It’s not easy being a start-up in Ukraine. But these companies have made it work
When 34-year-old engineer and inventor Dmytro Kostyk founded his Internet of Things (IoT) company Kodisoft in 2003, he knew there was a rough journey ahead. “In Ukraine, you have a top supply chain, but to get something here in the country, you have to move mountains,” he says.
More than a decade and a half later though, Kodisoft has helped transform the dining experience for customers and restaurateurs alike with its interactive table technology, which is now used by 19 restaurants in cities including Kyiv, Barcelona, London and Dubai.
These interactive dining tables can be used for ordering food and drinks, summoning restaurant staff and paying the bill, but also offer entertainment features like music, children’s games and the ability to share photos and videos with other guests.
To date, Kodisoft has sold more than 1,000 of its smart tables which are now used in shopping malls, cafes and other eating establishments all over the world. Despite delivering products all over the world, from North America, Europe, and to the Middle East and Asia, most of Kodisoft’s operations and productions remain based in Ukraine. “Most of our developers are still here, and a big part of the production is also here — all of our core IP, sensor technologies, etc, we keep it here,” Kostyk tells ZDNet.
Yet achieving such success in a country like Ukraine brings a unique set of challenges and obstacles, ranging from outdated legislation and difficulties with the IP laws, to high-level government corruption.
According to Denis Dovgopoliy, CEO of Ukraine-born investor matchmaking startup Unicorn Nest, startups often have to contend with a lack of funding alongside shortcomings in the legal system. “There are few local Ukrainian investors, while European and global investors are hesitant to invest in Ukrainian startups. The jurisdiction for registering companies has some shortcomings, while there is also an unstable economic, social and political situation,” Dovgopoliy tells ZDNet.
Galyna Paliychuk, country lead and global head of innovation at UK-based e-commerce company Growth Shop, says the lack of multicultural experience is another obstacle Ukrainian businesses face in attracting foreign clients and investors.
“People in Ukraine are very talented, but sometimes lack of multicultural experience makes it difficult for them to find clients and investors, and for foreign companies like ours to find the right talents that are a great cultural fit to the team,” Paliychuk says.
“Communications are still not at the high level. That’s why many startups struggle with scaling to other markets. They don’t know how to sell their products, services and even themselves in the West through the right communication.”
However, if there is a will, there is a way, says Kostyk. Kodisoft, which is today valued at around $100M, began its rise in 2007 when the company created a Bluetooth beacon device designed for mobile advertising. Using the profits from this, Kostyk’s company had the foundation to start experimenting with their next product — interactive ‘smart’ tables. “We spent four years creating the technology, and the machinery needed to produce the tables,” he says.
Unlike Kostyk’s case, for up-and-coming startups and tech companies in the country nowadays, the biggest angel investor comes in the shape of Ukraine’s Startup Fund ( USF). Founded in 2019, the state-owned fund develops tech startups at early stages, offering up to $85,000 in pre-seed and seed funding.
During the past couple of years, more than 250 startups have already received grants from the USF totalling more than $6M.
“Our Fund works to give impetus to the development of the Ukrainian startup ecosystem, to finance promising young entrepreneurs in the early stages, and to help businesses get back on their feet,” Pavlo Kartashov, director of the USF, tells ZDNet.
“We support every national startup that has a chance of succeeding.”
Telemedicine company Comeback Mobility is one of the startups to have received funding from the USF, and which has contributed significantly towards its early development. Recently, the company raised over $1M from different med-tech investment funds and angel investors in the country.
What’s interesting about Comeback Mobility’s business model is that its own employees are investors in the company, the organization’s 32-year-old CEO, Ilya Popov, explains.
According to Popov, this is mostly due to the uniqueness of the company’s core product — a telemedicine device that attaches to the end of walking crutches and helps aid patients’ recovery from leg injuries.
“We have created a product that’s unique and which solves the existing problem ten times better than anything else existing on the market,” Popov tells ZDNet, adding that investment by employees has now reached $218,000.
How success stories drive innovation
For the USF, such success stories can inspire other aspiring startups in Ukraine, and help drive technological development in the country.
“Successful startups can also help Ukraine’s society become much more technologically advanced. For example, medtech startups such as Comeback Mobility can also help a lot of hospitals in the country with their technology,” says Yana Paladiieva, project manager at the USF.
Paladiieva adds that most of the fund’s success stories have so far come from the medtech and AI sectors.
Altris is a young Ukrainian startup working at the intersection of these two fields. The company has created a deep-learning platform that applies AI and ML to detect more than 100 pathological signs and retinal diseases. Founded in 2018 by tech entrepreneur Andrey Kuropyatnyk and ophthalmologist Maria Znamenska, the startup received most of its funding from foreign investors and this year closed a post-seed round at about half a million dollars.
The platform now has more than 10,000 active users, and Altris has partnership deals with five global optical coherence tomography (OCT) equipment manufacturers. “In the upcoming period, I expect that we will cover more than 60% of the global market of OCT devices,” Kuropyatnyk says.
While such examples can be encouraging for up-and-coming Ukrainian tech entrepreneurs, Kostyk’s advice to most of them is to continue to believe in the core idea of their product, regardless of the odds.
“Ukraine has an image that there aren’t a lot of successful startups because a lot of people just get the investments, spend the money, and nothing comes out of it. My advice to those that really believe in their product is that they should work hard on it and do whatever it takes to make the best possible version of it.”
Originally published at https://www.zdnet.com on October 20, 2021.