Lviv IT Jazz 2019: Competition Will Make Ukraine Stronger

04 Jul, 2019

The 4th Lviv IT Jazz conference took place at Lem Station on June 28, during Leopolis Jazz Festival. IT company leaders, government officials, and investors came to join this event, discussing the breakthroughs and challenges of Ukrainian IT and creative industries as well as the future investment trends. Roman Waschuk, the ambassador of Canada to Ukraine gave the welcome speech on inspiring attendees to exchange and learn about cutting-edge technologies. The agreement signing ceremony of the Innovation District IT park, one of the biggest infrastructure projects in Ukraine marked a culmination of the event together with the new project – Lviv Tech Angel presented to the public eye for the first time.

The attainments and challenges of creative industries in Ukraine, one of which is the IT industry, have been a hot topic of the conference. For speakers, salary growth, increasing job opportunities and huge tax contribution for government budget are the main achievements that Ukrainian IT has created in recent years. “The tech industry creates more than 5,000 new IT positions annually in Lviv,” as Taras Kytsmey, the Co-Founder and Board Member of SoftServe put in the first panel discussion. According to him, employee salaries in his company – SoftServe, also show a moderate increase every year – around 5%. “Each month we see how the proportion between income and productivity at our company is getting better and better,” he added.

itjazz2019-37Despite all the excellence Ukrainian IT and creative industries create, there are a number of upcoming challenges including how to keep talents in Ukraine, improve the educational system and increase productivity. Enhancing the quality of education was highlighted as a priority by every speaker, “When it comes to audio-visual industries, we do have higher educational institutions, but unfortunately the level of education they provide doesn’t correspond to the needs of the modern fast-changing world. The industry and the state have to move in the same direction here, and we have started the process already,” said Olga Panteleymonova, the General Director of Star Media. Taras Kytsmey considered the influence of education on the country far-reaching, “If you do not care about the education of people, then you are in danger.”

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Vladimir Dubrovskiy, the senior economist of CASE Ukraine expressed his concern on how to retain professionals in the country: “Ukraine does have huge advantages in creative industries, intellectual services of all kinds, etc. We are within the top 50 countries in the world by innovations. We are ranking 25th in the list of most reliable engineers and scientists. But the main problem here is we are in the second hundred when it comes to the ability to attract and retain new professionals. Even despite all of the advantages we have in Ukraine, like the relatively cheap cost of living, low taxes and so on, it often happens that people leave Ukraine to reside in other countries, for example, startups normally register their intellectual property in other countries.”

The topic of future investment trends was among concern of the conference attendees as well. Andriy Tsymbal, the managing partner of KPMG in Ukraine shared his view on how a company could thrive on the verge of one of the biggest transformations for the creative industries since the early days of globalization and digitalization. For him, there are only two choices in front of any company – to be agile or to be irrelevant. Being agile means being active. Entrepreneurs should always pay close attention to the environmental changes (investment and regulatory environment), as for now – invest in the newly emerging markets. Tsymbal gave an example of China’s Belt and Road initiative which has brought about hundreds of successful companies out of Asia. Lastly, he underlined that companies should follow the current trend of digitalization: entrepreneurs know they need to get on board or they would miss the wave. “We should regard the digitalization and digital transformation of existing companies as the priority. And when we mention the digitalization, AI must not be neglected. Many companies know that AI should be implemented, but only 60% of them actually utilize it,” he noted.

In addition, the speakers of the second panel discussion talked about their investment preferences. Marina Petrov, the Associate Director and Deputy Head of EBRD Ukraine expressed her opinion on EBRD’s shift from focusing on large investments to small investments. “We can now provide investment at the minimum amount of $5 million,” she said. There is a certain appetite for EBRD to invest in the thriving Ukrainian IT companies as well. “We are reliable partners. We have a working relationship with the government and the ability to conduct policies. We are going to stay in Ukraine and help the companies grow to the next stage,” said Marina. In addition, Vasile Tofan, a partner of Horizon Capital also conveyed his enthusiasm for investing in Ukraine’s booming tech industry. “I think there’s money to be made in Ukraine. I am speaking as a hungry determined investor – we are committed to Ukraine and we believe from investors’ perspective – in a world of overvalued evaluations, Ukraine actually offers a compelling story. We are big believers of Ukraine,” said Vasile.

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In contrast with EBRD, for Dragon Capital, the investment outlook of Ukraine still calls for development, the company has its eyes on high-quality projects. As Andriy Nosok, the Managing Director of Dragon Capital said in the second panel discussion: “We prefer to be a later-stage investor. We don’t invest in companies that don’t have revenue and we like companies that are profitable. When you implement these criteria, you end up seeing significantly small companies on the list. And when you come to evaluations and deal structures you might not see many interesting opportunities.”

itjazz2019-65The presentation of a new Lviv IT Cluster project – Lviv Tech Angels, given by Michael Puzrakov, the Co-Founder of Intellias was the highlight of Lviv IT Jazz 2019. Lviv Tech Angels is the first angel investor club in the region. The club aims to unite a community of investors who are willing to invest in the startups and product companies in Lviv Ukraine, trying to boost the startup culture in the city. Michael described angel investments as a risky but worthy business. It is risky because most angel investments are towards startups and research shows only 15% of such financing actually gain profit. However, it is worthy for angel investors because the more they invest the more they learn. “Angel investment is like raising a child. Angels will feel satisfied seeing startups grow. It’s a risky business, but the results can be astounding.”

The Innovation District IT Park agreement signing ceremony was held during the press conference at the event. The IT Park is one of the biggest infrastructure projects in Ukraine, which is estimated to be finished in 2021. As for the questions raised after the panel discussion and presentation, attendees were mostly concerned about what could Ukrainian startups do in the wave of fierce global competition. The answer was exciting and thought-provoking – instead of being afraid of fierce global competition, Ukraine has no choice but to embrace them. We should have confidence in all our talents and the truth is we should be thankful for the competition because it makes us stronger.