Ukrainian startups boost the Polish economy

Author : Vsevolod Nekrasov

Respondent : Mykola Murskyj

Source : 112 Ukraine

Expert: Ukraine's domestic startups might be implemented in Ukraine without going abroad
20:43, 29 July 2016

Denys Gursky

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Denys Gursky is an ideologist of "1991" unprofitable startup incubator and the author of the open data portal

He is also the initiator of the draft of the Open Government Data Act, which allowed launching ProZorro and E-data projects.

As part of the US government's program, Gursky studied the experience of state support of innovative business, got acquainted with the work of world-class accelerators and venture investors.

Denys told how the domestic startups might be implemented in Ukraine without going abroad, how business innovation might develop the local economies, and how he intends to ease the lives of creators of Ukrainian IT-projects.

Related: Girl from Ukraine receives scholarship for startup

Denys, tell us about you trip to the US.

I had few goals. The most important one was to understand how we could improve the methodological work with startups in Ukraine. How should we improve "1991" program? How should be Ukrainian incubators reformed?

I have visited 500 Startups and Techstars accelerators and watched their incubation cycle. Based on this experience, we would create a new program of "1991."

Now the entire startup system is concentrated in Kyiv, and the startupers need to move to the capital to run their projects. We want to run a nationwide program that will help people build a startup, then invite them to incubate it in their region.

Have you talked to the American investors?

I met with representatives of Silicon Valley Bank, USAID, Morgan Stanley, Deutsche Bank, and George Soros. We discussed how they finance startups, how they see the opportunity to enter the Ukrainian market.

Denys Gursky

Our most important task is increasing the innovative component in Ukraine, resuscitation of the economy with the help of IT and Ukrainian startups.

Our main interest is to show how to work with the startups and at the same time have a positive impact on the ecosystem. We want to remove the problems, which stop the investors.

What are these problems?

Protection of intellectual property and lack of paybacks for the Ukrainian startups. Free economic zones do not work in Ukraine; there are no state programs of innovation entrepreneurship support.

One of the main goals of my trip was to study the experience of the government programs that support startups. I have spent ten days in Albany and Troy (New York).

Earlier these towns belonged to the developed industrial regions. In the early 2000s, unemployment and drug addiction have destroyed the local economy. The state machine began to work over creation of the work places. The state program adopted a startups support there.

Ukraine’s situation is similar; half of the country is a backward industry.

Related: Ukrainian startup Ecoisme won 100,000 euros in competition in France

What surprised me in the US that the state structures together with the private investors are investing in the transformation of old buildings into incubators and accelerators, which create the work places.

The US government exempted from taxation the local startups for ten years. Innovative companies are exempted from tax on wages to first employees (for the first three years). The state program has shown tremendous positive effect. Speaking about Ukraine in terms of the decentralization, local taxes will decide the fate of the region, and we have a huge amount of vacant buildings in the regions.

How to begin the implementation of such programs in Ukraine?

In Ukraine, there is no support for startups. Ukrainian legislation does not even has such a word.  There is a term “small innovative enterprises,” but it came from mid-nineties, and it does not mean startup. It is necessary to bring the legislation into a form that would be understandable to all market participants.

When we hear that Ukrainian business successfully raised several million dollars, it means that a group of people came to the US, created an American company, paid taxes to the US budget, and sold the US company for a large sum. Ukrainian IT specialists are talented, but they almost do no effect the economic success of our country.

Related: Ukrainian startup develops ‘anti-sleep’ smart watch for preventing road accidents

In addition to talents, the innovations of entrepreneurs still need some investment. Does Ukraine have enough venture capital?

Speaking about venture capital investment in Ukraine, we have “investment starvation.” It is very difficult to find the seed funds. It is necessary to create a special fund, which would be responsible for the seed investments. Actually, when the startup project faces the problems with the seed funds, it leaves the country. It finds the money in the Czech Republic and Poland. Therefore, our startups happily move to Poland and raise its economy.

Seed investments and focus on the agricultural sector, energy, and Smart City would create viable product and sell it to the pilot paying customers. Then your products go for export, and you do not have to think about moving your family abroad and establishing a company in another country.

How to make the life of the Ukrainian innovative entrepreneurs easier?

We would create a parliamentary group with the participation of the foreign experts, which would ease the life of innovative entrepreneurs on the governmental level.

We would create a long wish list, show it to the public, and vote for it. The lawyers would transform this list into the package of legislative changes, which must be supported by the Parliament.

We can no longer ignore the situation with the startups. Ukraine has a generation that needs to have an opportunity to create something. It can be given by law, it is possible to combine large investors that they have allocated a small amount of "seeding" fund. Let it be collectively controlled, but it will create conditions for the growth of startups.

What would be the focus of "1991" incubator in the nearest future?

We will build a network of non-profit incubators of "1991" across the country. First, we would establish them in two cities, and then will share this methodology to the initiative groups. They will raise the business community in their native towns and cities.

Denys Gursky

We are also considering the possibility to help the universities to create the competent incubators. I have seen the incubator at the New York Polytechnic Institute. Based on this experience, we want to offer an alternative to the Soviet legacy (summer students’ practice). The universities must give the students an opportunity to create something.

If you can create a startup and get good grades for it, it is beneficial for both parties. If you are working in a university incubator, some part of your money would go to the university.

For example, if your startup is successful and receives investment, then some money will be returned to the university. Thus, the university would be interested in it.

Related: The number of successful startups in Tel Aviv grows 20% annually

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