Ukraine's IT industry: Top 10 breakthroughs of 2015

Author : Vsevolod Nekrasov

Source : 112 Ukraine

Ukrainian startups received a record number of investments, and the IT sector took third place in terms of state's exports
15:45, 30 December 2015

The end of the year is a traditional time to take stock. Although in 2015 the domestic IT-industry had its defeats and breakthroughs, "Economichna Pravda" (EP) decided to recall the most significant successes.

After all, optimism makes move forward in spite of setbacks.

EP asked for a few leaders of Ukrainian IT-industry to develop their own rating of the most important achievements of the domestic high-tech industries in 2015. Comparing them, EP has produced the final top 10 achievements in the IT market in the past year.

1. Ukraine has launched 3G

Ten years after the introduction technology of the third generation mobile communication among developed countries, Ukraine still held a tender for the sale of 3G-frequencies. Three mobile operators only for the licenses paid 8.7 billion USD to the state.

Approximately the same amount they to invest in the next two or three years in the construction and maintenance of 3G-network, and this does not include the purchase of abroad equipment. In addition, they posted 1.6 billion USD for the conversion of frequencies of each year and now they will pay for 0.6 billion UAH of rent.

Thus, the largest investment project of 2015 in the Ukrainian IT-industry was the launch of 3G. "This event gives the green light to the development of the whole technological platform of services," stressed the president of "Kyivstar" Petro Chernyshov.

2. George Soros invested in outsourcing company Ciklum

Foreign investment, which Ukraine desperately needs, came from the eminent investor George Soros. November 18, 2015, his Foundation for Economic Revival of Ukraine announced the acquisition of stake of fourth largest Ukrainian IT-outsourcing company Ciklum.

Although the participants did not disclose the amount of the transaction, as well as the number of shares purchased, according to experts, the volume of investment can range from 40 mln USD to 60 mln USD. According to Ukrainian standards, this is a huge sum.

The founder of a venture fund AVentures Capital and member of the negotiating process in the deal Andriy Kolodyuk calls the deal a turning point for the whole Ukraine. "After that, the country will find new investors, and we will be seen not only in the context of political scandals and military actions," says Kolodyuk.

However, the managing director of the Association of International Investors Janika Merylo states that this investment was made contrary to the actions of the authorities. "Do not relax, it is necessary to constantly work on improving the business climate in the country," he said.

3. Snapchat bought Looksery startup for 150 million

Looksery developed an application for mobile devices, which in real-time allows the user to change the appearance of your face in videochats or photos.

Special filter let the program, for example, make a person younger, fuller or thinner, to change the color of eyes or skin, and remove wrinkles.

The development team was located in Odesa.

In September 2015 the founders of Snapchat mobile application for text messaging, photo and video, paid for Looksery 150 mln USD. While all of these millions indifferently passed by Ukraine, the PR effect of the sale of the largest Ukrainian startup just cannot be overestimated.

Senior director of "EPAM Systems Ukraine" Yuriy Antoniuk believes this transaction is a vivid example of popularizing Ukrainian startups and opportunities for bringing local development on a global level. "Unfortunately, such a solution is most often associated with team’s leaving of Ukraine," says Antoniuk.

Andriy Kolodyuk calls this event a great illustration of how in just two years, you can create a company worth millions of dollars. 

4. Ukrainian startups received a record 100 million investment

Branch of startups received a record number of investments. "We commend them from 60 mln USD to 100 mln USD. And it is the absolute maximum for this industry. The growth of the sum was enabled by an unprecedented number of transactions," says co-founder of Ukraine's first business incubator for startups Denys Dovhopolyi.

However, this figure is quite ambiguous. Ukrainian market of early investments is weak, according to Janika Merylo.

For example, in Estonia business angels invested 4.8 mln EUR in start-ups in 2015. If we compare the countries in terms of population, in Ukraine this rate should be about 155 mln for the successful development of an ecosystem of startups investment.

5. IT-industry took the third position in terms of exports

Ukrainian IT-industry is ranked third on the export after agriculture and industry with the index of 2.4 bln USD. It showed 10 per cent growth in dollar terms against the background of a falling economy.

Related: Smart City technologies presented in Kyiv

6. The state has retained the conditions for IT-companies

The representatives of IT-business positively assess the fact that the state in 2015, has retained the previously established economic conditions of work IT-companies. Business hopes that these conditions will change gradually.

Particularly appreciated the positive industry preservation of the single tax. Although there is a high probability of significant change with increasing rates every year of its work in its current form it helps the development of the IT market.

7. Educational Platforms have launched free online trainings

General Director of "Datagroup" Olexander Kardakov highlights the intensive development of free online training in the field of high technologies. "Getting the popular professional skills is easier thanks to online education platform, the all-Ukrainian educational programs and free online courses from leading Ukrainian universities," says Kardakov.

Related: Lviv IT Arena to be held this autumn in Lviv

8. The share of IT in the country's GDP exceeded 3%

According Kardakov, the share of IT in GDP in Ukraine in 2015 exceeded the 3%, and by some estimates, it reached 5%. The latter figure seems somewhat subjective, but 3% may correspond to reality.

In September 2015 the managing director of Luxoft Ukraine Vitaly Nuzhnyi also named 3% as the share of IT in the economy. In 2012, this figure was 0.8%. The manager expects that by 2020 the share of the sector will increase to 5.7%.

9. Horizon Capital bought a part of the internet shop

The investment fund Horizon Capital bought a piece of the country's largest online store In 2014, its turnover was estimated at 200-300 mln USD, and the cost of business - 200-700 mln USD.

The amount of the transaction was not disclosed. Denys Dovhopolyi believes that we can talk about buying 5-15% of the business.

"At the moment, it is the largest investment in Ukrainian project related to e-commerce. It is a good sign for this industry," said Dovhopolyi.

10. E-government initiative has been launched

Ukraine has launched a revolutionary electronic system of public procurement ProZorro, which eliminates the possibility of corruption in this area. In less than a year of test operation, it has saved 210 thousand USD of the budget.

In June, the IT-volunteers headed by Dmytro Dubilet, IT-director of Privatbank, launched the portal for ordering online public services. First mass technology of electronic identification of human BankID, a peremptory alternative to digital signature, has been launched in Ukraine. A mobile analogue of BankID, Mobiil-ID, was launched in test operation in Lviv.

Central bodies of executive power, under strong public pressure, opened registries of real estate, land, vehicles, and provided online access.

"In addition to providing transparency and public accountability, it will also contribute to the emergence BigData-start-ups, market services and applications based on such data," says Petro Chernyshov.

A spoon of tar

Unfortunately, 2015 is known not only by the IT-achievements. The passing year was unprecedented in the number of mass searches of IT-companies’ offices, seizures of servers, office and private equipment. Since July 2015 more than 30 scandalous searches were conducted.

According to Denys Dovhopolyi, searches scared away almost half of potential investors and intensified the outflow of personnel from the industry up to 10 thousand people over the next six to ten months.

Yuriy Antoniuk also confirms this trend.

"Such figures as 5-7 thousand people may seem insignificant at the level of industry, but in most cases, this level of senior experts with a five-ten years of experience, could be deterrent to industry growth and development of young professionals," he believes.

The good news is that, according to Olexander Kardakov and Andriy Kolodyuk, market participants who follow honest business rules, loudly defend themselves. There are the first stories of inspiring legal victories that some companies have got their equipment back and proved that law enforcers’ actions were illegal.

"Stopping the raids means maintaining the IT-sector and the investment attractiveness of Ukraine," sums up Kolodyuk.

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