Start-ups take off in Ukraine

Photo: Jacob Bøtter (CC) www.flikr.com

The best example: In September 2017 Apple presented iPhone 8 and iPhone X, along with new functional innovations, including augmented reality technology. During the presentation, Apple’s senior vice president demonstrated “lenses”, animated 3D face filters, that can be applied to photos and videos. Not many people knew that this technology was created in Ukraine.

Looksery and Grammarly

Everything started in 2014 when a start-up from Odesa called Looksery raised 46,000 US dollars on the Kickstarter crowdfunding platform. The company started its campaign with the aim of raising 30,000 dollars to complete the development of a mobile phone app for face correction. The app was envisioned to be able to make a face look thinner, smoother, with a different head shape or eye colour. Or even transform someone into some other creature, like a panda or a grumpy cat. According to Looksery, the real-time face tracking and modification technology was something unique. The company had a few patents pending for their innovation. Their closest competitors were able to provide filters for these kinds of photos, but not for online videos. At that time the team consisted of 15 staff members. At its core were the winners of the city’s student programming contest. Little did they know that in 2015 Looksery would be purchased by Snapchat for 150 million dollars.

In September 2015 Looksery disappeared from AppStore, while another much more popular app for photo and video messaging, Snapchat, rolled out Lenses. The way it worked had a striking resemblance to Looksery. International media outlets such as TechCrunch, The Verge, Business Insider, and Mashable wrote about Snapchat Inc. (currently Snap Inc.) acquiring Looksery. In the space of just a couple of years Looksery went from being a small start-up (in 2013) to a division of Snap Inc. The number of employees is currently over 200 and growing. Looksery stayed in Ukraine and has offices in two cities, Odesa and Kyiv.

Another app which came out of Ukraine is Grammarly. It is an online service for proofreading that helps enhance the quality and style of English writing. It works with the text in three ways, providing i) basic spellchecking and grammar; ii) addressing issues of clarity and ambiguity (readability); and iii) examining how effective and clear the communication is, including checking context and specific text features, (e.g. flagging aggressive language). To analyse spelling, writing tone and text efficiency, Grammarly uses machine learning and artificial intelligence.

The start-up, created by three Ukrainians in 2009, has skyrocketed to a level where it competes with Google and Apple. The Grammarly office in Kyiv remains their largest one, with over 60 per cent of their employees working there. The second largest office is located in San Francisco, followed by New York and Vancouver.

The app is used by over seven million users worldwide. Among them are leading American universities and corporations such as Cisco Systems, Dell, Expedia and Boeing. What is more, in May 2017 Grammarly became the first Ukrainian (founded in Kyiv) start-up that received an investment of over 100 million dollars during a public call.

Petcube

Petcube may not ring a bell to everyone, but for sure it does to many pet owners. It is a  device that enables people to watch, talk to, play with and fling treats to their pet, all remotely. The device is designed for people who often have to leave their animal companions alone at home. It can be purchased from over 5,000 retail locations in more than 20 countries or ordered from the Amazon and the company’s website.

While five years ago, when Petcube was just starting, there was nothing similar to it on the market, today, the company has sold over 100,000 devices, which are used by pet owners all over the world.  So far the company has attracted investments amounting to 14 million dollars.

It all started with Alex Neskin, from Kyiv, who created the first version of Petcube for his personal use. He needed a device that would help him reach his dog who was spending long lonely hours alone at home, ruining furniture and making noises. Being a techie since childhood, Neskin assembled a simple robot with a rotatable camera and attached a laser pointer, his dog’s favourite toy, to it. He then set up a website where he could view his dog playing with the laser and shared it with his friends. People loved the robot and convinced Neskin to make more of them and sell.  

Neskin gathered a small team and initiated a fundraising campaign on Kickstarter. The project raised a whopping 251,000 dollars – 2.5 times more than their initial goal. Now Petcube is seen as one of the most famous Ukrainian start-ups – it is often mentioned in tech media. In 2016 the Financial Times and Google included Petcube CEO Yaroslav Azhnyuk in the New Europe 100 – a list of individuals who have the biggest impact on the region of Central and Eastern Europe’s society, politics or business.

In October 2017 the company obtained ten million dollars in funding and plans to spend it on new product development, marketing and expanding its distribution networks. It is looking for opportunities to help research institutions in the same way that companies like Google, Twitter and Facebook have done over recent years. In the long term, Petcube is working on developing a deep learning software, which will try to find links between animal behaviour and health to later recognise an animal’s mood via video analysis.

The Petcube team, and Yaroslav Azhnyuk in particular, often attend conferences in Ukraine, encouraging young people to believe in themselves and start their own businesses. “Ukraine has some of the world’s best tech talents (not only in IT) and much lower research and development costs. There are maybe a dozen countries in the world that can build an airplane, and Ukraine is one of them. It requires expertise – and Ukraine has it. Besides, Ukraine has the world’s lowest wage cost per educated person. Petcube hires engineers in both Ukraine and the United States. However, for the same amount of money you can hire five times as many engineers in Ukraine as in the United States. There’s huge potential hidden in this nation,” the Petcube CEO said recently. He sincerely believes that Ukraine is now the best place to start a technology company.

LaMetric

Smart Atoms, a start-up company from Lviv, created the LaMetric smart desktop clock. It raised 370,000 dollars on Kickstarter and is currently available in some Apple Premium Reseller stores. It is also available in well-known outlets in Germany, the Czech Republic and Thailand, as well as at the famous Harrods department store in London. LaMetric is a multi-functional LED ticker-style display. In addition to time, it shows weather updates, notifications from social networks and Google calendar.

LaMetric was a product of necessity and curiosity of its inventors who, in their previous jobs, often felt hostage to metric services, such as Google Analytics or App Figures. The latter proved insufficient in providing them with the exact number of the new subscribers on social media or when they wanted read a new customer review of one of their products. Thus, the information displayed on LaMetric can be customised through a mobile phone app. The ticker can switch between different widgets and select the most important one. For each widget you can also set up a rule and a notification (for instance, you can be notified when the temperature rises to 25 degrees).

In 2014, when Smart Atoms was just launching their campaign on Kickstarter, their goal was to raise 69,000 dollars. In the end, they collected five times that amount and set a record for a Ukrainian start-up on the crowdfunding platform. The first shipment of the ready-made product to backers was delayed for eight months, but this gave Smart Atoms time to  improve the prototype in co-operation with the factory where it was produced. It was the famous Foxconn in China, where Apple and Amazon devices are also produced. Smart Atoms chose this factory because of its experience and engineering support.

The first backers received their smart tickers from Smart Atoms at the end of 2015. Its worldwide sales also began around this time: LaMetric became the bestselling device on Amazon Launchpad. Today the team is working on increasing its sales and improving brand recognition. It is important to note that LaMetric sales are done entirely from Ukraine. Smart Atoms CEO Nazar Bilous believes that in order to start building distribution and world expansion, Ukrainians only need to visit industrial trade shows such as the biggest tech conventions like CES and IFA, and participate actively in business networking there.

iblazr

Another Ukrainian start-up, called Concepter, makes LED-flash technology for iPhone cameras and its products which are sold in official Apple stores. With just two generations of the flashes, iblazr and iblazr2, the company raised 700,000 dollars on Kickstarter and Indiegogo. The company developed also other projects, but not all of them were equally successful: a flash case and a smart charm assisting with time management, for example, were stopped because they did not meet their users’ expectations. However, Lunecase, an iPhone cover that displays notifications, raised 150,000 dollars on Kickstarter.

The fundraising for the first iblazr kicked off in summer 2013. At that time smartphone cameras did not produce good photos in low-light conditions: iblazr made it possible to manage the light intensity in photos or videos, which eliminated red-eye effects as well. The device was equally efficient with both the main and the front facing cameras. The Ukrainian flash could be connected to a smartphone via the audio jack and synchronised with a camera by a mobile app. In order not to drain the smartphone’s battery, iblazr came up with its own battery with enough power for a few hours of photography.

The money that Concepter raised for the first flash was 2.6 times more than planned and amounted to 152,000 dollars. It was a record for a Ukrainian crowdfunding venture at that time. When the start-up began raising funds for iblazr2 in 2015, they reached their goal of 70,000 dollars in three days. The overall campaign brought in 250,000 dollars. The second generation flash was synchronised with smartphones, tablets, laptops and other gadgets. It could work as a constant light with regular photo cameras and it did not require any app installation. By that time the Ukrainian flash already had its copycats. These were Chinese manufacturers that started selling similar units, sometimes even copying the logo. They were sold on the Chinese market where Concepter did not manage to roll out distribution on time, but the situation had no impact on the start-up’s sales.

In autumn 2014, after four months of negotiations, iblazr started selling in Apple Stores. In some regions Apple even actively recommended the Ukrainian product to improve users’ experience in photography. By the end of 2015 iblazr2 was on display in 180 Apple stores in the UK, Italy, Germany, Spain, Switzerland, the Netherlands, Sweden, Belgium and Turkey.

Today, Concepter is working on Airphones, wireless headphones, as announced at the beginning of 2017. The team has also started another activity called Product Idea Accelerator, which assists other Ukrainian start-ups to raise funds via crowdfunding. The creators of iblazr offered their first consultancy service of this kind back in 2015. Since then demand has skyrocketed.

Not just IT

The recipe for a successful start-up, via crowdfunding, is not just limited to the IT sector. Anna Marynenko is one good example. She has been featured in Mashable, Fast Company, BuzzFeed, Inhabitat. With more than 300,000 followers on social media, she has raised 200,000 dollars via a Kickstarter campaign. Marynenko discovered merino wool and starting knitting blankets for her future brand which is now called Ohhio. The wool was too thick for commercial knitting needles, so Anna used her own hands instead. As part of her branding line she now has an online store where you can purchase ready-made products as well as DIY supplies with special knitting kits. Due to the brand’s popularity, the range of products has significantly increased, while she has employed new members. The products are shipped all over the world, with the biggest sales coming from the United States, Canada, Western Europe, Japan and Australia.

Similarly, a brand of creative Ukrainian socks called Sammy Icon, launched its successful campaign on Kickstarter in 2013 and raised over 9,000 dollars. Despite collecting a modest amount, it became one of the first Ukrainian projects to successfully use Kickstarter. Sammy Icon subsequently received coverage on Mashable and in Ukrainian media. New Ukrainian projects in street fashion are also becoming popular with backers. For example, a water-resistant HURU backpack, with a lifetime warranty, recently raised over 50,000 dollars after hoping to raise 15,000 dollars.

A start-up oriented approach is rapidly developing in Ukraine. An association of multi-product enterprises in various areas of the defence industry and a local business incubator has an acceleration programme for cybersecurity start-ups. Meanwhile, the National Bank of Ukraine supports an accelerator programme for fintech projects. In mid-2017 Google launched free assistance for start-ups in Ukraine through a project called Launchpad Start. The European Bank for Reconstruction and Development established a programme for innovation-oriented companies.

Receiving funds upfront from end users, via Kickstarter or Indiegogo, might not be appropriate for every start-up, but there are other places to turn to. Seventeen venture funds, six direct investment funds and one corporate fund are now actively investing in Ukraine. To make it more convenient, the Ukrainian Venture Capital and Private Equity Association have published an online catalogue, the Investors Book, with the names of the funds, contacts, company portfolios, criteria for start-up selection and other useful information.

The future, as often depicted in science fiction films, looks bright for Ukrainian tech start-ups. About 30 companies in Ukraine work solely in the cutting-edge field of virtual and augmented reality. In the first half of 2017 Ukrainian teams raised over two million dollars on crowdfunding platforms. This year the biggest start-up conference in the world, called TechCrunch Disrupt, had a dedicated zone for Ukrainian start-ups. At the Consumer Electronics Show 2018 in Las Vegas, one of the largest electronics and tech tradeshow, there will be a separate pavilion devoted to Ukrainian start-ups. These and countless other success stories show that the field is just developing. Seemingly, the Ukrainian start-up boom is yet to come.

Translated by Anna Chornous

Yulia Lipentseva is a Ukrainian freelance journalist who writes about start-ups and IT. She used to work as a journalist at AIN.UA and 24 TV channel website. She now lives in Lviv and works as a project manager in Ukrainian outsource company called Perfectial.

IT, Start up, tech, Ukraine