DeepTech and AI Ecosystem in Ukraine Overview
Distribution of Industries on the Market of 560 AI Companies
Industry market share shows the percentage of a certain industry among all industries in which AI-related companies operate. Thus, the more companies operate in a particular industry, the greater the share of this industry in the overall market is. According to the graph, the Technology industry takes the biggest share of 62.5% of AI companies operational market.
Since companies may implement AI technology in an almost infinite number of cases, they participate not in a single industry solely but several at a time. Nearly half of all companies (52%) are engaged in Software Development, some for internal usage, and some sell their software as a service. About one-fifth of companies work in such industries as Internet Media & Services, EdTech, HealthTech, Industrial IoT, E-Commerce, GovTech, and Defense.
Distribution of DeepTech Companies in Ukraine
Most Ukrainian companies are located or registered in Kyiv. Also, a large number of companies are registered in large Ukrainian cities, such as Kharkiv, Lviv, Odesa, and Dnipro. Also, it can be noted the growth in the number of companies in cities such as Zaporizhzhia, Ivano-Frankivsk, Chernivtsi and Vinnytsia.
The Problem and The Solution
Current State of Tech Market in Ukraine
$7.35B
Exports of the Ukrainian IT industry in 2022; 5.8% growth compared to 2021
703%
is the overall increase in the value of Ukrainian startups over five years
$881M
Volume of VC and PE investments in 2022; 6% growth compared to 2021
32.2B UAH
amount of taxes and fees paid by the IT business in 2022, which is ₴4.4 billion more than in the previous year.
The IT market in Ukraine has experienced significant growth over the past 10 years, with the most active dynamics over the past 5 years. As of the beginning of 2023, Ukraine still demonstrates the growth rate of the IT services market.
Despite the ongoing war, the number of registered IT professionals increased by 31,793, or 13%. By 2025, the number of IT individual entrepreneurs is predicted to rise to 347,000. Despite the growth, IT professionals make up only 1.5 to 2.0 percent of the working population in Ukraine, indicating substantial room for growth.
The Ukraine tech sector is booming despite being in the throes of wartime. There are numerous reasons why the industry is doing so well. There are just as many challenges that the industry needs to be aware of as they continue their resilient fightback. However, the most impressive feature of Ukraine’s tech sector during these times is the unrelenting quality of service.
Key Problems for AI Market in Ukraine 1/2
Solutions
Collaborative Platform
Invest in Ukraine Tech aims to further the development of AI and DeepTech in Ukraine. This dedicated, collaborative platform will help to develop a functioning entrepreneurial ecosystem in the country.
The analytical dashboard will facilitate collaboration between companies and DeepTech investors. The algorithms built into the platform will generate recommendations for both user groups regarding potentially mutually beneficial partnerships
This tool is designed to map the interdependencies between companies and identify opportunities for them to support each other based on their industry sectors.
This tool will enable investors to obtain quantifiable assessments of companies and generate profound and specialised market intelligence.
Solutions
Investor relations management (IRM) tool
The tool will allow companies to automate and track their relations with investors. IRM will give the ability to build own interactive reports and graphs on outreach performance in form of the dashboard.
LegalTech platform
An IT-based compilation of legal investment processes to optimize investment relations and business transactions.
Investment Landscape Overview
Distribution of 260 Investors
The United States takes the lead in the number of investors in AI/ML companies in Ukraine accounting for 39.1% of all investors. Such distribution occurs because the United States is among the top markets where Ukrainian AI companies operate. Ukrainian investors take only the 5th place accounting for 6.6% of all investors.
Industry Funding by Years
* Forecast taking into account the prediction of the World Bank about the possible fall of the Ukrainian GDP by 45% in 2022 due to the war
** CAGR-based forecast
Investments in Ukrainian innovative companies increased significantly over the last 10 years from $42.4 million in 2014 to $301.6 million in 2023, which shows the incredible growth of the Ukrainian economy and the attractiveness of Ukrainian companies to domestic and foreign investors. It is worth noting the sharp decline in investment in 2020 in connection with COVID-19, and in 2022 ($1.1 million in Q1 2022) due to Russia’s invasion of Ukraine in Feb 22.
Economic Landscape: Ukraine's Deeptech and AI Sector
Ukraine Deeptech and AI sector
Ministry of Digital Transformation:
National AI Development Strategy
In recent years, Ukraine’s world-class artificial intelligence (AI) industry has become something of a calling card for the country’s booming tech sector. This success has proved possible without the benefit of any significant state support. Indeed, many believe the vibrancy and dynamism of Ukraine’s AI industry are at least partially due to the relative absence of government interference in the sector.
The free market spirit that characterizes the Ukrainian tech sector led to considerable skepticism when plans were first unveiled in late 2020 for an official National AI Development Strategy to cover the coming decade. Approved by the Ukrainian Cabinet of Ministers, this
In recent years, Ukraine’s world-class artificial intelligence (AI) industry has become something of a calling card for the country’s booming tech sector. This success has proved possible without the benefit of any significant state support. Indeed, many believe the vibrancy and dynamism of Ukraine’s AI industry are at least partially due to the relative absence of government interference in the sector.
The free market spirit that characterizes the Ukrainian tech sector led to considerable skepticism when plans were first unveiled in late 2020 for an official National AI Development Strategy to cover the coming decade. Approved by the Ukrainian Cabinet of Ministers, this
Challenges and Future Outlook for Ukraine's Deeptech and AI Sector
Diia City – New Tax Regime for Tech Companies in Ukraine
Having long established a reputation for being a reliable destination for outsourcing, Ukraine is now looking to take its IT industry to the next level and establish itself as one of the world’s tech powerhouses. To accomplish this, in 2020, Ukraine’s Ministry of Digital Transformation unveiled the Diia City programme.
Attraction of investments
in Ukrainian tech
ecosystem
Development of digital infrastructure
Attraction of talented workers from around the world
Stimulation of the domestic innovative products creation (startups and product companies)
On 18 December 2021, the law "On Amendments to the Tax Code of Ukraine On Stimulating the Development of the Digital Economy in Ukraine" (the "Diia City Tax Law") was signed into law by the President of Ukraine. Therefore, as the regime is entered into force, Diia City remains in the spotlight for Ukraine's entire IT industry, including the entities engaged in AI & ML field.
Diia City: Parties Who Can Benefit from Diia City Residency
The Ministry of Digital Transformation is working to create a "state in a smartphone" called “Diia” that combines a mobile application and a public services portal.
The first step of the Ministry was the creation of diia.gov.ua, the online portal of public services, and the mobile application, where everything is fast, clear and easy to understand. They allow the citizens of Ukraine to get a service when and where they need it without worrying that it’ll take all day in the queue and cost a lot of nerves.
AI Trends 1/3
In 2023, the value of the artificial intelligence market in Ukraine is expected to reach USD 422.50 million. The annual value growth rate (CAGR 2023-2030) is expected to be 20.35%, leading to a market size of USD 1,545.00 million by 2030, which is due to increased adoption of artificial intelligence technologies in industries, improvement of artificial intelligence algorithms and infrastructure, and increased investment in artificial intelligence research and development.
Tech Hubs in Ukraine
30 Tech Hubs in Ukraine
Top Hubs Profiling 1/5
Ukrainian Startup Fund
The Ukrainian Startup Fund (USF) is a state fund launched on the initiative of Cabinet of Ministers of Ukraine. The mission of the fund is to promote the creation and development of technological startups in the early stages (pre-seed and seed), in order to increase their global competitiveness. The process of selecting startups for grants takes place on a competitive basis.
USF is expressly mandated to provide funding for early-stage startups. It has launched a pre-seed and seed-stage grant program, with awards of $25,000 and $50,000 for qualified businesses. USF plans to continue to grow this program as an important source of capital for early-stage businesses.
AI Conferences in Ukraine
Top AI Conferences Based in Ukraine
Name
Date of last event
Organizer
Number of attendees
Number of speakers
Frequency
Location
Starts from
Participation fee
September 22, 2023
Unknown
TBD
Annually
Online
2018
Donation
(25+ EUR)
AI- & ML-related Сonferences in Ukraine
The steadily increasing number of AI conferences in Ukraine since 2014 suggests that the topic is becoming increasingly popular in the country and that more businesses are using AI in their operations. While most conferences in recent years have been held online due to the COVID-19 pandemic, there is a growing trend towards in-person events, even in the midst of the war.
The United Kingdom as a Potential Partner for Cooperation within AI/ML Industry
Supporting AI Startups in the UK
Innovate UK
Innovate UK exists to help companies in any part of the UK to grow through innovation. Innovate UK is a key delivery body for the government’s Innovation Strategy. They support business through a range of interventions, including helping them:
-
to find the right partners
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to access the right expertise and equipment
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with financial loans and grants
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by connecting them with investors
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international funding
Innovate UK helps companies, through three strands of activity:
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inspire – to make the opportunity visible and compelling
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involve – to bring relevant organisations and people together
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invest – to convene the resources needed, including their own
Innovate UK runs competitions to identify the best ideas to support.
To date, Innovate UK has supported 11,500+ UK businesses with one or more grants. Three quarters of these companies fall into the technology sector, with SaaS and life sciences being most common.
In connection with the russian invasion of Ukraine, UK Research and Innovation (UKRI) is conducting a comprehensive review of all current projects and related collaborations with russian-based partners and institutions to ensure no research directly benefits the russian government.
Supporting AI Startups in the UK
UKRI works in a partnership with a broad range of stakeholders to ensure maintain UK's leading position and realise the vast potential benefits of AI.
UK Research and Innovation has a current investment portfolio of more than £1 billion supporting research and innovation activities related to AI. This breaks down as:
Executive Summary
Key Takeaways 1/3
The Technology industry takes the biggest market share of 62.5% (52% of companies develop software and provide software service). Also, about one-fifth of companies work in such industries as Internet Media & Services, EdTech, Health Tech and Industrial IoT. Geographically, more than half of Ukrainian AI companies are headquartered in Kyiv; Kharkiv and Lviv both take second place (11%). Almost every second Ukrainian AI company earns $1 to $10 million annually, has 11 to 50 employees, and was founded 5 to 10 years ago.
The US takes the lead in the number of investors in AI companies in Ukraine accounting for almost 40% of all investors. Two-thirds of companies have seed funding status whereas VC firms and angel investors make up half of all investors of Ukrainian AI companies. Investments in Ukrainian AI increased significantly over the last 7 years from $42 million in 2014 to $301.6 million in 2023 with a CAGR of 40%. Unfortunately, due to the russian invasion of Ukraine Q1 2022 brought only $1 million and the adjusted CAGR hit 24%.
Since the war started, 71% of startups haven't relocated abroad, 39% claim that they will run out of money shortly and 28% decided to stop the operational activity. Obviously, the dynamics of the startup market in Ukraine roughly reflects the situation with Ukrainian AI companies.
Appendix
Companies & Investors Lists