Ukraine is a startup on the world map. Capable of providing unprecedented investment growth to those who believe in it.
Can a traditional business be a startup? It is generally believed that no. Because there are conceptual differences between a startup and a traditional business. One of the main differences is that a startup simply needs to find its own business model. Ukraine is now in a situation where inventing its own business model is one of the essential tasks for ensuring not only rapid but also rapid and dynamic development. And if in the post-Soviet period, Ukraine’s main task was to become better than the countries of the former Soviet Union, which was not such a difficult task. Now we will have to try to become in certain matters even better than countries where most of the processes are established and presented as an example to follow. This will already require significantly more effort and even the help of those same countries.
And, it would seem, why should they help them grow their competitor? Under normal conditions, it is obvious that such an idea looks maximally altruistic, but under conditions when the issue concerns your own security, this idea takes on a maximally egoistic character and becomes quite logical.
So, the progressive world and, first of all, the countries of Europe are interested in Ukraine developing much faster than it is described in textbooks on economic theory. Regardless of how many parts the Russian Federation will disintegrate into in the future, the presence of a powerful economic, and, accordingly, a powerful military neighbor, which acts as a guarantor of security for the entire Europe, is the main and unconditional interest of most of the developed world. Now the military strength of Ukraine is supported by the help of international partners. But both Ukraine and its partners are working to ensure that in the future, Ukraine’s basic needs can be financed independently. Thanks to a rapidly developing economy that provides a stable tax base.
Another important difference between a startup is financing and profit. Investors in startups do not expect immediate profits from their investments, they rather expect that in the long term, their investments will return several tens of times. Political investments in Ukraine, which have already begun to take place, point to exactly this approach of world investors. And it’s not just about military aid packages, but also about budget subsidies from international partners, help with the restoration of damaged objects and infrastructure, and the creation of roadmaps for the post-war reconstruction of Ukraine with publicly announced clarifications that reconstruction begins immediately, without waiting for the end of the war and insurance guarantees of risks.
These are the political investments that should act as a marker for private investors, which indicates the prospects for private investment in Ukraine.
And another key difference between a startup is ambition and desire for scaling. Agree, it is difficult to call anyone a more ambitious country on the world map today than Ukraine. Ukraine supports its ambitions with very specific actions on the battlefield, defending the whole world from war, and very specific actions towards membership in NATO and the European Union. No one of the key politicians in the world has any doubts that Ukraine will become a member of the EU and NATO.
But in addition to membership in these respected structures, Ukraine has begun the procedure for joining the Organization for Economic Cooperation and Development (OECD), which entails radical transformations of all public processes and institutions. In the perspective of several years of preparation for membership, institutions related to management, transparency, and public process administration systems undergo all the necessary changes to meet the organization’s membership requirements.
This in turn will lead to the creation of a legal infrastructure that will make Ukraine a modern, efficient state capable of being on an equal footing with the leaders of the democratic world.
Based on these features, it can be stated that Ukraine, as a project in a new geopolitical reality, fully meets the criteria for a startup. What Ukraine offers as a return on political investments is already clear, it remains to figure out what Ukraine offers or will offer shortly to a private investor.
I will try with my own knowledge and experience to illustrate what is happening with investment in Ukraine.
Understanding all of the above, various institutions have already created about two dozen funds that are raising investments under projects in Ukraine.
Among them, for example, Black Rock, which accumulates $25 billion that it wants to channel into the restoration of Ukrainian agriculture, energy, manufacturing, information technology, and infrastructure.
Horizon Capital, which invests in the real sector of the economy and operates several funds with a total asset volume of about $1.4 billion. The company’s interests are technological and export-oriented projects, which ultimately indicates the prospects for this type of projects in Ukraine. Investors in various types of production are building their plans by focusing not so much on the domestic consumer market of Ukraine, which, of course, will also grow, but primarily on the markets of the European Union.
For example, the American-Polish venture capital company ffVC, is completing the formation of a $50 million fund, more than 30 of which have already been raised, and which it plans to invest exclusively in startups founded by Ukrainian entrepreneurs. ffVC mainly invests in fintech, insurtech, B2B and SaaS companies that can be easily and quickly scaled in the United States. With its $50 million fund for Ukrainian startups, the company plans to invest in almost 20 companies at the pre-Series A stage, with tickets ranging from $500,000 to $2.5 million. First of all, ffVC is interested in Ukrainian startups that develop software, SaaS and cybersecurity solutions.
Meanwhile, the President of the European Investment Bank Werner Hoyer says that Ukraine already has more than one trillion euro in investment opportunities.
The European Investment Bank itself has already signed a memorandum with the Government of Ukraine to allocate €840 million for the reconstruction of Ukrainian infrastructure. These funds will be used to prepare, assess, finance, and implement reconstruction projects: municipal infrastructure (schools, hospitals, etc.), public buildings with energy efficiency in mind, water supply and sanitation infrastructure, transport networks, and urban public transport.
And although it is clear that a significant part of the volume of investments announced by the President of the European Investment Bank will be financed after the end of the war, private investors are not waiting for its completion and are already forming funds and considering projects in a variety of industries. From food processing, through energy, to the technology sector of venture capital and military technology. The International Investment Office, for example, is working on several projects related to the development of production sites, logistics, energy, and even recreation.
All experts agree that there will be so much money that Ukraine has never seen such numbers before.
What needs to be prepared for now is the ability to accept such a large amount of financing and operate it. A sharp demand for specialists of various profiles related to the organization of business processes is what awaits Ukraine in the near future. In case of a shortage of local specialists, it will be necessary to think about motivating qualified experts from other countries who would be willing to sacrifice the infrastructure they are used to for temporary lower taxes and accordingly higher personal incomes.
The Ukrainian economy will develop at a very fast pace, but it needs to be prepared for this. Those who understand that the cheapest assets are right now are not waiting for the end of the war, because then the numbers will be completely different, and investing in technical documentation and the development of investment projects is as relevant as ever. What we and others who understand these prospects are currently busy with. Ukraine is destined to become a global unicorn, on the tip of whose horn the evil empire will perish.
Roman Matys,
President, International Investment Office
specially for Gazeta Prawna