As Ukraine’s booming IT industry garners increasing international attention, there is also growing interest in the country’s vibrant startup scene. Ukraine has already produced a number of high-profile tech sector success stories such as Grammarly and GitLab. However, the vast majority of promising Ukrainian startups currently tend to relocate at the earliest opportunity as they go in search of more appealing business climates in the US or nearby EU countries. The big challenge now is to harness the country’s considerable untapped innovation economy and persuade Ukrainian startups that they can realize their potential without leaving.
Sector X is a Kyiv-based acceleration hub that seeks to improve the Ukrainian tech ecosystem by bringing startups and potential corporate partners together for mutually beneficial cooperation. Located at Ukraine’s flagship UNIT.City innovation park, the hub launched the largest platform in the region in 2018 and unveiled its new corporate partnership initiative in February 2020. Initial corporate partners include L’Oreal Group, Foxtrot, Farmak, British American Tobacco, Parimatch Tech, and JKR Investment Group.
Sector X offers startups a range of paid and unpaid programs that are available in both online and offline format. A key focus is the industrial track program, which sees startups specially selected and paired with corporate partners seeking specific solutions. The program envisages mentoring from senior corporate management alongside a comprehensive program of support in developing a road map towards the launch of pilot projects.
The Sector X team say this approach offers participating corporate partners the opportunity to test out various novel solutions designed to streamline their business processes, while the startups themselves benefit from practical insights into the implementation of their innovations in a competitive business environment. In the best case scenario, corporate partners may eventually become clients or investors in the startup.
Sector X is the only acceleration hub of its kind in Eastern Europe. While there are a large number of incubators and accelerators offering standard two- to four-month programs across the region, this Kyiv-based hub is currently developing programs that last for up to one year. The people behind the Sector X model hope this longer time-frame will facilitate a more thorough elaboration of startup ideas and encourage greater synergy between startups and corporate partners.
This initiative comes at a time when the startup ecosystem in Ukraine is still in the relatively early stages of its development. There is undoubtedly an abundance of raw talent in the country, but the current business climate for startups is in urgent need of investment and clients in order to grow and consolidate. This is the main objective of the Sector X initiative and explains why the project focuses much of its energy on attracting the right corporate partners from the Ukrainian and international business communities.
With so much depending on finding suitable corporate partners, Sector X officials have adopted a proactive approach towards building partnerships with companies and individual executives who demonstrate an appetite for innovation. It is vital to identify challenges requiring the kind of solutions that startup culture is best-equipped to provide. Officials say. The next task is to find a good fit from within the Ukrainian startup community.
Since the launch of Sector X, 60 Ukrainian startups have graduated from the hub’s programs. While the number of applications from startups is high, the selection process is quite competitive. An ability to produce realistic and commercially viable ideas, as well as the existence of a prototype product, are considered important. Other factors that are typically taken into consideration include the niche a startup intends to work in, the composition of the startup team, and the technical credibility of the innovation itself.
As of October 2020, two startups have received considerable investments from the hub’s corporate partners. Meanwhile, a number of pilot projects are awaiting launch, and five of the hub’s startup alumni have received grants of between USD 25,000 and USD 50,000 from Ukraine’s National Startup Fund.
The Sector X hub is still in the initial stages of development. Officials currently speak of making a meaningful impact on the broader Ukrainian startup scene over a three- to four-year period. By that time, the hub should have established a significant portfolio of successful startups and expanded its stable of corporate partners. The real challenge, however, will be convincing Ukraine’s startup talent to build their businesses at home rather than following the well-trodden path to more developed but increasingly crowded markets in the European Union and North America.