This is the result of a new study prepared by the Polish-Ukrainian Startup Bridge team in cooperation with the Warsaw Stock Exchange and the Ukrainian Startup Fund.
Almost all respondents notice a definitely negative impact of warfare in the country on the possibility of doing business. Most startup leaders rate their current situation as bad. 12% of the companies that completed the survey reported that they had ceased operations as a result of the Russian invasion. The full report can be downloaded from the official website of the Polish-Ukrainian Startup Bridge project by the link.
Reasons for closing the company
The reasons for start-ups closing in Ukraine are diverse – the 4 most common factors that result in the need to discontinue or limit operations are listed. In the case of 1/3 of start-ups, the reason for withdrawing from operations was the decline in sales of products and services on the Ukrainian market. In the case of about ¼ of the respondents, the decision to close the business was determined by the lack of possibility to go abroad (which in their case was necessary to maintain the business) and the loss of capital that would allow the company to maintain financial liquidity.
Of all the surveyed enterprises, more than half (56%) encountered the need to serve at least one member of the team in the Armed Forces of Ukraine. This indicates, that a significant share of startups is involved in the defense of the country against the Russian invasion.
Most companies operate globally (64% of respondents indicated the international nature of the sale of services and products), focusing both on the Ukrainian market and abroad. About 13% declared that they direct their services and products exclusively to foreign markets, excluding local markets. This state of affairs proves how much impact direct access to the global economy has on the survival of young, scalable enterprises.
Almost half of the surveyed enterprises are located in Kyiv. The Lviv, Kharkiv, and Vinnytsia oblasts are also important points on the startup map of Ukraine. Particularly appreciated is the high turnout of responses from the Kharkiv region – due to the immediate proximity of the front and war damage.
Problems in the functioning of startups from Ukraine are reflected in markets far beyond the country’s borders and are an obstacle for all entities cooperating with them or buying their services and products. This is due to the difficulties in the work of enterprises due to the loss of access to energy sources, telephone and Internet communication, and the obvious operational difficulties associated with them.
At the same time, for some of the analyzed enterprises, the fact of working for foreign clients and cooperating with them is a chance to survive a very difficult economic, political and social situation in the country. Many companies see this as the basic factor that allows them to continue to develop.
Among the respondents who answered the question about plans to relocate their start-ups after the end of the war and Ukraine’s victory, the largest percentage indicated that they planned to return to or stay on the Ukrainian market (43%). Almost 1/3 of the sample are people who want to move their company to the European Union market, less often (only 5%) to the United States. Some companies were already outside Ukraine at the stage of filling in the survey (16%). This is of particular importance for the future of Ukraine, which, according to the authors of the report, should be protected against the draining of key talents in the reconstruction of the post-war economy.
Developing plans after the end of the war
“We leave in good memory all those who will no longer return to their projects, offices, and laboratories, to their families and friends. With their loss, innovative ideas, business challenges, and technological solutions will have to wait for new talented, and brave successors. We pay tribute to all those who died fighting for Ukraine. – says Łukasz Wawak, head of the Polish-Ukrainian Startup Bridge.
The first important mission of the report is to constantly remind everyone that many Ukrainian startups still operate in the country and abroad and work not only for their own development but also for Ukraine’s victory.
The second overtone is to encourage Polish and European citizens to use the services of Ukrainian entrepreneurs who still have the opportunity to send their products, solutions, and intellectual property around the world. Every euro spent on the products of Ukrainian entrepreneurs is a small step toward Ukraine’s victory.
And the last most important message is that the war will end one day and the world should do everything to ensure that Ukraine is not deprived of its greatest talents, especially entrepreneurial people. Respect for Ukrainian intellectual achievements and society’s struggle for freedom should be reflected in helping to rebuild and strengthen Ukrainian elites on the spot, and in efforts to ensure that as much capital as possible flows back to Ukraine.
The full report can be downloaded at the link.