In our new series, we will look at examples of Ukrainian startups that have raised funding and found success in international markets.
Over the last year, the activity of Ukrainian developers and entrepreneurs has increased, indicating a clear recovery in the Ukrainian economy, interest from investors, and integration into the international market. In 2019, according to UVCA, the total amount of venture investment in Ukrainian IT companies reached $510 million, one and a half times greater than the previous year. The number of transactions in 2019 was almost the same as in 2018; 111 transactions compared to 115 in 2018, but the volume of mergers and acquisitions increased 18 times, of which 15 transactions amounted to $460 million. Business angel investments in 2019 increased 7-fold and amounted to $6.1 million compared to $0.9 million in 2018.
Structure of Investment Rounds
The name of the round corresponds to the business stage. There are three early stages of investment for startups: Pre-seed, Seed, and Round A. Consequently, the three late stages include Round B, Round C, and Round D.
Among the most famous startups are GitLab, Grammarly, Petcube, Preply, Ajax Systems, Grammarly, and Ring. We will talk about these companies in more detail, namely: their founders and teams, their first investments, and their products.
Preply - a Platform For Finding Tutors
Founders: Kirill Bigay, Sergey Lukyanov and Dmitry Voloshin
Offices: Kyiv, Berlin, Barcelona
Company valuation: not disclosed
Total funding: $15.5 million over 6 funding rounds
Year of establishment: 2013
Initially, the Preply platform was built as a service for learning English, but the concept has changed several times during the process. It is now an online marketplace where you can find a tutor for 27 different languages, along with several other subjects and hobbies.
The idea of a startup related to language courses came to Kirill Bigay in 2011. He faced the difficulty of finding a Chinese tutor, incentivising him to build a business. Kirill’s first project FindGur, which was selected for the EastLabs business accelerator, failed. Without financial success, in 2012 the team returned from the United States to Kyiv, Ukraine. The main mistakes of their strategy were the wrong team and a lack of quality product. After the closure of the first product, the team was joined by designer Sergei Lukyanov, who a co-founder of Preply.
Kirill Bigay ended up starting over from scratch, but a few years later, the team got into the Techstars accelerator, receiving $120,000 from angel investor Semyon Dukach. The potential of the startup was noticed by other investors (Digital Future, Xevin Investments, Hedgehog Fund, Techstars), and in 2016 Preply collected $1.3 million in the Seed round. Later, in 2018, the team managed to collect $4 million from international investors, the main ones being Pavel Chudzinski from Point Nine Capital, RTAVentures VC, Ukrainian Diligent Capital Partners, and SMRK. Angels from Poland also contributed, namely: Mariusz Gralewski from DocPlanner, Przemyslaw Gatsek from Grupa Pracuj, and Dutchman Artur Kosten. All of these investors were previous contributors in 2016.
This year, the Ukrainian IT-company raised another $10 million in Series A round, where the lead investor was the London venture fund Hoxton Ventures, followed by Point Nine Capital, All Iron Ventures, The Family, EduCapital, and Diligent Capital. The following angel investors participated in the round: Arthur Kosten (Cooking.com), former Upwork CEO Gary Swart, Unity Technologies CEO David Helgason, and Couchsurfing founder Daniel Hoffer.
Locations in Ukraine
In the summer of 2020, Preply became a resident of Kooperativ in Kyiv - a space that combines business, technology, art, experience, and passion to create an environment that nourishes and promotes innovation. The company will hold meetups with its foreign colleagues and consultants for Kooperativ residents and the Kyiv IT community.
Preply's tutoring service now operates in the US and Latin American markets, as well as the Asian and Western European markets. The platform provides access to over 25,000 tutors and the opportunity to learn 27 different languages, averaging at $15-20 per lesson. In addition to language classes, the service offers tutoring in academic subjects such as math, physics, biology, chemistry, and several creative subjects like theatre, music, and art. Furthermore, the platform also offers help with preparation for numerous exams. Every month, over 10,000 hours are done on the Preply platform.
Preply plans to expand in new markets, mainly in North America, France, Germany, Spain, Italy, and the United Kingdom, with ambitions to open an office in the United States later this year. The company has plans to introduce new tools, which will allow tutors to develop their own lessons with the platform and efficiently track students’ progress. The company plans to use the $10 million raised in 2020 to open a new office and recruit more staff, as well as create a mobile application for Android and iOS, allowing Preply to quickly find tutors and establish effective communication. It looks like Preply is certainly on the right path to become a "unicorn" in the near future.
In future publications, we will report about successful Ukrainian startups that were able to create a quality product and an effective team. We will learn how their ideas come about, how to choose the right partners, and find the first investment. The next company will be Grammarly - a service that helps people communicate more effectively in English.