Ukraine: The startup scene in Odessa

Eastern Europe is best known to us for the cost-effective outsourcing of development and less for its own startup scene. I receive offers from Eastern European offshore development companies several times a week, luckily most of which end up in the spam folder.

Outside the EU, Ukraine was particularly popular as an outsourcing location a few years ago. At Rayneer We had a version of our iOS app developed in Kiev in 2011, but quickly ended the collaboration; connex.io, my friend’s startup at the time Marcus Kuhn, had the entire development team in Ukraine.

Vibrant startup scene in Odessa

I recently went on a long weekend trip to Odessa, a beautiful city on the Black Sea. Odessa is the third largest city in Ukraine, has an important port and is the cultural center of the country. The majority of Odessa's residents speak Russian, young people mostly understand English fairly to very well, but older people can usually only communicate in Ukrainian or Russian. Free, ad-supported, but very stable WiFi is available practically throughout the city.

Around 6,000 people work in around 150 IT companies in Odessa. There are currently two coworking spaces: Den Impact Hub and that Terminal42; I chose the latter to work for a day. A day membership costs the equivalent of around USD4, so it's very cheap by our standards. Terminal42 is located in the middle of the city center, is modernly furnished and, in addition to many spacious workstations, also offers its own café and an area for events.

Contacts with the local startup scene were quickly made and we spontaneously decided to start one to conduct a meetup, where I gave a talk about my startup experiences in Switzerland. Afterwards, some Ukrainian startups pitched and talked about how they live entrepreneurship in Odessa.

Spontaneous startup meetup in Odessa

I found the startup scene to be very lively: most entrepreneurs were very sociable, wanted to exchange knowledge and experiences and were very helpful. Education in Ukraine is very good, so there are many talented developers trying their hand at startup ideas. Added to this are the salaries, which are very low by European standards: you can't lose much, but you can win. The willingness to take risks is therefore correspondingly high.

BalMuMu: Selfie app

At the meetup I met Sergey, who... BalMuMu works; a selfie app that inserts stars into the picture. Specifically, you select a prominent person with whom you would like to be in a selfie, pull the trigger, and BalMuMu automatically creates a realistic photo montage. At first glance the idea may not seem revolutionary, but in the current selfie boom the concept could be successful. Sergey's business model is in-app purchases (B2C) and licensing of the technology for B2B. I can well imagine that BalMuMu is exactly the right thing for a large-scale campaign similar to theirs Swisscom carried out with Bryan Adams some time ago, could be.

Misha: News Audio Reader

Karina, who worked at Yandex as a startup coordinator, among other things, is testing with us Misha currently an app that reads news with an artificial voice at the push of a button. Various English and Russian-language media are available as sources. I find it exciting how Karina and her co-founder consistently think from the user's perspective and gear the app towards news consumption during activities such as driving or jogging where you cannot easily use your cell phone. Voice control was integrated in the first version, but tests showed that this was not used. It will be interesting to see how Misha will develop further.

Kaznachey: The Ukrainian PayPal

Since PayPal has been in Ukraine for a long time was not available and is still only of limited use, Yaroslav has the Ukrainian counterpart Kaznachey (Казначей, in German treasurer) developed. The bootstrapped startup enables easy payment for websites and mobile. Thanks to its consistent focus on the Ukrainian market, the startup has now become very successful.

Yaroslav learned that Ukrainian investors didn't yet understand what a startup actually was. The first investment offers he received when he founded the company six years ago were pretty unfair: the majority of the shares were supposed to go to the investors, and the entire risk belonged to the founder. After a few attempts, he finally decided to bootstrap the company - in retrospect, a wise decision.

Black Sea Summit in September

This fall will take place for the second time Black Sea Summit instead of. Anastasia and her team want to bring techies and entrepreneurs from all over Europe to the Black Sea to improve exchanges between Western and Eastern Europe. The participants should inspire each other on three stages and several networking events, learn from each other and exchange experiences. This year's summit will take place on September 9th and 10th, 2016 in Odessa.

https://www.youtube.com/watch?v=8Ra3TOs9G98

Odessa - the right place for startups?

From a Western entrepreneur's perspective, Odessa has a number of advantages to offer: The infrastructure is well developed, the developers are very well trained, the young developers speak perfect English, entry is possible without a visa, the city is... Ukraine International Airways Reachable within half a day, the food was excellent and... the costs are unbeatably low.

Odessa Opera House, Ukraine

Subjectively, I have the feeling that Ukraine is currently no longer the preferred offshore location for startups. One of the main reasons is definitely the war in eastern Ukraine, which is 700km away and not felt at all in the city, but still has an impact. The economy has suffered badly since spring 2014, which, for example, has set Yaroslav's payment startup Kaznachey back significantly. Although Odessa made a very peaceful impression to me, there were pro-Russian uprisings there too two years ago, which quickly subsided. The Ukrainian warships that were recently stationed in Sevastopol are now in the port of Odessa, and Crimea is not far away.

Added to this is corruption: Ukraine is the most corrupt country in Europe. I didn't feel any of this, apart from the passport controls when entering and leaving the country, I never came into contact with officials or government offices. However, entrepreneurs from Odessa have made it clear between the lines that working with public authorities is not always easy.

Outsourcing in Odessa

At our spontaneous meetup there was an exciting discussion about the right configuration if you should consider Odessa as a location for your startup. It quickly became clear: someone who doesn't speak Russian or Ukrainian fluently and doesn't know how to behave properly when dealing with government authorities is likely to quickly reach their limits.

That's why it definitely makes more sense to find someone you trust locally who will take over the technical lead and take over local management. Personally, I'm not a fan of completely outsourcing a startup's main assets, but I can well imagine that working with a co-founder from Odessa could work well. Many startups these days have multiple locations anyway, and in my opinion there is little to be said against, but there is something to be said for Odessa as a location for development.

If you like the article, I would be happy if you share it on social networks! What do you think about outsourcing? Have you already had experience with Ukrainian developers? I look forward to your comment here on my blog, on Facebook or on Twitter.

Update: English version on Medium