The first thing we did on the morning of February 24 was to pay the team’s salaries in advance.”
That’s what entrepreneur Anna Polischuk remembers about the day Russia invaded Ukraine.
Anna co-founded one of the country’s most successful startups, Lalafo, a C2C marketplace platform operating since 2015 and expanding its presence in Central Asian and European markets in recent years.
After the war, Anna moved the company’s office to Poznan, Poland, where Lalafo operates as a charity project providing goods to Ukrainians there, free of charge.
According to the Ukrainian Foreign Ministry, investment in the startup sector is increasing from $39 million in 2014 to $509 million in 2019. In 2021, Anna says, $779.6 million will be invested in startups in Ukraine – a 46% increase compared to 2020.
She says the Ukrainian startup and tech scene has two main characteristics. Most startups in Ukraine have software development and management teams but are focused on markets abroad. Second, they represent well-developed large outsourcing companies serving needs outside Ukraine. Such are Grammarly, Reface, Petcube, Deposit Photos, Readle, Restream, Preply, Jooble, Lalafo.
“Almost all of the so-called Ukrainian Strut Wall of Fame companies are international with Ukrainian founders and teams,” says Anna.
What is the picture after February 2022, when Russia invades Ukraine? How are startup founders trying to preserve their businesses and people, finding new niches for development? What are the new players on the Ukrainian entrepreneurial scene seven months after the war?
We talk about these topics with Anna, one of the keynote speakers at the Digital Trends 2022 forum on October 25 at Sofia Event Center, along with many other big names from Bulgarian and global companies, including Adidas, Glovo, Microsoft, SiteGround, Mastercard, Dreamix, FITE and more. During Digital Trends 2022, the co-founder of Lalafo shared valuable insights on the development of startups through her experience as a business leader in wartime.
What happened to Ukraine’s startup sector after the Russian troops’ invasion in late February?
We’ve been getting a lot of warnings about the Russian invasion for weeks, but I don’t know a single person who took them seriously. No one was prepared when it happened. Nobody knew what to do. The Russians were bombing the whole country, and it was unclear whether it was safe to stay where you were or try to go somewhere.
The first thing we did on the morning of February 24 was to advance the team’s salaries.
The first problems in Kyiv came from fuel and cash. There were 4-hour queues outside petrol stations; many closed because they had no more fuel. ATM withdrawals were limited to $200 per person per day. Supermarkets and pharmacies were open, but all other stores were closed.
All the technology companies were trying to set up offices in western Ukraine. Old houses in the most remote small settlements were rented en masse. Lviv became the new technology centre. My partner and family moved from Kyiv to Ivano-Frankivsk, where we had business partners.
People lived in their offices. They were sleeping on the floor between desks.
Later, the problems with the currency started, the restrictions on buying foreign currency, orders from abroad and sending money outside Ukraine. Then there was the problem with electronic services. Some government offices were closed, making it impossible to carry out various activities. For example – it was not possible to carry out property transactions.
It is difficult for all the young startups that have yet to profit by February 2022. In general, all investments in Ukraine have been suspended.
If new startups don’t move to a new geographic market like we did with Lalafo Ukraine, they either have to enter the military tech sector or go out of business.
Around 30% of Ukrainian startups shut down after the war.
On the other hand, even before the war, many of them were looking in a direction outside the country’s borders. Because of this, their businesses remained unaffected. At Lalafo, for example, we are seeing good growth in all the other markets where we operate. Geographical diversification has helped us.
Can you talk business when bombs fly over your head, and sirens are blaring? How did you manage to relocate your business and keep your employees?
Every online business stopped for almost two months. Then people adapted. Most tech companies can work remotely, which we did once our people were safe. We’ve promised and will continue using our business to support the people on our team and their families and, most importantly, donate to the military to stop this madness.
In February, I went to Poland, and with mesmerising and mind-blowing support from our business partners, we arranged free accommodation for anyone who wanted to move there. It was easier to find shelter in Poland than in Western Europe. Apartments and houses were waiting for us. People believed everything would end in days, and nobody wanted to move. However, a few weeks later, in March, the first families started to move. We now have 40 people living in Poland.
One of our workers was in Irpen, near Kyiv. She managed to escape literally under fire. As soon as Irpen was liberated, her family immediately returned. Most people were in the same situation, nobody wanted to leave their homes, and they returned to it as soon as it was safer.
Now rule number 1 says: if no sirens are heard, there should be two walls between you and the outside world. That way, you are protected if a missile falls nearby. The first wall could be destroyed, and the window panes could be thrown everywhere. The second wall will protect you.
The hallway is the most preferred place to work and sleep in an apartment. If the air attack is massive, people move to basements, dungeons, subway station parking lots, etc. People have set up offices and bedrooms there, brought chairs, tables, Wi-Fi routers and mattresses. Everyone has a first aid kit with them. As long as there is electricity and internet, we can work.
What is the difference between the roles of women and men in wartime?
In the beginning, many women and children left the country between March and April—those who still had homes returned to them. Of the 40 people who came with me to Poland, two-thirds went back to Ukraine. It is very difficult for families, especially those with children, to remain separated for a long time.
Some of our software engineers are now drone pilots or work in the radio departments of the army. The tendency is to do what you are good at.
In the beginning, men and women who were not in the military were tasked with finding supplies: body armour, helmets, drones, radios, medical kits, etc. There was a meme at the time that every Ukrainian soldier had a volunteer and that the Ukrainian volunteer could find anything and deliver it anywhere.
Now the volunteer movement is going toward making their own devices rather than buying them. One of our engineers organised a team to create Drop systems for drones. Another girl runs a team that makes night vision devices for cars.
What is Lalafo’s contribution to Ukrainians?
When the war broke out, we provided about 50,000 products for free from our warehouses in Kyiv. The price of all the goods on the platform was 0 so that people could have access to them.
When we went to Poland, we realised we could use our technology to deliver humanitarian aid to Ukrainians who had moved there.
We got a lot of help from Poznan, including free space that 10 Ukrainian women turned into a fully functioning warehouse in just two weeks. We receive products from humanitarian centres and private individuals, which we process and then provide free of charge through Lalafo.
Lalafo in Poland still operates as a charity project. Ukrainians can order free clothes and household gadgets, which we will deliver anywhere in the country. So far, we have sent about 12,000 products to nearly 12,000 families.
Our next step is to open Lalafo to all people in Poland. Everyone will be able to order free products, not just Ukrainians. This is the model we worked on in Ukraine before the war. We used to get products from people by courier or post and offer them in Lalafo to those in need.
What is your forecast for the development of Ukrainian startups in 2023?
The new trend on the Ukrainian startup scene is military and defence technologies and those with dual use. Volunteers have learned to raise significantly large funds. We see more and more startups funded by volunteers rather than professional investors.
A new type of entrepreneurship is also emerging. Before the war, the typical start-up was a young IT person working in a shared office. Now the situation is changing. Wartime startups come from all walks of life – pilots, teachers, athletes, engineers. Now the way they get started is this: a team of two can develop a product or service for their friends in the military, offering it for free. For example, a drone launch system, night vision devices for cars, solar batteries for Starlink, etc. They raise funds through social networks and send their products to the army for free. Many of them don’t even realize that they are basically running a startup. This is how some of them are seeing huge growth in their development.
These new entrepreneurs lack knowledge of basic accounting and supply chain management. Very often they do not have structure or management. To help them develop, we created Spices, a special projects fund through which we support initiatives that bring us closer to winning. We offer grants and help with structuring new business ventures. And we’re not alone in this process. There are many organizations like ours. I think this trend will grow in the coming year.