Several entrepreneurs are now leading the startup movement in Lviv, providing assistance for business opportunities, entrepreneurship culture and the needed networking. Stepan Veselovskyi, CEO of Lviv IT Cluster and Ivan Dmytrasevych, CEO of Startup Depot Business Incubator and the newly appointed CEO of Lviv Tech Angels investor club are working on the front row of the startup ecosystem in the city. From organizing one of the key startup contests in Eastern Europe, to running a private investor club and building a community of tech-savvy enthusiasts, they know everything about the importance of taking risks and the significance of collaborative mentality.
Startup Competition, organized during IT Arena (one of Ukraine’s largest and most anticipated tech events), is the key contest for early-stage startups looking for validation of their ideas, media exposure and, of course, funding. The event brings together hundreds of startup teams along with business angels, investors, finest entrepreneurs and tech companies. The concept arose as an organic extension of the IT Arena conference, emerging at first as a startup panel. As the IT Arena evolved, so did the Startup Competition.
Stepan Veselovskyi, the contest’s visionary and CEO of Lviv IT Cluster which has been organizing IT Arena since 2014 tells: “Many companies now known as large enterprises, began their career path by exhibiting modest startup products at the IT Arena tech expo. After a few years of monitoring and analyzing startup presentations and ideas, we discovered it was time to go forward.” The idea to expand the original startup panel into a full-scale startup contest was organic. Veselovskyi is confident: “IT Arena has never been about recruitment. It’s about innovation, technology, entrepreneurship, networking, and company development.” His team took the lead to become an active driver of supporting companies and changes in the city.
The mission of Lviv IT Cluster is to see Lviv becoming the center of world-class cutting-edge technologies. Not a single person, a company or a group of people are working towards turning this mission into a reality. It’s about a community of people, putting in effort every single day to represent the tech market in Ukraine, supporting micro, medium and large startups and companies and developing the culture of tech entrepreneurship. Lviv IT Cluster’s projects like IT Arena have made a tremendous contribution to the promotion of Lviv worldwide, putting the city on the international event destination map. Given the success of IT Arena, it was a team decision to organize a Startup Competition within the conference. The contest is a small piece of a much larger puzzle.
Changeover period: from embryo to go-to startup event
As mentioned already, even though IT Arena had already been running for a few years there was no separate Startup track nor contest in the early days. “Back in the day, the competition was more chamber-like: a few dozen companies fighting for minor awards,” recalls Ivan Dmytrasevych. “We did have a jury, but the scale of everything was much much smaller. In 2018, we began to organize the Startup Competition in a more systemic manner.” In total, over 800 startups have applied to take part in the contest, and the organizers continue to receive a flood of applications every year.
Not only does competition evolve, but so do the startups that participate in it. Both Stepan and Ivan differentiate one significant trend for Ukrainian startups: the level of thinking is shifting from local to global. When the Ukrainian startup ecosystem and the Startup Competition were in their early phases, startup teams came up with concepts mainly concentrated in Ukraine or their home towns; they rarely thought about testing their ideas on foreign markets. The new generation of startups are global citizens and global thinkers, they don’t restrict themselves to one location but focus on how they can solve a certain problem for a larger number of people.
Of course, participating in any startup contest is not a magic pill to launching a full-fledged business. The application process requires time and effort, but the one thing the startups will definitely get afterward is the understanding of whether they are properly equipped to showcase their idea to the world. Ivan shares: “In-person communication skills are always one of the most important things during the pre-selection process. We conduct face-to-face interviews with every applicant, trying to evaluate both the startup idea and the founder’s readiness to pitch on stage, which can be a stressful event even if you have a great idea. After the pre-screening process, we pick 30 teams to compete in the semi-finals.” The organizers strive to make the judging process as discreet as possible, involving experts representing various focus groups: venture capitalists, angel investors, and media representatives or veteran entrepreneurs.” Dmytrasevych agrees that the pre-selection interview is required even because often founders simply don’t know how to voice their ideas in a written form. “The interview stage also helps us determine how well the team is working and the concept’s veracity. Startups frequently encounter situations in which they create a fantastic product and have a brilliant idea, but they are unable to describe it properly,” continues Ivan.
There is no secret formula that will make a startup successful overnight. Similarly, there are no exact tips that will help startup teams attract investments. The rule of excellent networking applies here, and it must be established methodically. Here is what Veselovskyi thinks about that: “In 8 years, the IT Arena team has managed to create a fantastic brand that works well. The event’s brand attracts investors to visit Ukraine and check out local startups. Our team and its network is the initial source of how we meet investors and future jury members. The word of mouth works here: angel investors visit our event, then introduce their colleagues to the Ukrainian market, some time passes, and they’re hooked. Ukrainian startups are an undiscovered area for many foreign investors, but their potential is unmatched.” Stepan continues: “For investors, IT Arena serves as a catalyst. They witness businesses succeeding in such a short amount of time and realize that they can also invest here, come to Ukraine, and contribute to its economy.”
Rising startup stars
Many of Ukraine’s most promising startups had gone through Startup Competition. Stepan Veselovskyi recalls a pharmaceutical e-commerce Liki24 as one of the contest’s most telling examples. “Liki24 is an outstanding case of how the team used their Startup Competition win and ripped all the benefits it included. They received immense media attention and in a very short span of time became one of the leading Ukrainian startups.” Founded in 2017, Liki24 is an ecosystem that unites over 5,000+ pharmacies with consumers. Rapid delivery of affordable family care products is the startup’s core mission. In 2020, Liki24 has raised over $5 million in funding from Horizon Capital, TA Ventures, Genesis Investments and Mission Tech.
Ivan Dmytrasevych mentions another startup called AXDRAFT. Zaremba brothers created a document automation platform that allows you to draft legal documents 70% faster. In 2019, the startup was valued at $10 million, having raised over $1 million in funding from a group of American investors. In 2020, AXDRAFT was acquired by a U.S. software company Onit for an undisclosed amount.
Esper Bionics is, perhaps, one of the most complex hardware startups in the IT Arena history. The team created a prototype prosthesis that improves and gains abilities overtime with the user. Their bionic hand could truly revolutionize the prosthetic industry in the future. Even though Esper Bionics didn’t attract 6-figure deals from investors yet, the startup continues to work, now mainly focusing on the American market.
First angel investor club in Lviv
In 2019, Lviv IT Cluster presented the idea of the city’s first angel investor club – Lviv Tech Angels. Lviv Tech Angels is a niche community of investors who aim to boost the startup culture in Lviv and Ukraine. As of today, the club consists of 7 investors who are always on the hunt for inventive startups and product companies. The ultimate mission of the club is to contribute to the expansion of the innovative ecosystem of Lviv and the development of the entire region as an attractive location for startups and businesses.
The idea for Lviv Tech Angels came from a simple market analysis and realization that there are no similar angel investor clubs in the region. There are several examples of similar initiatives in Ukraine, both successful and failed, or maybe successful but having achieved their natural conclusion. Stepan is confident that angel investor clubs, which establish a network of collaboration and rivalry among companies, should exist in every major city.
Ivan Dmytrasevych, who has been recently appointed as the Lviv Tech Angels CEO, says: “The last year has been fruitful for the club. The amount the club’s members investment in local startups totals $560,000.” The initiative’s goal is simple: on the one hand, there are entrepreneurs looking for money and on the other – investors who have the money. The objective is to merge them in such a way that each group receives the most advantage and efficiency. Experts assist startups in navigating the valley of death when they are still in their early stages and are unsteady and unstable, but more cash at an early stage enhances their chances of survival. Lviv Tech Angels is steadily involving new members and startups looking for financing, hence, the investors’ chances to discover potential unicorns are constantly growing.
Every child is unique (and so are startups)
Startup infrastructure in Lviv may not be developed enough yet, but Lviv has room to grow, improve, and contribute to the market. Such organizations as Lviv IT Cluster, Startup Depot Business Incubator and Lviv Tech Angels are investing in its growth. “The Startup track and Startup Competition hosted during the IT Arena are essential components of the local startup ecosystem. Whether it’s a boost or death of a startup, the event has helped decide the fate of many startup teams,” Stepan says. Not every entrepreneur has the guts to end the project; it is a risky move, and if you wait too long, it might be too late. As a result, the local startup ecosystem players are concerned not only with boosting companies but also filtering them out and eliminating what is not viable.
Everyone is aware of the market’s shortcomings. One of the things Lviv lacks today are startup accelerator programs. But Veselovskyi and Dmytrasevych are confident that given the current global trend towards “remote everything”, competing with the best acceleration programs from the world’s key startup incubators is inefficient. Instead, they believe that the community should devote more attention to expanding the existing networking platforms. “Every year we see a steady growth of our projects in terms of quality, scale, and content. We intend to make our Startup Competition not only the must-visit startup event in Ukraine but also compete with similar events in Eastern Europe and beyond. We are working on the same plan for Lviv Tech Angels,” shares Stepan Veselovskyi.
Ivan Dmytrasevych notices that Ukrainians often tend to undervalue themselves, believing that people living abroad have more opportunities and resources for growth. This concept prevails not only among startups but also in service and product companies. “It is pointless to compare Ukrainian and international startups, both existing and emerging because neither is weaker,” believes Ivan. “Take a look at GitLab, Grammarly, or other long-standing businesses. Their experience demonstrates that we can compete in global markets successfully,” he adds. “The most important thing in startup business as in any business is not to be scared of making errors, learning from them, and be grateful for gained experience whatever it might be.”
We often hear success stories of European or American startups. However, we seldom come across stories of failure. A startup’s development and survival are natural processes, and if the startup lives and evolves, it is considered successful. But what are the criteria for comparison and success? Stepan Veselovskyi continues: “Each startup is exceptional, and so are the ideas, teams, and pathways to success. This approach is great for comparing the same elements, such as an apple with another apple. But no one tries to compare an apple with a pear to determine which is bigger, better, and tastier. These products are unique and require independent assessment standards. The same thing applies to startups: when we’re talking about a startup rather than an established firm, we can’t really compare it to another startup.”
What the future holds for startups
Any startup future cannot be foreseen, but it is safe to assume that without the right team, a startup will fail. “The essential thing, in my opinion, is the team. We can see it even by looking at success stories born at IT Arena. The major job is always done by the team, a group of people with the same interests and passion. They come up with one concept, test it, and when it doesn’t work, they refocus and restart the business anew,” Ivan Dmytrasevych says. “Other aspects of a startup’s formation and development are vital but secondary. All investors begin by assessing whether the team leader of a startup will be able to be a CEO and operate a company of four hundred employees in ten years rather than the startup itself.”
Nowadays, the world transforms so rapidly, changes in the Ukrainian market are also hard to forecast. Veselovskyi believes: “There is no such thing as a Ukrainian market. Instead, there is a global market. We frequently observe that a successful Ukrainian business or a startup with Ukrainian founders is not based in a single nation; its members may reside across many countries. And each of these nations may look at a single startup as its own success story.” Startups are increasingly focused on worldwide markets, so referring to them as “local” becomes misleading. “Where does Lviv begin, and where does it end? I can’t state that any startup is from Lviv, Kharkiv, or any other place. The problem here is intellectual property laws that don’t attract many companies to remain in Ukraine,” he continues. “I’d like to see more Ukrainian investors, angels, and venture funds enter the Ukrainian or Eastern European startup sector. We frequently underestimate the scale of our businesses. A relatively tiny firm in Ukraine, for example, is a pretty substantial company in Croatia or Montenegro. We are a vast country and while we often treat local big enterprises as small companies, that is not always the case,” concludes Stepan. “There is a whole generation of people eager to invest in innovative Ukrainian products. I’m positive that during the next ten years, we will see more Ukrainians participating in startup ventures and investment deals too,” adds Ivan.
As we are approaching the end of the third quarter of 2021, Ivan and Stepan are convinced that plenty of changes have occurred recently. The pandemic is not yet fully under control, but with mass vaccination, our everyday lives are slowly returning to what they used to be. It hasn’t been an easy time for anyone, but a number of startups worldwide have thrived despite pandemic pressures. The critical advice from Stepan Veselovskyi and Ivan Dmytrasevych is to look for the key to success in resilience. Startups do stand at a soft spot against competition that had established itself ages ago. They need to work hard to build a solid structure to stand on and get through fast-changing development. Communities driven by Stepan and Ivan are there to help them do so.