The document provides an overview of the Ukrainian venture capital and private equity market in 2016. Some key points:
- There were 87 deals in 2016 totaling $88 million invested, a 125% increase over 2014.
- The majority of deals and capital invested were at the seed stage. Online services saw the largest growth.
- Ukrainian capital dominated deals though some large deals had Russian and international investors.
- The number and quality of startups increased but investors said there is still room for growth.
- Factors like tax incentives and a skilled workforce are improving Ukraine's investment climate and competitiveness.
2. Special thanks
Marianna Yarosh, Noosphere Ventures, Head of Research Committee UVCA
Yurii Sachenok, Concorde Capital
Alexander Bartkovyak, Concorde Capital
Yuliya Sychikova, AVentures Capital
Iegor Vernoslov, EY Ukraine
Konstantin Vasiuk, 4i Capital Partners
Anna Zorya, Arzinger
3. Foreword
Ukrainian Venture Capital & Private Equity Overview 2016 3
Last year UVCA released the first Ukrainian Venture Capital and Private Equity Overview. Our
aim as the Association is to encourage the development of Ukrainian venture ecosystem
with its achievements, showing the reliable and accurate data. 2016 was marked by the
entrance of international investors, to the market by becoming UVCA members. We also
hope that ukrainian startups will grow not only in quantity (today there are about 3000 in
Ukraine), but also qualitatively. This will be an additional motivation for the investment
increase and the rise even more international investors. As the voice of private capital in
Ukraine, our Association leans to bring the investment market players together and support
collaboration between them.
Another objective of the mission is the improvement of Ukrainian investment climate. UVCA
Legal Committee is steadily working on the creation of necessary legal environment for
investors in our country in order to let both local and foreign investors benefit from the
favorable conditions created. It will also give market players the assurance of safety and
lead the decrease of number of undisclosed deals (today this rate is 14%) so that will show us
few times better investments volume rate.
We are actively working on the creation and delivering country’s image at the international
scene by applying our efforts and involving partners, stirring up market players. We hope
that you share our vision and join us in spreading the latest information presented in our
researches. Look forward to hearing from you as far as UVCA is open not only for new
members but also for new partners. Let`s shape the market together and prove that it is
definitely worth to INVEST IN UKRAINE!
Olga Afanasyeva
Executive director of UVCA,
PhD in Finance
4. Foreword
Ukrainian Venture Capital & Private Equity Overview 2016 4
Every year we see more and more Ukrainian success stories in the sphere of high
technologies. Making the Overview, we investigated investments in IT companies in 2016 – it
gave us the understanding of market’s structure. About 100 companies were invested last
year, which is a very high indicator that shows interest of investors, international ones in
particular. As we can see, today more and more Silicon Valley funds have portfolio
companies from Ukraine so that is the signal to the whole world – it is possible and necessary
to invest in Ukraine.
Ukrainian IT sector is growing and developing every year. World’s community already knows
about the technological (engineering) talent of Ukrainians, which is why many outsourcing
companies are successfully operating in the country. According to PWC, Ukrainian market of
IT outsourcing has all the opportunities to grow up to $ 5-7 billion in the near future. At the
same time, despite the capacity of the outsourcing market is now the greatest, startups and
product IT companies are running the leadership in terms of capitalization. Today there are
about 3000 startups of different directions being developed in Ukraine.
The investment activity of 2015, shown in the Overview 2015, became the catalyst for the
growth of transactions. When the world saw the success of IT companies in the global
market, the number of investments has begun increasing. Taking into account the average
time for a deal, which is 8-12 months, we can expect a further growth of investment
transactions and deals’ amounts. We hope that the collected data will give an
understanding of not only about the current situation at the investment and IT market of
Ukraine, but show its prospects and competitiveness.
Andrey Kolodyuk
Chairman of UVCA
Supervisory Board, Founder &
Managing partner, AVentures
Capital
5. • 87 deals (32% growth in number 2016 vs 2015)
• $88 mln total capital invested* (125% up over 2014)
• $525k average deal size at Seed stage (31% growth in average 2016 vs 2015)
• 8 exits by VC and PE funds
• Ukrainian capital prevails in the majority of deals on the Ukrainian market
• Ukrainian startups should have a main part of the team or R&D center based in Ukraine according
to investors’ view
Industry snapshot 2016
Note: here and throughout the report investments include VC, PE and Angel capital
Ukrainian Venture Capital & Private Equity Overview 2016 5
6. 7
16
10 9
7
UVCA released the first in Ukraine
Investors Book, displaying current
players’ activity, sectors of interest
and portfolio.
There are 31 funds operating in
Ukraine, consisting of
5 incubators and accelerators,
1 corporate fund,
17 venture capital funds, and
8 private equity funds.
Investors overview
Source: Investors Book by UVCA
Ukrainian Venture Capital & Private Equity Overview 2016 6
Investment stages considered by funds
5 1 17 8
Seed
Pre-seed
A
B
Growth
7. Portfolio & average ticket
Investment funds in Ukraine usually have around 20 companies in portfolio. The average ticket
varies from $50k to over $10 million
Investments stages
The prevalent number of funds operating in Ukraine focus on the Seed stage
Geographical focus
Most investors seek to diversify their portfolio and are looking for projects with international
presence beyond Ukraine
Investors overview (cont’d)
Source: Investors Book by UVCA
Ukrainian Venture Capital & Private Equity Overview 2016 7
8. > 65%
of investors
expect an increase
in VC investments in
2017
> 50%
of investors
expect an
increase in Private
equity investments
in 2017
6
of investors met
their expectations
for 2016
Investment Outlook
Market participants expect an increase in
investment activity in 2017 over previous years.
Exits
8 successful exits in 2016.
We expect more success stories as political
and economic conditions improve.
Investors overview (cont’d)
Source: UVCA Investor Survey, April 2017
Ukrainian Venture Capital & Private Equity Overview 2016 8
68%
exits by
VC funds 2exits in private
equity
9. Fundraising outlook
A certain number of investors is undergoing the fundraising process in different stages.
According to UVCA’s Investor Survey, 15 investors started their fundraising plans for 2017.
Fundraising
Source: Horizon Capital
Ukrainian Venture Capital & Private Equity Overview 2016 9
Horizon Capital is in the final stages of fundraising and expects to attract up to USD
37.5mln from Overseas Private Investment Corporation (OPIC) into the Emerging Europe
Growth Fund III, L.P.
This fund seeks to invest in fast-growing, mid-size, export-oriented companies in Ukraine and
Moldova with the potential of growth from local to regional market leaders.
10. The most active investors 2016 according to AIN.ua
*AIN - a major Ukrainian tech publication. Runs an annual ranking of the country’s startups.
Ukrainian Venture Capital & Private Equity Overview 2016 10
11. ● Total number of deals in 2016: 87
● Seed stage: 73 deals (58 in 2015)
● Round B stage: 1 (4 in 2015)
● 13 Undisclosed deals
● Local investors: 19 (34 in 2015)
● Average ticket: total $1.01mln:
$525k at the seed stage,
$20 mln at the B Stage,
$2.2 mln are undisclosed deals
Highest number of deals since 2010
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016 11
Note: 2016 including aggregated 17 seed deals
($5.4mln)
and 13 undisclosed deals ($29mln)
20142013201220112010 2015 2016
Round A
Seed
Round B
78
55
48
24
11
58
73
8
14
9
5
2
4
13
4
1
1
2
1
Growth
Undisclosed
86
71
58
29
14
66
87
12. ● Total capital invested: $88mln,
125% up over 2014 and 33%
down over 2015 (due to several
one-off large growth stage deals)
● Seed stage: $38.36 mln
● Round B stage: $20 mln
● Undisclosed deals account in
$29.21 mln
Total investments dropped by 33%, to $88 million
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016 12
Note: including aggregated 17 seed deals
($5.4mln) and 13 undisclosed deals ($29mln)
20142013201220112010 2015 2016
Round A
Seed
Round B
18151516
4
22
38
Growth
Undisclosed Total
39
89
59
24
20
88
22
51
33
8
6
9
20
22
12
10
101
29
132
-128% +125%
14. ● Median value deals are the
most attractive in 2016 –
24 deals in $100-500k sector
● Number of $0-100k value
deals is also growing, while
seed stage is rapidly
accelerating as well
Deal value brackets
14
Note: excluding undisclosed and
aggregated data
Note: 2015 and 2016F are based on
interviews conducted in the course of EY
Ukraine & UVCA Investor Survey, April 2016.
2016 is based on actual deals in 2016
$10 - 100M$1 - 10M$500k - 1M$100-500k$0-100k > $100M TOTAL
6
14
24
11
9 9
27
19
6
4
2 2
3 3
2
1 1 1
2
54
Online services
E-commerce
Other
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016
15. ● Average ticket at the seed
stage – $525k
● Undisclosed deals,
average - $2,2 mln
● 44% of capital invested at the
seed stage, and
the number of seed stage deals
is dominant at 84%
Structure of capital invested in Ukrainian Internet sector in 2016
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016 15
Note: including aggregated 17 seed deals
($5.4mln) and 13 undisclosed deals ($29mln)
Deal Volume by stages,
number of deals
Deal Value by stages, $M
UndisclosedSeries ASeed Series B
87
13
88
1
73
29
20
38
16. Seed Stage Deal Volume by
segments, number of deals
Seed Stage Deal Value by
segments, $M
● The most active segment of
investments is Online Services -
16 deals
● $9 mln were invested in Online
Services at the Seed Stage
Deals
Seed Stage Deals by segment
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016 16
Note: excluding undisclosed and
aggregated data
E-commerce
Hardware
Consumer Internet
Other
Software
Online services
AIMobile
Sales
Agtech
Education
56
4
33
1
7
9
13
9
5
4
1
1 2
2
<1
5
9
7
5
1
1
<1<1
3
17. ● Russian investors completed
one of the biggest deals by
value - $20 mln (Busfor)
● Ukrainian capital prevails in the
majority of deals on the
Ukrainian market
Origin of capital
Source: "Dealbook of Ukraine 2014-2015” by Ukraine Digital News and AVentures Capital; Inventure; UVCA research
Ukrainian Venture Capital & Private Equity Overview 2016 17
Note: excluding undisclosed and
aggregated data
UkraineRussiaUS International EU
Capital structure by
country 2016, $M
Capital structure by country 2016,
number of deals
48
6
44
1
20
5
18
11
1
12
9
9
18. Quantity
Number of eligible startups
grew 3 times versus 2015,
however investors surveyed
noted that there is still room for
new projects
Quality
Perception of founders
professional level improved
year over year, however
investor expectations are rising
as well
Startups snapshot
Source: UVCA Investor Survey, April 2017
Ukrainian Venture Capital & Private Equity Overview 2016 18
Startups quality and quantity
Number of targets
for investment
Professional level
of projects in Ukraine
45%55% 55%45%
19. Top 10 Startups according to AIN.ua rating
*AIN - a major Ukrainian tech publication. Runs an annual ranking of the country’s startups.
Ukrainian Venture Capital & Private Equity Overview 2016 19
Sixa
A full computer that operates
right from the cloud
via a client app
eTachki
The first in Ukraine online auction for the
sale of cars
Mobalytics
Personal performance analytics for
competitive gamers and esports
People.ai
System for empowers sales
leaders to be
more effective
Allset
Wait-free dining experience at
restaurants
Hideez
An electronic hardware manufacturer
specializing in cybersecurity and
authentication devices and services
Ajax Systems
Smart security systems and sensors for
homes
SolarGaps
Smart blinds that generate
electricity
Wishround
An online platform that enables its users
to choose online gifts and share them
with friends on social media networks
LifeTracker
AI based context aware mobile app that
reminds to do right things at the right
time
20. For investors to identify a
startup as Ukrainian, its core
team or R&D center must be
based in Ukraine.
Certain investors are looking
for Ukrainian born founders
who own at least 50% of
shareholders equity in the
company.
'Ukrainian' startup, the definition
Source: UVCA Investor Survey, April 2017
Ukrainian Venture Capital & Private Equity Overview 2016 20
No less than 50% founders -
Ukrainians
The major part of the team or R&D
center in Ukraine
The company is registered in
Ukraine
100% founders - Ukrainians
17%
4%
70%
9%
21. Capital of Ukraine was added
at Top 10 least expensive cities
for living. It helps to reduce
operation costs for companies
based in our country.
100+ multinational R&D centers*
are based in Ukraine, including
Samsung, Huawei, Siemens,
Magento, Playtech etc.
Ukraine - international rankings
Ukrainian Venture Capital & Private Equity Overview 2016 21
Based on 113 cities surveyed in September 2016
Cost of living index
The ten most/least expensive cities
Source: Economist Intelligence Unit (economist.com)
Source: Hi-Tech Ukraine
22. Ukrainian Venture Capital & Private Equity Overview 2016 22
World Bank Doing Business
Economies are ranked on their ease of doing
business, from 1–190. A high ease of doing business
ranking means the regulatory environment is more
conducive to the starting and operation of a local
firm.
8180
55%
45%
Innovation Index
This is the highest ranking of the GII that Ukraine has
attained, led by raising eight positions up in the
Innovation Input Sub-Index (76th) and raising seven
places up in the Innovation Output Sub-Index
(40th).
Ukraine’s ranking in the Innovation Efficiency Ratio
has also improved by three points to the 12th place
in rating (and 10th in the region), which is one of the
economy’s relative strengths in 2016.
Source: The Global Innovation Index 2016 - Cornell University, INSEAD, and
the World Intellectual Property Organization
Source: The World Bank doingbusiness.org
2016
2017
+1 spot up
64
56
2015
2016
+8 spots up
Ukraine - international rankings
23. Legal novels of Ukrainian IT market in 2016
Ukrainian Venture Capital & Private Equity Overview 2016 23
The year 2016 was marked by a significant novelty in the corporate law. In particular, successful steps were taken to reforming and
bringing Ukrainian legislation and case law into the compliance with the European standards. 2016 may be described as the year
of new trends and opportunities.
Thus, the important and long-awaited Law on the Protection of Investors Rights dated 7 April 2015 No. 289-VIII was enacted, which
came into effect on 1 May 2016. The Law introduces a number of novelties into Ukrainian corporate law aimed at improving the
level of protection for domestic and foreign investors in Ukraine and, as a result, to improve Ukraine’s position in the Doing Business
rating.
The Law abolishing the mandatory state registration of foreign investment dated 31 May 2016 No.1390-VIII was finally adopted. The
Law introduces the application-based principle for recording investments through submission of statistical information on
investments made. The introduction of such changes will ensure the approximation of Ukrainian laws to the EU standards, simplify
the procedure for attracting foreign investments and will facilitate the recovery of the State economy.
In turn, the end of the year was marked by the adoption of the antiraider law dated 6 October 2016 No.1666-VIII, which abolishes
the so-called "general" extraterritoriality principle and introduces the mandatory notarial certification of signatures of a legal entity’s
shareholders on resolutions of its general shareholders’ meetings/ other management bodies, amending the records contained in
the Unified State Register regarding the legal entity.
To bring the Ukrainian corporate law into compliance with the world standards, it is primarily necessary to adopt the law on limited
liability and additional liability companies. The adoption of the new law will allow considerably improving the conditions for
activities of limited liability and additional liability companies and creating an attractive alternative for many Ukrainian companies
and foreign investors.
24. Legal novels of Ukrainian IT market in 2016
Ukrainian Venture Capital & Private Equity Overview 2016 24
Export of IT services
IT services worth around USD 3 billion were exported from Ukraine in 2016. Therefore it is hard to overestimate the importance of
removing the administrative barriers for the export of Ukrainian IT services adopted in November 2016 by the Law "On lifting
administrative barriers for the export of services" for industry and foreign customers (investors). Particularly, the Law stipulates the
following:
● Foreign economic agreements may be concluded in electronic form, inter alia through billing (invoicing), including in
electronic form;
● Using transfer and acceptance certificates to confirm the completion of work or provision of services is not a must;
● It is no longer mandatory to translate documents into Ukrainian, if they are drawn up in English;
● Currency control requirements do not extend to export transactions with services and IP rights.
Tax
Most IT specialists and not large IT companies enjoyed simplified taxation system during 2016 paying 5% (amount of unified tax for
the 3rd unified group payers if VAT is included in the unified tax) from the amount of their income.
Worth noting that conditions of simplified taxation system were toughened in 2016, - particularly tax rates for the 3rd unified group
payers became higher and threshold of annual income providing opportunity to be unified taxpayer became lower from UAH 20
mln to UAH 5 mln.
Currency regulation
The year 2016 was as well marked by gradual currency regulation liberalization which continuous in 2017 and results particularly in
the following:
● dividends, accrued for the period of 2014-2016, are permitted to be repatriated;
● an amount of foreign currency proceeds transferred from abroad to accounts, opened with Ukrainian banks, and subjected
to mandatory sale at the interbank market, has been reduced from 65% to 50%;
● placement of funds in foreign currency by individuals into accounts opened abroad, provided that such funds were
originated outside Ukraine (salaries, dividends etc.), is no longer subject to obtaining a respective individual license of the
NBU.
25. Ukrainian pavilion at CES
2017 for the first time in the history of CES Ukraine presented its
national expo, which was jointly organized by UVCA and
Western NIS Enterprise Fund (WNISEF).
To choose the best 8 companies that are worthwhile to be
exhibited in frames of the first national expo, UVCA organized
contest “UVCA Challenge: CES Edition”.
Hideez Your only digital key
SolarGaps Green energy available to everyone
Ecoisme Discover your home power
Tecnhovator Remote wireless charging
Cardiomo Saves your life
Raccoon.world Tactile virtual world
Wider Unique multivision solution
Luciding Dream what you are dreaming about
UVCA achievements for investors, startups and Ukraine
Ukrainian Venture Capital & Private Equity Overview 2016 25
26. In frames of the World Economic Forum in Davos, which took
place on January 2017, two Ukrainian investment-oriented
events were held by UVCA.
Ukrainian Davos Nights gathered more than 400 participants
of the World Economic Forum: investors, entrepreneurs, media
representatives to let them learn more about Ukraine’s
achievements, partnership opportunities in IT and investment
sectors. The main goal of these jointly organized Ukrainian
business events was to position Ukraine not only as the new
technological leader but also as the country where new
international R&D centers are being opened and people are
making successful investments.
Read more:
http://uvca.eu/en/news/ukrainian-davos-nights
Ukrainian Davos Nights 2017
26Ukrainian Venture Capital & Private Equity Overview 2016
27. Ukrainian Venture Capital and Private Equity
Association (UVCA) was established in mid-2014 and
unites more than 40 members - private equity and
venture funds, accelerators, incubators, educational
institutions, and non-government organizations that
make significant impact on the development of
Ukrainian investment market.
UVCA aims to remove the gap, by channeling the
power of its network into better awareness and
investment climate by proving that it is worthwhile to
INVEST IN UKRAINE.
http://uvca.eu
https://www.facebook.com/uvca.eu/
https://twitter.com/uvca_official
Learn more about what do we do:
http://uvca.eu/en/about
About UVCA
Ukrainian Venture Capital & Private Equity Overview 2016 27