Well-known IT expert Oleksii Kocherev agreed to head an international fund for the selection and audit of young Ukrainian startups in the field of information technology. He believes that the unstable situation in the country is the best motivator for the development of innovative projects.
On the Potential of the Ukrainian IT Industry
The fact that today Ukraine has a reputation as one of the strongest countries in Eastern Europe in the field of information technology does not require proof. Suffice it to say that our country ranks first in Eastern Europe in the number of certified engineers. Therefore, despite the stagnation of the national economy, the IT business continues to develop. Many Ukrainian startups have successfully started in global markets and gained wide popularity around the world, proving that our IT specialists have huge potential, work capacity and generate brilliant ideas. Therefore, Ukraine has every chance to become the European IT capital and the largest global IT hub.
On Foreign Investments
The myth that foreign investors are in no hurry to invest in the Ukrainian IT sector is refuted by my daily practice. My foreign colleagues are actively looking for promising Ukrainian IT projects by creating a special fund. The interest at the global level is also evidenced by the fact that according to the review of the Association of International Investors, last year the volume of investments in the Ukrainian IT sector grew by 237% and amounted to $132 million in venture and private investments. I am pleased to note that in 2016, the industry also shows a positive trend - according to the State Statistics Service, direct foreign investments grew from $43.371 billion to $44.790 billion in the first half of this year. That is, in just six months, Ukraine received $1.419 billion in investments. And this is a good signal for international and local investors.
On Trends in the Ukrainian Startup Market
Over the past two years, most Ukrainian startups have reoriented themselves to external markets. Thereby, they minimize their dependence on internal risks, and therefore increase their appeal to international investors. As a result, the domestic innovation market has shrunk significantly. So the most noticeable trend in recent years has been the shift in focus from the Ukrainian market to the European one and the rejection of expansion to Russia in favor of Europe. So, if in 2007-2013 there was one global project for every nine focused on local markets, now it is one to one.
Another trend is that the managerial and entrepreneurial skills of Ukrainians working in IT are growing and approaching the global level. I observe a steady growth in their professionalism, approaching the global level in creating products and the value of the company. I'm glad that our fund will also be able to contribute to this process.
Of course, our local startup market also follows global trends, including continuous price correction, a clearer focus on operational success, a growing interest in low-cost early-stage investments, experimentation with models and increased sector specialization.
On the Relevance of Young Startups
Crisis is the engine of startups! In difficult times, people often find themselves without a job and instead of looking for a vacancy in an unfavorable labor market, they try to launch their own project. Especially since in such an economic situation, resources are becoming cheaper, that is, you can do much more for the same money.
But the main reason that good projects do not reach the implementation stage is still the lack of start-up capital. And even for popularizing their business ideas among potential investors. The tasks of financing young Ukrainian projects, as well as many other relevant issues of venture investment, will be solved by our fund, which will start the selection and expertise of the most interesting IT projects at the beginning of 2017. This will be followed by the distribution of funds for their implementation.
On the Volume of Investments
Our fund does not have a specific budget, since different projects require different investments. The optimal amount of investment will be determined in the process of selecting and auditing startups. However, I can say that today the average amount of investment in a startup is about $400,000, which is 2 times more than the "average check" in 2013-2015. So if the fund does not have enough of its own resources, we will attract private investors. The main thing is to find truly innovative and promising projects. For them, we are ready not only to allocate funds at the growing stage, but also to help carry out operational activities and attract additional intellectual resources. After all, the more successful cases on the market, the faster it will develop. And the trigger for this growth can be closer cooperation between various startup participants.
On Priority Areas
In our competition, we focus on the interests of the global venture capital, which is interested today in startups in the field of IT that create software, mobile applications, Internet services, information systems, wearable devices and other IT equipment. We are also interested in projects with the development of new processes and approaches to the organization of IT services. The Internet of Things (when all objects are united into a network), Big Data (working with big data) - these are also global trends that will be priorities for our venture fund. In addition, we plan to invest in developments and experiments in the field of physics. I am already participating in the work on an innovative invention that can overturn our ideas about the existing laws of physics, together with a group of scientists. Perhaps soon we will be able to prove the phenomenon of direct generation of energy - both mechanical and thermal, and electrical - using a plasma-frequency installation and battery power. We are now at the experimental stage. If all tests are successful, a presentation for potential investors and the media will take place in the near future.
On Selection Criteria
First of all, we pay attention to the relevance of the project for both the Ukrainian and international markets. The main idea of the startup should be innovative, unique and feasible. The presence of a working project model and a prototype for a device or equipment will be very important. We can help in its implementation if it becomes clear at the initial stage of selection that the project can make a real breakthrough in its industry. That is, we are ready to take on the functions of a business incubator, which is interested in any projects with growing revenue and great growth potential.
The fund will pay a lot of attention to the startup teams, which should consist of specialized specialists, whose goal is the implementation and development of their idea, and not personal enrichment. In world practice, about 20-30% of the investment project should be ready to be financed by the developer himself, in order to convince investors of the seriousness of his intentions. Any venture investor will say that it is best if the project already has not only a finished product, but also the first global customers. This will be able to confirm the demand for the product, prove its potential for growth and the ability to develop. After all, in the end, the investor is needed not for the creation of the project, but for its scaling. If the team has a vision of the market, an understanding of development trends and the competitive environment, our venture fund will not leave its project without attention!
On the Selection Process
The first stage is filling out an application form on a special Internet portal, which will be launched in early 2017. The selection will be carried out by the fund's team, as well as involved Ukrainian and foreign IT industry experts. The second stage will be interviewing the teams of the selected startups and a preliminary audit of the projects. The presentation of the winners will take place as part of a specialized educational event, to which leading global and Ukrainian IT leaders will be invited. In the near future, a wide announcement of our initiative, its concept and timing will take place. For this, we will involve a wide range of print and electronic media, social networks and our official resources, so that all aspiring and seasoned startups will have all the comprehensive information.
On the Entrepreneurship Ecosystem
I dream that an open communication system will take shape in the Ukrainian IT industry. Of course, this does not mean that the secrets of your startup or technology will become available to everyone in the market. But an ecosystem of openness, where people communicate without borders and selflessly help each other, is beneficial for everyone. Such a community creates a tremendous synergistic effect that strengthens each player. This environment generates new ideas and discoveries. We must create a new reality in which the Ukrainian economy will become truly innovative, and its main value will be human capital!