War disrupted the functioning of start-ups and tech companies in Ukraine

The invasion of Ukraine by the Russian armed forces marked the onset of war, which has disrupted the functioning of start-ups and tech companies in Ukraine. Amid the conflict, Ukrainian companies have been trying to keep up with the evolving implications of war, keeping their employees safe, outsourcing operations, and ensuring that the work continues.

Ukraine, being a young state with 30 years of independence, has seen a humble tech start-up activity compared to its European counterparts such as the UK and Germany. Nonetheless, Ukraine witnessed a thriving start-up ecosystem due to its vast pool of software developers, resulting in successful startups such as Gitlab, Grammarly, People.ai, and Liki24. However, owing to the pandemic and the war, the tech start-up industry has found itself jumping out of the frying pan into the fire.

The industry faces myriad challenges, starting with the short-term business impacts such as ensuring the continuity of business operations, the safety of employees, and the relocation of servers. For the time being, the operational implications are being mitigated by outsourcing the operations and shifting the Ukrainian servers abroad. However, start-ups such as Beetroot, which had 90% of the staff located in Ukraine, had to plan to move the tech infrastructure and relocate the employees. But many of these employees chose to stay back and fight for their motherland. At the same time, other start-ups have relocated their employees and their families to safer countries in Europe.

The other major issue was the availability of the internet for the employees in Ukraine. Ukraine’s Vice-Prime Minister tweeted, indicating the resumption of Starlink satellite internet service in the country. Therefore, the start-ups managed to mitigate the operational impact and carry out their operations by relocating their employees and hardware resources.

As for the long-term effect, the funding of start-ups is at a slow pace. Foreign investors halted investments owing to the war and the risk involved in funding these start-ups. However, despite the turmoil and uncertainty, investors such as SMRK VC Fund, an IT-focused Ukrainian venture fund, are keen on continuing their investments in the Ukrainian start-ups to keep the industry going forward.

In anticipation of the invasion, the US and Europe imposed heavy sanctions on Russia and plan on imposing additional sanctions if the war continues. These sanctions will also affect the start-ups in Russia and result in devastating consequences. Therefore, the war has affected industries on both sides.

SOURCE: GLOBALDATA

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