Ukraine looks to tech to rebuild economy after Russia invasion 

An attendee walks past the Ukrainian booth at the Web Summit 2022 technology conference in Lisbon, Portugal.

Patricia De Melo Moreira | Afp | Getty Images

LISBON, PORTUGAL — As the war in Ukraine rages on, the country’s tech entrepreneurs are trying to stay positive.

“I don’t think there’s anything in the world that can kill our ability to win and our ability to do business or anything,” Valery Krasovsky, CEO and co-founder of Sigma Software, told CNBC on the sidelines of the Web Summit technology conference. in Lisbon.

Sigma, which has 2,000 employees based in Ukraine, has equipped its offices with diesel generators and Starlink Internet terminals so employees can continue to work amid Russian shelling of critical energy infrastructure.

“Nothing can happen that would prevent us from doing business, even in these conditions,” he added.

Sigma was one of 59 Ukrainian start-up companies that attended the event last week. Ukraine was a notable presence at the Web Summit, where it sought the support of the global technology community to strengthen its fight against Russia.

In 2021, Ukraine had a small stand at the Web Summit, Krasovski said. This year, she had a significantly larger stand, lit in yellow and blue. It was surrounded by torrents of visitors, including the first lady of Ukraine Olena Zelenska — accompanied by armed guards as she passed through the space.

Ukrainian Deputy Prime Minister Mykhailo Fedorov (right) and First Lady Olena Zelenska (center) attend the Ukrainian booth at Web Summit 2022.

Rita Franca | Nurphoto | Getty Images

At the opening night, Zelenska gave an impassioned speech calling on tech entrepreneurs and investors to help her country.

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“You are the force that moves the world,” Zelenska, the wife of Ukrainian President Volodymyr Zelenskyi, told a packed auditorium on Tuesday.

While Russia uses technology for “terror,” the international community has “technologies that can help, not destroy,” she added.

Russia called its invasion a “special military operation”. For Ukraine, however, it is an unprovoked seizure of the country with the aim of undermining its sovereignty.

Renovation with technology

Ukrainian officials and entrepreneurs have said the technology will be key to helping the country rebuild after the Russian invasion.

Moscow launched an invasion of Ukraine in February, and the war has decimated the country’s economy. Its gross domestic product has shrunk by 30 percent so far this year, according to economy ministry figures.

The World Bank estimates that Ukraine’s gross domestic product will decrease by 45 percent throughout 2022.

“People in Kyiv and some other cities, they build, they do business, they still export,” Dima Shvets, CEO and co-founder of Ukrainian social media startup Reface, told CNBC.

Shvets manages Reface remotely from London, where he lives with his wife and four-year-old daughter. About half of his team of nearly 200 people continues to work in Ukraine. When the bombing starts, people use the basement of Reface’s outpost in Ukraine as a shelter to hide.

Reface has rented a hotel for 50 people in the western part of Ukraine with separate electricity infrastructure so they can continue to work safely, Shvets said. It tried to move workers to Portugal “organically”, he added – but convincing them to leave was difficult.

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“People have houses, families in Ukraine,” he said.

In an interview with CNBC’s Karen Tso, the first lady of Ukraine said that it is “impossible to underestimate” the role of technology in Ukraine.

Watch CNBC's full interview with Ukrainian First Lady Olena Zelensky

“In this situation, it is difficult to talk about sustainability, technology, progress, because we are just trying to maintain ourselves and live as normally as possible,” said Zelenska. “However, we have a lot of startups and I hope that all the ideas presented at this summit can lead us to victory.”

However, as winter approaches, Ukraine will need more than investment in information technology to weather the difficult months ahead.

There were reports of widespread power outages lasting several hours across the country. About 40% of Ukraine’s energy system has been destroyed, according to the government.

“Ukraine needs more weapons, more military aid,” Zelenska said, calling in particular for air defense missiles.

Capital is coming

Ukraine’s IT industry brought in $2 billion in revenue in the first quarter of 2022, according to the National Bank of Ukraine, a 28% year-over-year increase despite the devastation caused by the Russian invasion.

The war displaced millions of Ukrainians, including technology experts. Many have joined roles abroad. When the fighting stops, hopefully these workers will return.

Some companies are ramping up hiring in Ukraine, betting that the country’s tech industry will become stronger after the war ends.

Two months ago, Lithuanian VPN software company Nord Security opened an office in the city of Lviv in western Ukraine. The company plans to hire 100 people there, according to CEO Tom Okman.

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“We think it’s time to bring Ukraine back, and we think the talent there is great,” Okman told CNBC.

He noted that Ukraine is home to thousands of skilled software developers and engineers. “Just imagine how many American companies have IT outsourcing” in Ukraine, he said.

Several billion-dollar “unicorn” founders hail from Ukraine, including Max Lytvin and Alex Shevchenko of Grammarly and Dmitriy Zaporozhets of GitLab. Google, Samsung and Amazon they also have research and development centers in the country.

But there are challenges beyond war that Ukraine’s tech ecosystem faces. The entrepreneurial landscape in the country is still developing. Startups in the country attracted just $22 million this year, according to Dealroom data.

“There are no big capital inflows to support what we’re doing,” Reface’s Shvets said. “What we should do right now is show more examples of entrepreneurship.”

Shvets said the government in Ukraine should seek to help local entrepreneurs in the country with tax incentives and other pro-business initiatives.

Still, there are signs that tech investor sentiment toward Ukraine is improving. Last month, Horizon Capital, a Kyiv-based VC firm, raised $125 million for a startup fund aimed at supporting Ukrainian founders.

SID Venture Partners, a venture fund founded by Sigma and fellow Ukrainian tech companies Ideasoft and Datrics, has so far invested in 10 startups with Ukrainian founders, Krasovsky said.

It plans to raise an additional $50 million to $60 million from institutional investors after raising an initial $15 million in December 2021. “There is tremendous interest,” Krasovsky said.


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