Key insights of 2021-2022 in VC&PE Deal book of Ukraine by AVentures Capital

AVentures Capital presents Key insights of 2021 in VC&PE Deal book of Ukraine that covers the full year 2021 and the first deals of 2022.

Key findings:
  • Record high VC and PE volume exceeding US$ 830m in Ukrainian tech companies marking more than 45% YoY growth
  • Historic high volume of early-stage (Seed and Series A) deals exceeding US$ 240m
  • Strong M&A activity with at least 28 exits of product and IT service companies
First insights of 2022: Antifragility of export-oriented product companies, effective initiatives by IT community, the slowdown in deal volume yet fair market valuations, and more

Ukraine’s tech during first 60 days of War:

  • Export oriented Tech sector resilience: Despite slowdown in the first few weeks of war due to relocation of employees to safer territories, the export-oriented IT companies demonstrate continued revenue growth and traction, indicating the sector’s antifragility amid the worst crisis. Example: most portfolio companies of Ukrainian funds continue to grow fast;
  • Fair market valuations for startups: Valuations remain high at pre-war levels for strong product startups oriented at western markets,especially those with HQ outside Ukraine. Valuations for Ukrainian startups follow global trends and are not significantly impacted by local factors. Example: two of AVentures portfolio companies are closing new rounds at substantially higher valuations;
  • Struggle for survival of local companies: Companies serving local consumers with Ukraine as a core market (e-commerce, ride-sharing, classifieds) experience a major slowdown caused by the war. Many fire employees in masses to cut costs and lower salaries for those they keep. Companies are working on reanimating logistics capabilities that have been significantly tampered;
  • IT salaries are down for new hires: For the first time since the first COVID wave in early 2020, we observe a decrease in salaries for ITprofessionals. On selected job websites, the number of candidates exceeded the number of available vacancies for a short while. The market, however, is steadily coming alive;
  • YoY deal volume is 5 down: Although the 1Q YoY deal volume has declined, the new deals are still being closed. Most of M&A deals with tech companies with majority of employees in Ukraine are on hold;
  • IT Service sector challenges: Since most IT Service companies serve global clients, the sector demonstrated resilient growth in February and March. That said, the companies reported lower levels of employee productivity during first months of war. Yet, Ukrainian professionals adapt to new environment and full productivity is soon to be back;
  • Tremendous war effort: Ukraine as a country and nation has united more than ever. Most employees combine volunteering with the job. More people volunteer joining the military than being mobilized. The number of independent initiatives aimed at helping win the war is inspiring and offers optimism in the imminent victory.
  • Quick rebound sector’s militarization: Given sector’s proven track-record of antifragility, we expect to see a quick rebound in investment and M&A activity after the war. More so, Ukraine’s IT industry has a chance of becoming country’s number one export;
  • Military tech sector revival: IT + military (as offence, defense tech, cybersecurity) and e-government are likely to emerge as new popular verticals in Ukrainian tech ecosystem. See slide slides 22 for existing military projects.
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Support Ukraine!
  • Come Back Alive is one of the largest charitable foundations that supports Ukrainian soldiers, founded by the IT specialist Vitaliy Deynega. The organization collected more than 210 million UAH (more than $7M) in 2014. According to Na chasi, the Patreon page Come Back Alive is in the top ten projects by the number of financial donations.
  • Army SOS, which develops drones;
  • Everybody Can, an organization that supports internally displaced people;
  • Help on the Ministry of Defense website.