The Cultivators: New breed of Ukrainian tech entrepreneurs seek success in global markets (part 4)

This series of articles shows how tech entrepreneurs living or born in Ukraine explore their motivations and dreams and also the many obstacles they face, striving to shape new products and services worldwide. A continuation of Part 3  of this series, the innovators in this group established their global companies and still manage and continue to grow them to this day.  These “cultivators” faced many challenges taking their products to the US market and elsewhere outside Ukraine, but have experienced great success as they focused on long-term growth.  These profiles of young risk-takers highlight their efforts to succeed on a global stage despite the odds stacked against them.

Yaroslav Azhnyuk and Petcube

So what did four 23-year-old Ukrainian entrepreneurs know about the connected pet market in the US?  Almost nothing, but they learned very quickly.  Yaroslav Azhnyuk and his colleagues Alex Neskin and Andrey Klen founded Petcube in Kyiv (Kiev) in 2012, Their product is an electronic device that enables owners to communicate with their pets over the Internet.

The four entrepreneurs later moved their headquarters to San Francisco, Calif.  There is still a Kyiv R&D office and manufacturing is done in Shenzhen, China.

Today Petcube is sold at major shopping malls and can be bought at familiar online stores including Brookstone, Amazon and BestBuy. It is a successful and award-winning product in the US pet care market, which was estimated at $69.5 billion in 2017.  By July 2017, more than 100,000 Petcube cameras were sold.

Marketing is key to this success.  Research, too.  Azhnyuk and his team started with a study of the market for pet products and services in the U.S. and found there was nothing like Petcube available.  So they began a small PR campaign to announce the device that attracted about a dozen major US and European media outlets.

In 2013, a Kickstarter campaign was launched after their first major media coverage.  Email marketing was also used as an essential tool,said Azhnyuk in a later media interview.

The entrepreneur emphasizes the importance of having a great staff.  “We were fortunate enough to hire some amazing executives here in the US… That was one of the best investments I’ve ever made.”

He also believes that his company has a significant competitive advantage because its R&D operation is in Kyiv.  “Ukraine has an incredible talent pool of engineers and designers and I think that’s a big competitive advantage for Ukrainian companies, or for Ukrainian founders worldwide.”

To date, Petcube has raised more than $14 million with lead investors including Y Combinator, SOSV, Almaz Capital and AVentures Capital.  Azhnyuk is a vocal evangelist for the great potential of Ukraine in global tech markets.  And he is a member of an informal Silicon Valley group called the “UA50”.

“I’m proud to be member of that the 50 group and those are people who are helping other aspiring Ukrainian entrepreneurs to find their way here in Silicon Valley. So if anyone’s coming here, they should make sure to get in touch with one of us,” said Azhnyuk (listen to interview).

Oleksandr Kosovan and MacPaw

In a 2019 list of most innovative companies, the business magazine Fast Company included MacPaw’s Mac software subscription service Setapp, launched just two years ago, as an honoree in the ‘Europe’ category.  Oleksandr Kosovan founded MacPaw in 2008 in Kyiv, Ukraine, but it also has offices in London and Santa Clara, Calif.

The company’s leading product is CleanMyMac, a very popular Mac cleaning and maintenance software product.  The company has been completely “bootstrapped” with no outside investment.

“Back then Ukraine had no culture of startups, or raising money or investors. I could rely only on my own skills. And so I spent most of my time in developing the product,” said Kosovan.  He added some designers and web developers paid for by early sales and his personal savings of about $2,000.  He points out that today a Ukrainian tech entrepreneur would have to spend at least $100,000 to take a product to market and so it is much more difficult now to bootstrap a startup. MacPaw has customers in 185 countries worldwide and is profitable.

How does MacPaw market and sell its products? “Our product is mostly for the B2C market so the end user is our target.  We invest a lot in online advertising or performance advertising like Google Ad Words or Facebook advertising.  This works really well for our main products,” says Oleksandr.  But satisfied client word-of-mouth referrals, or viral advertising, are also very important.

MacPaw has five million paid customers and the company’s revenue is growing at 14-20% annually.  Inc. magazine included the company in a 2018 list of the 5,000 fastest growing companies in Europe.

Kosovan tries to help the growth of Ukrainian tech startups through his VC firm called SMRK.  He originally funded it with $10 million and to date his investments include 8 companies in Ukraine, one in Russia and one in Finland.  The companies are focused on service-creation, software development and hardware.  One of his Ukrainian startups, Ajax Systems, is developing smart security devices for the home and home automation. This company made the news recently when Horizon Capital, a major PE firm, bought a stake in it.

And what challenges does Kosovan see for Ukraine in the tech sphere?  “I believe the major challenge in Ukraine is the brain drain.  Also, we have a lot of good product people because of all the engineering schools in Ukraine, but very few people who are entrepreneurs who think about creating products especially for Western markets.”

MacPaw’s strong growth clearly shows that a Ukrainian tech startup with a strong desire to succeed, good products and great marketing can thrive in global markets while also extending a hand to help other young upcoming entrepreneurs at home (listen to interview).

Article prepared for UADN, kindly provided by Michael Buryk

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Mike Buryk is a free-lance writer and also the producer and host of Made in Ukraine Tech Startup Edition, a podcast covering investment in Ukraine and the global expansion of its technology product and software companies. https://soundcloud.com/ukrainetech

Ukraine Digital News (UADN) is the first English language international information platform dedicated to the Ukrainian digital and IT industry

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