund is looking for investments, and we are positive in our fundraising prospects,” he said.

  • andrew-woodman.jpg
    Written by Andrew Woodman
    Andrew Woodman is PitchBook’s London Bureau Chief and oversees news coverage of Europe and the Middle East. Andrew has been reporting on the private markets since 2012. He was previously an editor with Private Equity International and with the Asian Venture Capital Journal. A Japanese speaker, he spent the best part of a decade in Asia, living and working in both Japan and Hong Kong.
  • leah-hodgson-photo.jpg
    Written by Leah Hodgson
    Leah Hodgson is a London-based senior reporter for PitchBook covering venture capital across Europe and the Middle East. Leah graduated from the University of Surrey with a BA in international politics with French. She has previously been a radio reporter in France. She later turned to financial journalism, covering the wealth management industry. She joined PitchBook in 2018.
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