Ukraine is a startup on the world map, one capable of delivering unprecedented investment growth to those who believe in it.
Can a traditional business be a startup? The usual answer is no, because the two differ in concept. One of the main differences is that a startup has to find its own business model. Ukraine is now in exactly this situation: inventing its own business model is one of the key conditions not just for fast, but for dynamic development. In the post-Soviet period Ukraine’s main task was to do better than the other former Soviet countries, which was not especially hard. Now, in some areas, we will have to become better than countries whose processes are long established and held up as examples. That will take far more effort, and even the help of those same countries.
Why would they help a competitor grow? In normal times the idea would look purely altruistic. But when your own security is at stake, it becomes a matter of self-interest and makes perfect sense.
The democratic world, and Europe above all, has an interest in Ukraine developing much faster than economics textbooks describe. However many pieces the Russian Federation breaks into in the future, having a powerful economic and therefore military neighbour that guarantees security for the whole of Europe is the main and unconditional interest of most of the developed world. Today Ukraine’s military strength relies on help from international partners. But Ukraine and its partners are both working towards a future in which Ukraine can finance its own basic needs, thanks to a fast-growing economy with a stable tax base.
Another important feature of a startup is how it is financed and when it makes a profit. Startup investors do not expect immediate returns; they expect their money to come back many times over in the long run. The political investments in Ukraine that have already begun point to exactly this approach. This is not only about military aid packages, but also budget support from international partners, help with rebuilding damaged facilities and infrastructure, and roadmaps for post-war reconstruction, with public statements that rebuilding starts now, without waiting for the war to end, and with risk insurance guarantees.
These political investments should serve as a signal to private investors, showing them the prospects for private investment in Ukraine.
A third key feature of a startup is ambition and the drive to scale. It is hard to name a more ambitious country on the world map today than Ukraine. It backs its ambitions with very concrete actions on the battlefield, defending the whole world from war, and with very concrete steps towards NATO and EU membership. No leading politician in the world doubts that Ukraine will become a member of the EU and NATO.
Beyond these, Ukraine has started the process of joining the Organisation for Economic Co-operation and Development (OECD), which requires a radical overhaul of public processes and institutions. Over several years of preparation, the institutions responsible for governance, transparency and public administration will go through all the changes needed to meet the OECD’s membership requirements.
This will create the legal infrastructure that makes Ukraine a modern, efficient state able to stand on an equal footing with the leaders of the democratic world.
Given all this, Ukraine as a project in the new geopolitical reality fully meets the criteria of a startup. What Ukraine offers in return for political investment is already clear. What remains is to understand what Ukraine offers, or will soon offer, to private investors. I will try to illustrate what is happening with investment in Ukraine from my own knowledge and experience.
Understanding all of the above, various institutions have already set up around two dozen funds raising capital for projects in Ukraine.
Among them is BlackRock, which is pooling $25 billion to channel into rebuilding Ukrainian agriculture, energy, manufacturing, IT and infrastructure.
Horizon Capital invests in the real economy and manages several funds with total assets of about $1.4 billion. The company focuses on technology and export-oriented projects, which shows the potential of such projects in Ukraine. Investors in manufacturing are building their plans less around Ukraine’s domestic market, which will of course grow too, and more around the markets of the European Union.
The American-Polish venture firm ffVC, for example, is closing a $50 million fund, more than $30 million of which has already been raised, to invest exclusively in startups founded by Ukrainian entrepreneurs. ffVC mainly invests in fintech, insurtech, B2B and SaaS companies that can scale quickly in the United States. With this fund it plans to back around 20 companies at the pre-Series A stage, with tickets from $500,000 to $2.5 million, focusing on Ukrainian startups that build software, SaaS and cybersecurity solutions.
Meanwhile, the President of the European Investment Bank, Werner Hoyer, says Ukraine already has more than one trillion euros’ worth of investment opportunities.
The European Investment Bank itself has signed a memorandum with the Government of Ukraine to provide €840 million for rebuilding Ukrainian infrastructure. The money will go towards preparing, assessing, financing and delivering reconstruction projects: municipal infrastructure such as schools and hospitals, energy-efficient public buildings, water and sanitation, transport networks and urban public transport.
A large part of the investment mentioned by the EIB President will clearly be financed after the war. But private investors are not waiting: they are already forming funds and looking at projects in many sectors, from food processing and energy to venture tech and defence technology. The International Investment Office, for example, is working on several projects in industrial sites, logistics, energy and even leisure.
All experts agree that there will be more money than Ukraine has ever seen.
What we need to prepare for now is the ability to absorb and manage such large-scale financing. Ukraine will soon face sharp demand for specialists in every area of business organisation. If there are not enough local experts, we will need to attract qualified professionals from other countries who are willing to trade familiar comforts for lower taxes and higher personal income for a while.
The Ukrainian economy will grow very fast, but it has to be ready for that. Those who understand that assets are cheapest right now are not waiting for the war to end, because by then the numbers will be completely different. Investing in technical documentation and in developing investment projects has never been more relevant, and that is what we and others who see these prospects are doing now. Ukraine is destined to become a global unicorn, on the tip of whose horn the evil empire will perish.
Roman Matys, President of the International Investment Office. Originally written for Gazeta Prawna.