In a guest column to AIN, Damian Wielechowski, Head of Communication & Partnerships at SpeedUp Venture Capital Group, talks about how a startup can increase its chances of a successful overseas expansion, also sharing the thoughts of the representatives of startups: Localazy, Swobbee and SP Tech.

Startups, by definition, are supposed to be rapidly scaling companies. While it is possible to achieve a significant foothold in some market niches in your home market, building a truly large company usually requires overseas expansion. Easy to say, harder to do.

Expanding into new markets comes with many challenges. According to the Startup Hub report, companies identify a number of challenges associated with this. The most frequently raised obstacles are regulatory issues, financial constraints, approaches to advertising and lack of knowledge of local culture and consumer preferences. Some may say that a key element of success is flexibility and the ability to adapt quickly to changing conditions. This is all true. However, when undertaking an expansion with an often limited budget and uncertain cash flow, one simple mistake can have very…bad consequences.

In the first phase of overseas expansion, the key issue is to properly match the product to the specifics of the new market. Research conducted by CSA Research on nearly 9,000 consumers from 29 countries found that as many as 76% prefer to make purchases in their native language. This means not only translating product and marketing materials, but also taking into account cultural differences and consumer preferences.

It is important to understand that what appeals to an audience in one market will not necessarily work in another. That’s why it’s essential to thoroughly research the expectations and needs of the local community and tailor your offering to meet those requirements. This will avoid potential misunderstandings and better appeal to new customers. With a solution to this problem comes the startup Localazy, which has created a platform that combines machine translation, experienced translators, and experts from local markets.

When establishing Localazy, our goal was to make the complex process of expanding into international markets easier for entrepreneurs. At the same time, our motivation from the very beginning was to strive to reduce language barriers around the world. Our Localazy platform can be compared to an advanced autopilot that ensures smooth and efficient translation of content. When you add text in the native language, our platform automatically translates it into other languages of your choice, using professional translators from the relevant market, who are supported by AI-powered workflows. Our approach pays special attention to User Experience. That’s why Localazy supports more than 50 different content formats, providing support for a wide range of business needs. Our goal is to provide a flexible and comprehensive tool that allows businesses to effectively manage multilingual content, saving them time and money,

Václav Hodek, CEO of Localazy, says.

Having a solid knowledge of the laws in the country to which a startup is targeting is a key element for success in the expansion process. It is not enough just to know the commercial, civil, or tax laws. This is only the tip of the iceberg. The legal reality is multi-layered and requires constant deepening of knowledge and keeping abreast of changes. Neglecting this aspect can lead to serious legal consequences and even threaten the stability of the company.

Legal challenges related to expansion can be acute, and it’s what the aforementioned Startup Hub report listed as the #1 concern for 60% of respondents. Additionally, when a startup operates in a heavily regulated industry, such as medicine, aviation, or railroads, things can get even more complicated. It is from the railroad industry that SP Tech Solutions, a Polish startup that recently made its first deployments in the German market, comes from. SP Tech Solutions offers the Raily toolkit, which is a comprehensive IT system designed for companies whose business involves rail transportation in both its operation and execution.

Entering new markets really requires a comprehensive plan and thorough analysis. I’m not just speaking of business analysis, but also, and perhaps most importantly, a thorough familiarity with regulations, regulatory requirements, cultural attitudes and the ways in which the market itself operates – especially its so-called unwritten rules. SP Tech operates in the rail market, which to many may seem quite hermetic, but in reality you just have to know how to navigate it. In the case of our growth and overseas expansion, our main focus is on the German market, as a result of the need we have identified there. We saw a wide field for our tools, especially the Raily Marketplace, which provides a platform for finding and ordering, among other things, traction services, such as hiring a driver to run a train on a specific route. Our tool not only allows you to take advantage of fixed prices and proven partners, but also to act faster, without the need for telephone appointments, while eliminating the chance of duplicate orders. It’s worth noting that in Germany, about 50% of the railroad workforce operates on an outsourced basis, which is a huge market for Raily Marketplace and a real need we can address,

Piotr Sikorski, CEO of SP Tech Solutions, comments.

Scaling a software solution to other markets already seems like a challenging task, but expanding overseas to a country or continent for a hardware startup is a huge challenge. In addition to the need to understand legal aspects and adapt to language and cultural differences, such as in the case of SaaS products, hardware development companies must pay special attention to delivery logistics and building relationships with new subcontractors.

In addition, legal issues are becoming even more complex, especially in the context of selling and distributing equipment, which must comply with different technical standards and energy efficiency requirements in different countries.

Such a path has been traveled, among others, by Swobbee, a German startup developing battery charging stations for LEVs (light electric vehicles), which have a swappable battery. The company provides a solution (hardware + software) that takes the responsibility for the physical process of charging batteries off the shoulders of LEVs fleet operators. Swobbee is already available in several European countries, and more recently in New York City.

Expanding a hardware start-up overseas poses significant logistical challenges. Establishing a new value chain in a distant market requires a reliable supply chain and overcoming complex regulatory barriers. Critical questions arise, such as where to manufacture equipment. Should we set up new manufacturing facilities, outsource production, or deal with long and costly shipments? In addition, after-sales service and ongoing operations present further challenges. Building awareness in a blue ocean market is essential, as is establishing a new corporation in the target region. There are inherent uncertainties in establishing and maintaining partnerships, which adds another layer of complexity to the expansion process. I would strongly recommend that hardware companies seek out local partners to aid in this process. For example, during Swobbee’s expansion into New York, direct support from the NYC Department of Transport was invaluable in navigating local constraints and complexities,

Ludwig Speidel, CFO of Swobbee, comments.

Overseas expansion is definitely a watershed moment for any startup. It’s a step that requires courage, strategic planning and flexibility. During the process, startups face a variety of challenges – from adapting to local regulations to building relationships with business partners and adapting the product to the new market. However, for those that go through the process successfully, the door opens to potentially huge opportunities to grow and scale their business.

Author: Damian Wielechowski,
Head of Communication & Partnerships at SpeedUP Venture Capital Group

Tetiana Ladanova, Startup Programs Lead at TRMNL4 by Genesis, shared the main insights: the peculiarities of the Baltic tech industry, how venture capitalists perceive Ukraine, and which projects attract the most investment.

Paradigm shift: why the Baltic is no longer a region closed to other startups

The Baltic States are a group of countries that include Latvia, Lithuania, and Estonia. At the same time, in the context of the startup ecosystem, Finland is always close to them, as it maintains close ties with the Baltic States. What should we understand about this region? These countries have historically been among the most productive in generating unicorns and promising startups. This has been facilitated by a strong community, strong government support, a favorable investment climate, and a developed infrastructure. A few facts: 

• Estonia is a leader among European countries in the density of funded startups and unicorns. According to the State of European Tech 2023, there are 4.5 unicorns per 1 million people. 
• Finland, Lithuania, and Latvia also generate many successful startups, outpacing countries like Germany, France, Austria, and others in density.
• According to Dealroom, there are more than 5,800 startups in Estonia, Lithuania, and Latvia. 

At the same time, the ecosystem of these countries was relatively closed: local venture capital funds invested mainly in their startups and rarely considered businesses from other regions. Now, the situation is changing. These four small countries, with a combined population of about 11 million in recent years, have accumulated significant capital. Large ecosystem funds have begun to enter the region; for example, Antler has opened an office in Finland, and Plug and Play has opened an office in Lithuania. 

However, the number of new startups ready to attract early investment is growing much slower than the investment market. For example, in neighboring Finland, the practice of investing not so much in startups as in talented founders with promising ideas has begun to spread. To solve this problem, the Baltic States invite CEE entrepreneurs to participate in programs and choose their jurisdiction to register businesses to invest in them later. Local investors also pay more attention to startups from non-EU countries, such as Ukraine, Georgia, Moldova, etc. For example, in the past few months, New Nordic Venture (a fund based in Riga, Latvia) has invested in two startups from Ukraine and Georgia, both of which are participants in Startup Academy, an international educational program on scaling and managing technology businesses from Genesis and Meta. In general, the TRMNL4 ecosystem was fascinating for investors at TechChill, because we have a good understanding of local ecosystems and have many startups from there in the community. 

Fundraising, partnerships, and networking: Why Go to TechChill

TechChill is a platform that brings together investors and startups from over 40 countries. The organizers accumulate an increasingly large European IT resource at their location every year. 

Such conferences bring together different participants. Early-stage startups (pre-seed and seed) actively raising investments come here to pitch, get feedback, and build relationships with investors. The international community of funders operating in different markets also provides opportunities for strategic partnerships with complementary products.

Projects at the idea stage come to talk to different people and get feedback from the market. Series A+ startups are likelier to attend specialized events where their potential customers gather. However, such conferences are great opportunities to speak and develop their brand. 

The task of the TRMNL4 team was to communicate with investors and funds that are now discovering new markets in Eastern Europe. In addition, one of the focuses was to meet with representatives of Big Tech to enlist the support of strong partners who will develop the ecosystem with us and provide startups with their expertise, networking, or relevant software. Compared to WebSummit, TechChill is a smaller conference. Still, it was attended by such big players as Google, Snapchat, Deel, PayPal, HubSpot, and others, which indicates interest in the CEE region. For us, it was a productive trip: when you can personally talk to representatives of these companies about their needs, requests, and how they see interaction with startups, it provides a solid basis for further launching joint initiatives. 

TRMNL4 was a member of the jury that selected the top 50 startups among the 388 that made it to the semifinals of the Fifty Founders Battle competition. Each was presented on the TechChill stage, from which 10 finalists were selected. Among them, we have chosen one participant for this year’s Startup Academy 4.0 — Latvian startup Sorsera. The winner of the battle was Submerge LTD.

Defense Tech and attention to Ukraine

Recently, European leaders announced a “new era of defense technology” by announcing large-scale financial support for the sector. At the same time, Western venture capitalists are cautious about this vertical. In 2023, the number of defense technology deals remained at 2022. In addition to ethical reasons, these hardwired technologies require long-term development, testing, and significant investments. Instead, according to Sifted’s review, investors are keenly interested in dual-use projects — when the technology can be helpful in another segment.

At TechChill, there was a high demand for solutions in the Defense Tech niche. More and more projects are emerging in this vertical, some reaching the top ten finalists. For the first time, the Defense Tech product Submerge LTD, which develops underwater drones, won the conference’s startup battle, illustrating this trend. In general, this was the No. 1 topic in conversations with investors: almost every representative of the Ukrainian delegation was asked at least once for recommendations of Defense Tech startups or accelerators.The good news is that promising Baltic military projects are ready to cooperate with Ukraine actively. “The community has come together to show its support for Ukraine, to pool skills and resources in a defense technology industry that is stronger than ever,” said Annija Mežgailė, CEO of TechChill, in one of her speeches.

Three key startup trends

The top ten winners of the competition are very representative, as they demonstrate global trends. In addition to the high demand for defense tech, we see investors’ growing interest in B2B/SaaS products. Half the startup battle winners offer effective management, secure operations, cost optimization, and process automation solutions. Previously, B2B solutions for large corporations were trending, but now the focus is on projects aimed at small and medium-sized businesses. Thus, in 2021, the share of SaaS among the total number of venture capital investments in the Baltic States was 34%, and in 2023, it was 78%, according to Dealroom.

Another trend is Deep Tech. The world is returning to demand for technology and sophisticated solutions. For example, the top ten startups include two projects in the medical field: bright patches for treating complex wounds and capsules for internal diagnostics based on VR technology. These are complex technologies that require extensive clinical testing. At the same time, investors believe in their value.

Another interesting observation is that investors from Western Europe choose a clear vertical to work with. In the CEE region, most funds tend to invest in startups that have the potential to generate quick profits, regardless of sector or industry. Western investors who attended the conference chose specific segments with solid connections, partnerships, and expertise. This way, they offer startup funding and many other opportunities for developing expertise and networking.

The CEE startup ecosystem has every chance to change the perception from outsourcing or outstaffing to a product-driven region. Funders from these countries have experience working with large corporations worldwide that have been customers of services, so they understand their needs and problems well. As a result, they create B2B products that quickly find customers and meet their needs. For example, the founders of InputSoft, participants of the Startup Academy working in the aviation industry, at some point realized that there was no convenient modern software for airports that would provide management and logistics and created a corresponding product. Also, many specialists have gained experience and built careers in top product companies such as Spotify, Bolt, and Booking.com and are ready to apply their expertise to launch their startups.

Author: Tetyana Ladanova, Startup Programs Lead at TRMNL4 by Genesis

So, you have made an important decision and arrived at the conference to present your startup. Now the most productive and interesting phase begins: communication with attendees and networking. In the second part of the article, we have collected the opinions of repeated participants of large startup events that will help you build effective communication and keep focus in the whirlwind of events. 

How to get leads at a conference 

Each conference is not only about new technologies and new contacts, it’s also about leads that can help you grow your startup. We asked Alina Pendeshchuk, Business Development Lead at Datrics, a portfolio startup of Sigma Software Labs, about her experience in preparing for conferences. She shared the secrets of successful lead acquisition from a team that has traveled halfway around the world and attended such conferences as JICA conference in Japan, Nordic Fintech Week, Ukrainian delegation to London Tech Week, and European Blockchain Convention.

Preparing for a conference is probably the most important thing to plan. We choose only those events that are relevant to our track record, i.e., that will bring us the most benefit, or events where we are more likely to meet the right people. We don’t rule out the possibility of attending Web Summit, but specialized conferences are often more relevant to us,

Let’s go through the most important steps:

1. Book meetings in advance with interesting people, who will be attending the conference, through a special event app or direct contact via social media. The hottest time is 2–3 days before the conference. This way, you will get a plan of action & meetings and will be able to confidently follow it throughout the trip.
2. Put away your work and spend all your free time during the conference days communicating with people at the stands or in specially designated areas. However, remember that the main communication boom will take place at side events. Don’t forget that this is a big component of communication, albeit in a more informal style.
3. If you have a booth at the conference or are working as part of a delegation at a joint booth, make sure that your brand is well covered. Your startup’s identity, logo, and video should be visible everywhere. 
4. Instead of using paper business cards, merchandise, and handouts, use QR codes with a direct link to LinkedIn, your website, or a form to connect with visitors and all stakeholders you communicate with. 
5. Choose the relevant side events you want to attend, where you can establish personal communication with future clients, partners, and market players. 
6. Keep a record of each useful conversation in a special working chat or document that is available to your team for quick lead processing. After each important conversation, write down the main points:
   • the contact’s LinkedIn profile; 
   • a brief description of the meeting;
   • a photo of the person you’re talking to or a photo of you together; 
   • next steps for communication.
7. Get involved with the local community. When planning a visit to another country or city, schedule meetings with local clients or partners. This will help you adapt more easily to the city where the event is taking place and possibly get involved in the local community.

Business communication at conferences

To get the most out of a conference, you need not only to attend the event itself, but also to plan business meetings with participants. We talked to Daria Yaniieva, Investment Director at Sigma Software Labs, about business communication during events. Daria attended about 10 top international and many Ukrainian events last year alone. She participated as a member of Ukrainian delegations, as a speaker, and as a jury member in numerous startup pitches in many countries around the world. We asked Daria how proper communication affects the results of business trips.

The geography of our events is incredible — from a major summit in Lisbon to a technology conference in the heart of Morocco, from a VC event in Warsaw to a Ukrainian delegation in London. Over the year, we visited numerous locations for completely different types of events, and each one brought its results,

Daria Yanieva, Investment Director at Sigma Software Labs, says.

“Today, it is even more important than ever to maintain existing contacts and create new global opportunities. This opens up new horizons for business and great prospects for our portfolio companies. But it is not enough to be present at the heart of technology events. In addition to all the tips on how to prepare, we clearly got that learning about cross-cultural nuances is another major success factor. For example, the casual dress code for most European events should be set aside when you are packing a suitcase for a tech conference in Marrakech. Your personal agenda is also important. It’s better to check the locations, format, and invitees for the side events in advance. Ignoring the accepted formats will not add success points.

The optimal timing of follow-up communications requires special attention. From our personal experience, it is not always effective to follow up with potential contacts the day after the meeting, and sometimes a delay of a day can, on the contrary, make a negative impression. The first rule applies to large-scale events like Web Summit. Where the schedule of official and additional events takes a full day, except for a few hours of sleep. Firstly, in such a schedule, it is quite difficult to process all contacts effectively here and now, not to mention personal follow-ups. Besides, there’s a pretty high risk of losing emails among hundreds of notifications from networking apps, organizer emails, calendar reminders, and regular mail that never stops during your travels. Of course, you shouldn’t postpone communication in a super long box, but it seems optimal to process contacts within a business week after returning. At the same time, after more small events for 70–100 people, it is highly recommended to send follow-ups the very next day. Be sure that the number of emails will be ten times smaller and, with a high degree of probability, the scale of the event allows you to agree on more specific points to include in further communication. And in this case, there is no need to lose time and interest to continue the conversation in detail.”

What conferences are interesting to attend in the first six months of 2024

Yes, there are a lot of conferences, but not all of them can boast of a sufficient number of attendees, classroom impact, or the target audience that gathers there. We have prepared a shortlist of conferences worth attending in the first half of 2024:

Startup Grind Global Conference

• Date: April 23-24 
• Location: San Francisco, California, USA
• Topics: Startups, entrepreneurship, technology

TechChill

• Date: April 18-19
• Location: Riga, Latvia
• Topics: Technology startups

Latitude59

• Date: May 22-24
• Location: Tallinn, Estonia
• Topics: Innovations and startups

Infoshare

• Date: May 22-23
• Location: Gdańsk, Poland
• Topics: Technology and startups

GITEX AFRICA

• Date: May 29-30 
• Location: Marrakech, Africa
• Topics: Innovation and startups

London Tech Week

• Date: June 10-14 
• Location: London, England
• Topics: Innovations and startups, business

Collision

• Date: June 17-20 
• Location: Toronto, Canada
• Topics: Technology, innovation, startups

Author: Elvira Zhukovska, PR-Lead at Sigma Software Labs

In the guest column for AIN, Elvira Zhukovska, PR-Lead at Sigma Software Labs, gathered tips from tech event organizers and regular attendees to help you make the most of your time and energy and avoid getting lost in the shuffle. The material will be released in two parts. This is the first part of the column, which starts with the basics: do you need to attend conferences and what to expect? Find all the pros and cons below.

Why you should attend conferences

• Meet investors. Conferences are the perfect place to meet potential investors who might invest in your startup.
• Network. You can meet people from different industries and expand your contacts, which can help open up new opportunities for your business.
• Research new trends. Conferences allow you to learn about the latest technologies and market trends, which will help your startup stay at the forefront of innovation.
• Build brand awareness. Speaking at a conference is an opportunity to raise awareness of your product or service and gain credibility in your industry.
• Learn. Conference presentations, panel discussions, and workshops can teach you new strategies and approaches that will help your startup grow.

Which risks are there?

• High cost. Attending conferences can be expensive, especially for small startups with limited budgets.
• High competition. Conferences often bring together thousands of companies, making it difficult to stand out and attract the attention of investors or partners.
• Waste of time. If you don’t do your homework  and skip preparation for efficient conference navigation, it can be a waste of resources.
• Potential disorientation. Too much information and events at conferences can lead to a loss of focus.
• Unsuccessful contacts. Not all the contacts you make at a conference are useful or lead to results.

But there is good news. These risks can be avoided if you follow a simple rule: preparation. 

How to prepare for the conference

We asked Kateryna Stefanovych, Event Management Lead at Sigma Software, how to get the maximum out of the event without breaking the already limited budgets of startups.

Teams often finish preparing for a conference by booking tickets, giving priority to polishing their pitch deck and developing a product. The result is a lack of focus, scattering on everything at once, unjustified budgets, and at best, returning home with a bunch of contacts, most of which are irrelevant. Inside conferences, however, many opportunities and nuances will help you achieve your goal, which everyone knows about but forgets when preparing. Let’s go through the main ones:

• Goal: What are you going there for? Is your goal finding new clients, networking, investment search, competitor research, hiring, or maybe you just want to be inspired by trends? Answer the question clearly and focus on two main areas of your activities.
• Go beyond the standard agenda: find out what tracks are available, whether participation with a stand is possible, and whether startup competitions, broadcasting, mentoring sessions, business matchmaking, and hackathons are planned.
• Make plans for side events and your schedule: there is a chance to find an investor or client at presentations, but you are more likely to do so at smaller events that are not part of the main event. As practice shows, some organizers are ready to share these events directly on their website (such as ETHCC Paris), but if not, you can safely search for them in lu.ma, evenbrite, meetup.com, or Telegram groups, which often publish compiled tables with side events that are niche and worthy of attention.
• Apply as a speaker: usually in 4–6 months, a CFP (Call for Papers) opens, where you can submit your candidacy and topics. There is a chance to get in, but we recommend paying special attention to the naming and originality of the topic, which ideally should be in line with the conference theme. 
• Elevator pitch exercise: start practising a short, clear, and catchy description of your startup for networking and presentations. The rules are simple: 2 weeks before the conference, set aside 15 minutes a day to “sell” your idea. It’s important to find people who don’t know what you do and get honest feedback on what catches their eye, where you feel insecure, or where your explanations are too complicated. 
• Delegate roles: Often teams go to conferences and have a common plan for the meeting. Can you split up and cover more ground? Think along these lines and send those who really need it and are able/will be willing to communicate a lot.
• You can’t have a meeting if you don’t plan it: you can often find conference participants in conference mobile apps. If this is not possible, use social media and hashtag searches. 
• You are remembered when you stand out: it can be an item of clothing, a hairstyle, an accessory, something small, but something that will capture a person’s attention and make them remember you among hundreds of others. The same applies to cold emails when you’re scheduling meetings before an event. Don’t write standardized messages, take the time to make sure your message catches the eye of a person out of 100 other invitations.
• Act quickly and follow up on meetings and new connections right away: it always works to send a selfie of you and your friend right into the chat.
• Have a QR code with quick access to your contacts and product: Linktree and Beacons are great options for this.
• Create printed materials: business cards, informational brochures, and other materials about your startup that you can hand out to potential partners or investors. Yes, yes, it still works.
• Don’t neglect partnership offers for booths: sometimes there are very good opportunities, for example, at the Web Summit conference there is a Startup Alley. If you are selected, you will have the opportunity to get a stand and 3 tickets for the price of one.
• Minimize stress, you still have a startup to launch: conferences are not easy, because in addition to expertise, you pay with emotional resources. Get enough sleep, remember to drink, eat, and have everything you need for a comfortable stay, including a power bank, notebook, and comfortable shoes.

AI tools for conference planning and attendance

It’s easier and faster to navigate a conference if you have helpers. AI-powered apps can help you schedule a meeting, translate a speaker’s presentation, or follow important news that happen during the event. We have collected several tools that will help you be more productive at the conference: 

• Crystal: Helps you analyze the communication style of conference participants and prepare for effective communication.
• Covve: Helps you keep in touch with contacts made at the conference and track new opportunities.
• Feedly: Helps you keep track of news and articles from your industry before the conference.
• Voicea: Records key points and ideas during conference presentations.
• Whova: Helps you organize your event schedule and connect with other attendees.

In this article, we shared a couple of reasons to attend conferences, what AI technologies to use, and detailed the steps that can be taken to prepare for the conference. The second part of the article will reveal the secrets of lead generation during the event and communication with the international community. Stay tuned…

Author: Elvira Zhukovska, PR-Lead at Sigma Software Labs

CREVV, a Ukrainian design studio, assisted AIN in reimagining itself. Co-founders Nata Ivanova and Anton Ivanov shared insights on their redesign project in a guest column.

In the endless line of Ukrainian brands that require updating are many products we use daily. Nobody can remember it now, but six years ago, Uklon had a video player button logo, and Depositphotos used a standard camera icon as its main symbol. We at CREVV have changed the identities and symbols that represented these modern Ukrainian businesses for a long time.

In late 2023, AIN.UA asked CREVV to update its identity and website. A new logo of AIN is a case of rethinking a well-known symbol by making it up-to-date. It is a challenging and fun task at the same time. We love such challenges.

A message bubble of the old logo got a new sense thanks to rethinking the main function of this medium. Today, it’s not just a website but several different communication channels. But in the end, it all is being compressed into a unit of information, a message. The new symbol of AIN.UA is a segmented message from a messenger.

Two segments are an ‘a.’ If there are many segments, as many as subjects that AIN.UA writes about, you can see three letters in a message: a, i, and n. It is an abstract and simple symbol that inherited the old logo and got new senses. AIN.UA is a daily portion of information for a modern entrepreneur. It is one of many signals the new logo brings up.

Based on modular letters, we created symbols for AIN categories: Business, Tech, Work, and Community. All of them got their letters designed in the same way as the main logo.

Rethinking a modern media format impacted the layout and website design, which is still in progress. News feeds, stories, tabs, window layers—all this inspired us to create adaptive graphical elements that follow the logo form and build an adaptive and recognizable design system.

By font solutions, we wanted to leave behind a neutral current grotesque, so beloved among Ukrainian businesses and IT companies. To create an intelligent mood, we picked Skema Pro News. Why? To prepare AIN.UA readers for a serious vibe, a so-called monocle vibe but more digitally arranged.

Concerning colors, only the central red was slightly updated. In addition, we assembled two bright and dark color sets that one can combine as they wish. So, put it together with a diverse set of forms and several perfectly matched fonts, and you will get a powerful tool for all possible modern manifestations.

The best part of cooperation with AIN was its team’s engagement. All brand identity design decisions are always for people who will work with it. The best thing that can happen to a project is when the brand team is engaged, knows well what they need, and can perceive critics of their product to aim for obviously better results.

We love to interfere in the product part, and this time, it helped us so much develop a new website, which we will discuss in our next article.

Authors: Anton Ivanov and Nata Ivanova, co-founders of the design studio CREVV

What percentage of startups become unicorns? The report by CB suggests a range between 0.01% and 0.1%. I know it’s small. Besides the sad news, I have another one — on average, 90% of startups fail within the first three years, according to The Global Startup Ecosystem Report 2022 by Startup Genome. But why does it happen?

Chat GPT gives the following reasons: lack of market need, ineffective management, competition, financial difficulties, technical problems, lack of business model, and legal and regulatory problems.

All is true, but ChatGPT needs to explain the foundation of all these reasons. AI can’t yet isolate the main one based on data and experience, but an entrepreneur can (proving that humans are still good at something).

What Сan You Miss By Not Taking Into Account Data?

Yeah, I’m talking about working with data again. A proper primary project audit can solve all the above challenges based on my experience as CEO and co-founder of international companies and projects:

1. Often, a startup is just an excellent idea based on the enthusiasm of the funders. With the right analytics, it becomes clear that the concept, although impressive, requires N resources in entirely different planes, which were not considered at the start.

2. The analysis of competitive goods should have considered imported goods, which can completely change the project’s business model.

3. Potential product users’ statistics are also lame due to outdated systems. Technical problems account for 12% of startup failures, according to the opinion in Failory Newsletter for startup runners.

4. Sometimes, after detailed analysis, a startup from one economic sector moves to another — remember the McDonald’s movie where the lawyer tells Crook, “You’re not selling burgers, you’re selling land.” Forbes suggested that nearly 70% of startups fail due to no market need.

5. Statistics can tell you how many narrowly focused startups succeed and how many don’t. This data can be compared and safeguarded against mistakes.

6. Risks are not a hypothetical fear of something but a mathematical value that can be calculated no worse than in poker.

7. Finance — any figure has reasoning and options for use. A study by the Kauffman Foundation reveals that 42% of startups fail within the first 3 years, often due to cash flow problems.

8. Legal issues — dealing with the legal framework is standard data work, and I’ve seen more than one case where the options for one party to a contract were not fully explored, which became a problem.

Illustrations Of How Data Saves Businesses

Here are 3 examples of how data analysis is used by already existing unicorns to inspire you to use data as much as possible:

1. Netflix Cancels Recommendation Fatigue to Win

Netflix HQ found themselves in a challenging period, with a potential surge of cancellations on the horizon. Why? Streaming fatigue. Users were inundated with suggestions, feeling overwhelmed by content that didn’t align with their interests. They craved personalization, a reflection of their unique viewing habits.

Netflix, known for its pioneering spirit, refused to back down. They understood that the key to the problem lay in data, hiding user behavior. They developed a sophisticated digital framework, meticulously analyzing every click, scroll, and star rating. These data assets revealed a vivid picture of each subscriber’s preferences.

The results were nothing short of excellent. Armed with this new understanding, Netflix was able to tailor recommendations. No longer a generic approach, suggestions became personalized invitations to hidden gems and binge-worthy content. The effect was profound. Cancellations were reduced to a trickle and replaced by a wave of satisfied subscribers. Netflix solidified its position as the streaming giant. In 2013, Netflix won an Emmy award for “Personalized Recommendation Engines For Video Discovery.”

In 2023, Netflix smashed expectations, raking in an incredible $8.8 billion in revenue! 

How? This time, they looked at the data of non-paid account sharing between users and announced a global password crackdown. Again and again, by analyzing their data and improving product and advertising, Netflix has grown.

This dominant performance shows the streaming giant is firing on all cylinders. Netflix is looking to the future, forecasting continued healthy double-digit revenue growth for the year. 

2. Amazon Anticipates Customer Needs with Predictive Analytics

Imagine the relief when the customer clicks “order” excitedly, knowing that the dreaded “out of stock” message is passed. It’s a game-changer for both retailers and customers. However, for giants like Amazon, this scenario is becoming a reality. Their secret weapon? Data is the unsung hero of the retail world.

Amazon uses cutting-edge data analysis, like a digital fortune teller, to predict what you’ll want before you even know it. They delve into vast information — past sales, browsing habits, and broader market trends. All this data clearly shows what products are in demand and what might gather dust on the shelf.

The result is a mutual victory. Amazon maintains its inventory levels perfectly balanced, ensuring shelves are stocked with what customers desire. No more stockouts, no more disappointment. It is keeping Amazon on top of the retail game. So next time you hit that “order” button, remember — it is data work.

3. UPS Streamlines Delivery Routes and Saves Millions

For a logistics giant like UPS, every delivery truck caught in traffic is a significant blow to efficiency. The cumulative effect of these delays, akin to tiny daggers, could lead to a substantial headache. With a fleet spanning the country, UPS was constantly fighting traffic jams and desperately needed a solution to shave precious minutes (and gallons of gas) from its delivery routes.

But UPS had a secret weapon — data. They equipped every truck with a digital knight and a GPS that constantly fed information back to HQ. This real-time traffic intelligence and historical delivery data transformed into a magic map. It allowed UPS to analyze distance and navigate the ever-changing beast of traffic congestion. The result? Their routes became laser-focused, avoiding gridlock and streamlining deliveries.

The impact of this data-driven approach was significant. UPS now saves millions of dollars annually, thanks to reduced fuel consumption and more on-time deliveries. But the real victory is a smoother-running operation that ensures your packages reach your doorstep, regardless of rain or traffic jams. So, the next time you see the familiar brown truck, remember— data is that silent hero, making your deliveries faster and greener.

Is Unicorn Company DNA in Every Startup?

Overall, I suppose every startup is already a unicorn. There are no rabbit startups, mosquito startups, or possum startups. There are only unicorn startups. It’s just that only those who can see it reach the unicorn glade. Stats are precisely the points that help you get there, but those points:

1. not everyone has them,
2. they don’t fit everyone, 
3. there are few of them.

I know of teams that are just as dedicated to treating unicorn vision, and they are vital. Without them, a blind unicorn will most likely not make it to the clearing (I say “most likely” because there are circumstances where a unicorn just randomly ran and made it to the right place; I’m not implying anything; it just happens).

Sometimes, points can help initially, but they crack at some point, and then you need to upgrade them. It’s a whole science, too, where a unicorn needs to pitstop at the proper unicorn mechanics.

Only 10% of founders possess the necessary skills to successfully lead their companies through all stages of growth. Be in their range; use data. DATA is much more than money, success, or an idea. It allows you to consistently graze in a clearing with other unicorns without worrying about your eyesight. Statistics are essential in everything, from global to small; don’t fear them.

P.S. Statistics drop is here — the word “unicorn” was used in this text 18 times.

Author: Vlad Kytainyk, CEO of KITRUM

There is a common belief among startup founders that the financial model is first and foremost needed by investors, that it is some kind of clumsy and archaic attribute of the fundraising process demanded by venture capitalists for some unknown reason. “Why make a model, if it’s not gonna work anyway?”, “How can I make the right assumptions at this stage of a startup’s lifespan?” and other phrases can often be heard from funders. I believe that it is the entrepreneur who actually benefits the most from developing a model.

An effective financial model is a very important element in business success. As you invest your time in creating a financial model, you begin to better understand what factors are really important, the mechanics of making a profit, and the relationship between various elements of the business model. Let’s look at why it is needed, what it consists of, and what the main requirements are.  

So what do founders need a financial model for? Reason 1 – To turn  your business into an equation and better understand how it works

In the first place, a financial model allows you to better understand your business at all levels. Since every financial model is based on an operations/growth model, you’ll understand what drives your startup’s growth and how your market works by drawing up a financial model.  You have, for example, a B2B SaaS where Sales is the main distribution channel and you build a growth model. In the process, you’ll need to model a funnel for each sales employee and understand what percentage of leads he or she needs to close for the company to grow effectively and break even at the sales level. This allows you to identify key metrics in key business areas. Modelling financial processes also serves as a powerful prioritisation tool. For example, you may find out that a 5% increase in customer retention is much more profitable for you than a 5% increase in conversion. This means that you should focus your organisation’s resources on this particular issue to improve business performance. 

Building a financial model also helps to set benchmarks for operational and financial performance. When launching a startup, it is very difficult to determine what indicators are standard for a particular industry. When creating an operational and financial model, not only do you identify the main drivers of your business, but you also ask yourself what they should be, what benchmarks and guidelines exist for your industry and business model, and start researching. The source for such benchmarks can be analytical reports, market research, investment funds, and your co-workers in the same industry. Going back to the previous example, you ask yourself how feasible is the percentage of leads closed by a salesperson in your B2B SaaS startup, and you start looking for an answer. Or you realise that the burn rate (monthly net loss) you set for the Seed Round is twice as high as was in the famous SaaS Funding Napkin by Christoph Jantz, a partner at Point Nine Capital, and that you need to change something in your vision of how the business should grow. 

Being involved in the financial model development gives you an understanding not only of certain milestones, but also of how to achieve them. To reach $100 million in revenue per year, for example, you need to burn through $200 million in investment. Doesn’t sound very attractive, does it? Very often priorities are reassessed at this point. Entrepreneurs can either temper their ambitions, realising the complexity of implementing them, or raise the bar of expectations, or find other ways to accomplish them. 

So what do founders need a financial model for? Reason 2 – A bad plan is better than no plan at all 

The financial model’s key indicators should serve as the company’s goals, which you will use to guide you in dealings with your employees or partners.

The model will also be a handy tool for checking the soundness of your business. Sharp deviations between actual and planned figures can indicate critical business problems and encourage you to deal with them faster and move forward with more frequent iterations!

Another benefit is the ability to align different teams working in your business. They may have different metrics and intermediate goals, but a common goal can help them better grasp the end result, their contribution to it, and interdependencies. It makes no difference if the sales team meets their KPI for the percentage of closed leads, when marketing doesn’t generate enough leads or their cost is sky-high. 

And, of course, developing a financial model has certain advantages in your relationship with investors. They will have a better understanding of your business, allowing them to make an informed decision rather than relying on their own assumptions. Also they will certainly see that you have the right qualities to be successful, such as analytical thinking and strategic planning. 

The timeframe for your financial model

While your main goal will of course be to focus on the future, you shouldn’t forget about the past. Your financial model has to cover the operations of your business from the very beginning or at least the last 12 months. The best choice is to prepare a financial model on a monthly basis . It is essential to understand that past performance should be included in the same file as current results and plans for the future. This gives you a better picture of the company’s growth trajectory. To make it easier to distinguish certain time periods, they should be highlighted in different colours. 

The financial model’s most important component is the near future. This section shows potential investors what you can achieve with their contribution. The planning horizon is normally set at 18-24 months. Why? That is the expected run rate for a typical funding round, so both the investor and you must understand how the funds raised will be invested and what you will achieve with them. The depth of detailed elaboration is 1 month. 

The financial model should also include your main goal, like achieving annual revenue of $100 million, for instance. Such goals are set for the long term, usually up to 5 years. The depth of plan refinement is a quarter or a year. 

The structure of the financial model 

1. Assumptions. Non-financial drivers of your business, for example, conversion funnels, cost of lead attraction, etc.
2. Revenue generation model. With the cohort approach, you model how your revenue will accumulate from month to month. Below is an example of the way it works for a combination of platform and user acquisition channel

3. P&L (Profit and Loss Statement). It is best to use the cash-flow method, as no one expects the correct IFRS or GAAP reporting from you. Though some areas may have their own caveats. For example, for SaaS services, monthly recurring revenue (MRR) is important, which may differ from monthly revenue if you sell annual or quarterly subscriptions.
4. Team. The team composition including positions. Salaries must be indicated, as they account for up to 50% of total expenses in nowadays startups, especially in the early stages.
5. Dashboard. Visualisation of the key elements, goals, and benchmarks of the financial model by means of graphs.
6. Unit economics of your business. Summarising the results. Demonstrating the financial model operation on a per-unit, per-user, or per-product basis. 

How do you make a model attractive to investors?

Even the best idea can be killed by a poor presentation. Therefore, you need to create a certain style of your document to display your financial model to potential investors in all its glory. 

To begin with, use no more than three colours so that the colourfulness does not irritate or distract. Be sure to highlight past and future events to avoid misconceptions about your plans. You should also underline strategic goals and KPIs, drawing attention to them. 

Use the following rule of thumb to understand which metrics can be presented in a general table and which should be placed on a separate page of the presentation: if an indicator accounts for more than 10% of income or expenses, it should be disclosed in as much detail as possible on a separate page. At the same time, the financial model should be easy to understand. If a certain calculation does not fit on a laptop screen, it should be simplified, perhaps by grouping certain indicators or showing a general perspective with a lower level of detail. 

When pitching a financial model to an investor, you shouldn’t expect them to have the same knowledge as you. Rather, display your expertise. Decode acronyms and explain key metrics. 

Again, it’s worth emphasising: don’t overcomplicate your presentation! Don’t use extensive formulas and don’t force the investor to scroll through several pages looking for links. They are more likely to reject your proposal because of such hardship in understanding your business. Remember that an analyst works on no fewer than ten different deals at a time, and you need to make his or her life as easy as possible. 

Bad practices of financial modelling for startups

1. Indicators, such as “market share by a certain year”. Sadly, this is how most companies model their growth. This reflects high expectations and a lack of understanding of basic financial modelling principles.
2. Calculation based on profit or the number of customers. This approach turns everything upside down. You need to start with the question of what exactly needs to be done to achieve certain outcomes, such as profit or number of customers.
3. Focusing solely on financial indicators. This may sound counterintuitive, but the financial model should be more than that. You have to understand and explain to the investor exactly how you actually plan to make money, not what kind of profit you want to get in two years.
4. Deception or concealment of facts. When making an assumption, add a reference to the source. This can be either independent research or the performance of your business in the past.
5. Excessive optimism. The brighter the picture you draw, the more critical investors will be. We all adore “hockey sticks” (the so-called exponential growth of startups — ed.), but it is better to be pessimistic.  

Financial model dynamics

A well-built financial model will help you attract investors’ attention and get the funding you need to grow your business. This doesn’t mean, however, that you can take it easy after your idea is approved. The financial model may be revised in the following cases: 

• A change in the business paradigm — a pivot, for example;
• A sharp deviation from the initial plans;
• Errors detected in assumptions;
• The need to raise additional funding;
• Preparing a report for investors.

It is recommended that you review your financial model at least on a quarterly basis if you plan to use it as an action plan or set of goals. It is also worth reducing the analysis period to one month, meaning that in early October you should have a full set of actual September figures.

Author: Oleksandr Matsiuk, Founder & CEO of RiseGuide by venture builder SKELAR

Ukrainian businesses are currently facing challenging times. However, despite this, manufacturers are trying to find solutions; they are actively venturing into foreign markets. They operate both offline, in countries with large concentrations of compatriots, and online, opting to sell their products on Amazon. This globally renowned e-commerce platform allows them to reach numerous markets with minimal expenses.

Top Markets Ranking

Amazon is a true giant in online retail, operating 21 marketplaces across the globe. According to Statista, the undisputed leaders in terms of net sales were the USA ($395.64 billion), Germany ($37.6 billion), and the United Kingdom ($33.59 billion). For comparison, all other global markets combined accounted for only 19% of Amazon’s revenue – approximately $108 billion.

These countries also lead in other metrics. For example, the Amazon USA marketplace attracts nearly 3 billion visitors each month, while Germany and the United Kingdom see approximately 400 million and 500 million visitors, respectively.

It’s no wonder that Ukrainian manufacturers are striving to access such a broad target audience and achieve high sales levels. Let’s take a closer look at the markets of these countries.

Amazon USA: Features and Advantages

Apart from being recognized as the largest marketplace within Amazon (accounting for almost 69% of the marketplace’s revenue), there are other reasons that encourage our manufacturers to choose the American trading platform:

1. Popularity Among Consumers

According to JungleScout, 53% of Americans prefer online shopping on Amazon. The closest competitor to the marketplace, Walmart, lags behind the leader by 20%. Another resource, eMarketer, reports that 61% of US residents start their product searches on Amazon. Therefore, Ukrainian entrepreneurs prefer Amazon USA, which ensures that their products will be seen by tens of millions of consumers.

2. Tax System Loyalty and Convenience

I’ll start by saying that the US tax system is inherently convenient, especially compared to Europe. Although income from sales in the US is subject to Sales Tax (equivalent to our VAT), its rate is relatively low—averaging 5-7%. Moreover, this tax is not levied upon importing goods into the country; it’s paid only by the end consumer.

In the context of trading on Amazon, taxation in the US market has another advantage. It lies in the fact that large American marketplaces automatically add the tax amount to the price of the product, meaning they collect and pay the Sales Tax themselves. This is appealing to entrepreneurs, as it allows them to save time and money on accounting services.

3. Established Logistics

The USA is the most popular global market, so logistics from Ukraine and China to this country are well established. There are many companies specializing in working with Amazon. They handle various tasks, including preparing and packaging cargo and sending it to the marketplace’s fulfillment centers.

Despite the advantages mentioned above, one downside to the Amazon USA market is significant competition. Statistics show that there are 1.11 million active Amazon sellers in the United States. This is a lot compared to other countries worldwide—the total number of sellers in other markets is around 1.5 million.

However, our manufacturers easily overcome this problem. They do so by ensuring the quality of their products and paying special attention to creating an effective advertising strategy.

Pros and Cons of Trading in Germany and the United Kingdom

Germany and the United Kingdom are two constantly competing Amazon markets in Europe. Although their level of net sales significantly lags behind the American marketplace, trading here is still advantageous for several reasons:

1. Consumer trust: Amazon DE is the e-commerce site with the highest number of visits in Germany. According to statistics, in February 2024, 397 million users visited its pages. Meanwhile, eBay DE, Amazon’s main competitor in this ranking, was visited only 109 million times during the same period.

Regarding the British market, Amazon also holds the lead in terms of visitor numbers. The marketplace records about 500 million visits each month. Considering the population of the United Kingdom—69 million people—this means that all of them visit the trading platform about seven times each month.

2. Relatively low competition: Although the German and British Amazon markets rank second and third in size after the USA, there is quite low competition here. Amazon DE has just under 245 million sellers, and Amazon UK has 281 million. It’s worth reminding that in the USA, their number exceeds 1.1 billion.

3. A large number of Ukrainian immigrants: For manufacturers from any country, their compatriots are the primary target audience. Because of shared customs and mentality, it’s easy to create a product that meets their needs and demands. Official data states that there are currently 1.1 million Ukrainians in Germany and 253,000 in the United Kingdom.

However, working on European marketplaces, including the German and British Amazon, may be difficult. This is primarily due to the peculiarities of taxation and legal business registration. Let’s delve into more detail.

1. Subtleties of income taxation: In Germany and the United Kingdom, like in many other European countries, income from sales is subject to VAT, i.e., the European equivalent of our value-added tax (VAT) and the American Sales Tax. However, there are differences from America. 

Firstly, it lies in the rate. The standard VAT rate in Germany is 19%, and in the United Kingdom, it’s 20%. Secondly, VAT in Europe must be paid upon importing goods and at every stage of the sales chain, both in the B2B segment and in the B2C. Moreover, entrepreneurs must monitor tax payments to the state treasury themselves.

2. Necessity of establishing a legal entity: In 2022, Amazon added Ukraine to the list of countries eligible to trade on European marketplaces. Theoretically, this means that Ukrainians are allowed to work on the platform as individuals. However, in practice, this is impossible because tax authorities in Germany, the United Kingdom, and other European countries do not issue VAT to Ukrainian residents. 

Therefore, registering a legal entity is mandatory for trading on Amazon DE and Amazon UK. However, there is a solution for Ukrainian manufacturers to bypass this somewhat complicated procedure. It lies in the fact that the company does not have to be registered in these countries specifically for trading in Germany or the United Kingdom. You can choose a jurisdiction that is convenient for you. Therefore, it is entirely possible to enter the European market with a registered LLC in Ukraine.

The markets of Germany and the United Kingdom are quite attractive for Ukrainian entrepreneurs. There is minimal competition and a wide target audience, including many of our compatriots. As for taxation, the principle of collecting sales tax is very similar to Ukrainian VAT, so you won’t have to get used to anything new; you can just entrust taxation to professionals.

Getting Started with Expanding into New Markets: Top Recommendations

To successfully conquer foreign markets, it’s important to know where to start and how to proceed. Hopefully, some tips on this process will help you effectively expand your business.

Explore Sales and Revenue Prospects

To immediately understand if your product is relevant for a specific market, analyze the demand for it on the corresponding marketplace. Amazon Best Sellers section, available on each regional platform, can help with this. Find the relevant category of products and see if your product falls into the bestseller category. You can also learn about pricing here.

For the same purpose, it’s easy to use other Amazon tools, such as Movers & Shakers. It contains a list of products whose sales have significantly increased over the last day. You can also try third-party resources like Google Trends, Keepa, and Jungle Scout.

Understand Legal Matters

Is it worth creating a company to enter a specific market? In which country is it better to register a legal entity? How to obtain tax benefits? All these and many other questions can be answered on our blog. Since the beginning of the war, we’ve been filling it with materials that help Ukrainian entrepreneurs understand all legal issues related to doing business in foreign markets.

Find a Logistics Contractor

Contact a trusted company that provides a wide range of services. Such contractors can help you with customs clearance of goods.

Develop an Effective Marketing Strategy

There are three ways to do this. You can promote your products independently if you have the necessary knowledge and skills. You can also outsourceYou can also outsource this part of the work or createcreate a marketing department within the company. You can hire qualified employees or organize training for your own staff. Nowadays, many businesses offer training services for teams managing Amazon projects, where your specialist can gain all the necessary knowledge. 

Register a Seller Central Account

Once all legal, logistical, and marketing issues are resolved, you need to register a seller account on Amazon. Here, we have shared a step-by-step instruction for you to do it. Note that the marketplace thoroughly checks all provided documents and information. Therefore, it’s better to entrust this matter to specialists to avoid registration refusal and blocking. By the way, you can also consult with them regarding further work on the trading platform, including the use of FBA service, intellectual property protection, financial matters, and so on.

Summarizing

In 2024, the most popular markets among Ukrainian manufacturers are the USA, Germany, and the United Kingdom. Working in each of them has its nuances, including tax specifics, legal business arrangements, logistics setup, and more.

To ensure that the exploration of a new market goes as smoothly and quickly as possible, seek the support of professional lawyers. They will assist in resolving all questions regarding business expansion and will accompany you at every stage of your development.

Author: Andrii Matiash, Managing Partner at the 4B Law Company

Most non-profitable companies reflexively start investing in marketing and focus all efforts on it. Unfortunately, it’s a monkey job. When a company’s processes are not ready for scaling and cannot meet the needs of current clients, how can one expect this to change with new customers? This is where I start conversations with businesses that are hiring me as an advisor at Wiseboard.

To achieve all three pillars of success, effective delivery processes, a strong matrix organizational structure, and clear and standardized efficiency metrics are needed. Last year at Yalantis, we discovered that 65% of our new clients came from referrals. They came to us through recommendations from our existing clients, with whom we had actively expanded our collaboration. Our delivery and account management generate 70-80% of revenue. This is an achievable KPI that technological businesses should be aiming for. Here’s where to start to achieve this.

Check if your company is ready for scaling: main blockers and solutions

In the Ukrainian IT landscape, there are several typical obstacles to company growth. Here’s what these symptoms are and how to spot them in your business:

Blocker #1: The company isn’t making a profit due to low-margin projects and unnecessary expenses.

Projects usually become low-profitable, when they involve senior-level developers with a fair compensation level. While the client is satisfied with the quality, the profit margin remains low. This can happen when an employee’s grade has grown during the project, but their rate changes haven’t been negotiated with the client.

Solution: Clean the landscape – eliminate unnecessary tasks and optimize priority processes.

Analyze the market conditions, your employees’ grades and rates, as well as project margins. This will enable you to have a meaningful discussion with the client about raising rates or replacing seniors with mid-level developers. A common practice is to review rates with clients annually, typically by 2-3%.

The next step is to conduct an audit and identify, what wastes developers’ time but doesn’t generate profit or additional value. It usually might be internal developments lacking a clear monetization strategy or reputational value. Keep a cool head while analyzing each project: some might not be profitable but contribute significantly to your reputation, provide high-quality referrals, or help you enter a new niche and gain expertise. If not, get rid of them and focus your efforts on other developments.

Blocker #2: Absence of business development function

Without business development, a company doesn’t understand its customers, doesn’t measure if they are satisfied with the service, doesn’t know how their business is structured and what touchpoints may arise in the future, doesn’t work with the customer’s network and generate referrals. If there’s no consistent communication or dedicated business developers, if data isn’t organized systematically, clients will start leaving after 1-2 months of collaboration or unexpectedly terminate long-term contracts.

Solution: Establish a business development department and designate employees responsible for it.

You can only manage what you can measure. Therefore, building a business development direction should start with understanding what “effective work” means for your client and which metrics can evaluate it. Formulate these metrics into an internal standard and appoint team members responsible for communication and gathering feedback from clients.

In a small company, business development can even be handled by one person, as long as they have clear KPIs and responsibilities: stakeholder communication, risk assessment, satisfaction level evaluation, and finding ways to scale. This function can be integrated into different roles: delivery manager, account manager, or client success manager.

Blocker #3. Lack of internal standards and policies, leading to resource dependency

A common mistake is the absence of precise internal standards in project management, testing, business development, HR, etc. These documents may seem to be an unnecessary bureaucracy, but in fact, they are the shortest path to building human-independent systems.

Standardized processes help onboard new employees and avoid becoming dependent on highly skilled professionals. People may leave, get sick, go on vacations, or switch to other projects. If a company lacks internal standards for their roles, it will spend an incredible amount of time on hiring, or compromise against the business interests. As a result, there may be “broken” gross and net margin metrics.

Solution: Standardize the delivery processes

The company should have clear and precise technical and organizational documentation that describes all processes and requirements in delivery. It should be approved at the C-level, understandable, and accessible to the entire team.

Blocker #4. Weak motivation system

Motivation and development are essential parts of corporate culture. From my observations, financial motivation works for a maximum of two months; after that, this stimulus loses its effectiveness. When a company has a proper and transparent motivational system that engages all team members equally, people find it interesting for long-term cooperation, even working on the same project.

Solution: Find the optimal motivation for your team

Develop a value proposition for employees, that goes beyond financial bonuses: career growth, learning opportunities, involvement in an important mission, etc.

Blocker #5. Absence of delivery-centered organizational structure

A company with up to 100 employees can be driven by the founder’s enthusiasm. Beyond that, it’s necessary to build a strong matrix structure and processes that will work effectively for 200 or 500 employees, considering the interests of all parties (teams, clients, and the company itself).

Solution: Build an organizational structure with delivery and business development at its core

Build the organizational structure based on delivery and business development as the main sources of revenue. They are responsible for stakeholder communication, risk assessment, and scalability. These departments should be served by others — such as recruiting one. Other departments transform into service structures that help delivery generate more revenue.

Getting rid of all these blockers will be the beginning of effective business scaling. A healthy delivery can be recognized by the following signs:

• You know your client, their problems, and growth potential.
• You are aware of your client’s plans and goals and know how you can help them achieve them.
• You regularly measure NPS and consistently improve collaboration.
• The company has at least a 45-50% gross margin.
• Margins do not fall below 10-15%.

Last, but not least. Company transformation takes time and can be painful. Some team members may not be ready for scaling and growing their competencies. Along with the implementation of changes in the company, you may have to part with those team members who are not ready to align with the business goals. These are inevitable losses, but through them, you will find change agents and build a team, motivated to grow and drive the company’s development.

Author: Denis Rudenko, advisor on Operations and Delivery at Wiseboard and CEO of Yalantis.

Years of IT sector development have led both company owners and investors to believe that this trend will continue for the next decade – the sector will steadily grow, and valuations and demand will remain consistently high. However, the development of any sector is cyclical, and IT is no exception. In recent years, there has been a general international decrease in demand for IT products and, consequently, a correction in the value of IT companies.

The Ukrainian IT sector has demonstrated continuous growth, even in the first year of the full-scale war, along with the export of IT services, which has set new records annually over the last decade.

The sharp decline in Ukrainian IT exports by 8.5% in 2023 marked a turning point: the profitability of IT companies is decreasing, and the share prices of some giants have halved (for example, EPAM’s shares dropped from $670 in 2021 to $309 in 2024, ENDAVA’s shares even more—from $167 to $37, and the valuation of private companies has been significantly adjusted. It is primarily due to the decline in profitability due to decreased demand for IT services not only in Ukraine but worldwide.

As early as 2022, American and European companies began reducing their workforce, although national companies experienced 2022 and 2023 relatively stable, showing slight profitability growth. However, by 2024, the overall downturn caught up with Ukraine, so almost the entire IT sector experienced a decline in revenue and profitability, resulting in a decrease in the valuation of companies.

The next few years will be particularly challenging for small companies with less than 200 employees. While market giants may survive the turbulent period due to long-term contracts and strong partnerships, small players should find a unique growing segment (such as robotics). With reduced demand for IT services, clients will primarily refrain from continuing support for the development of some products.

Shortly, it will not be about growth but more likely about the possibility of business preservation. Those owners who sold their companies in 2021 at the maximum price got a “winning ticket.” Today, large companies have decreased in value by 2–5 times; we have seen the shares of some firms drop by 20–30% in a day, with smaller IT companies experiencing even more declines.

The analysis of public deals in the IT market also shows a decline – previously at 7–8 EBITDA, today we only have 5–6. Business margins have significantly decreased, and this countertrend and market reshaping will persist in the coming years. 

With Capital Times’s presence in the markets of Poland, Romania, and Moldova, we see differences in company valuations. The most expensive companies in this sector are in Poland, where the valuation is at 7–9 EBITDA, while Romania is similar to Ukraine, and Moldova is even cheaper.

Experts at Capital Times see that today, the IT sector is more than ever willing to merge and acquire. Large IT companies will acquire small ones to consolidate expertise and expand client portfolios. At the same time, small firms will receive support for their business through M&A tools.

That’s why, today, it’s more important than ever to approach the valuation of companies intelligently, moving away from old, established methods. Previously, the valuation of IT businesses was essentially a valuation of the future. In the optimistic year of 2021, it seemed that “trees could grow to the sky,” so the values of some IT companies reached tens of millions. The global decline in demand and the war in Ukraine require different approaches to valuation, as Ukrainian companies face increased risk factors that affect the final value. 

For example, the first question clients ask – is the physical location of the development team. The presence of the development team in Ukraine in 2024 is a factor reducing demand.

So, let’s consider how to evaluate the value of an IT company. Two of the most common indicators for this assessment — EV/EBITDA and EV/Revenue. These are integral parts of analyzing companies’ financial health.

Indicator EV/EBITDA

EV/EBITDA is an indicator used to evaluate a company’s financial efficiency. It takes into account the overall value of the company, including debt and equity, compared to its earnings before interest, taxes, depreciation, and amortization (EBITDA).

The formula for calculating EV/EBITDA: Total company value / EBITDA.

• Total company value (EV) = Company’s market capitalization + Total debt — Cash and cash equivalents. 
• EBITDA = Earnings before taxes + Interest on loans + Depreciation + Amortization.

Indicator EV/Revenue

EV/Revenue is a financial metric used by investors and analysts to assess a company’s value compared to its revenue.

The formula for calculating EV/Revenue:

Total company value / Revenue

• Total company value (EV) = Company’s market capitalization + Total debt — Cash and cash equivalents.
• Revenue = Total income generated by the company from its core operations.

It is important to understand that the valuation of service-based and product-based IT companies is based on different principles. For IT service companies, it is essential to assess the business value considering profitability, often using the EV/EBITDA ratio. The applies to companies providing software development, consulting, technical support, and similar services. In these cases, the focus is on profitability, and the EV/EBITDA ratio allows us to compare the value of companies based on their potential to generate profits.

On the other hand, for early-stage IT product companies, where it is more important to assess the business value considering revenues from software sales or other products, the EV/Revenue ratio is often used. The indicated may relate to companies developing and selling software, games, web services, etc. In such cases, revenue reflects the volume of income the company generates from selling its products and allows us to evaluate the business value based on these revenues.

Therefore, the choice of valuation metric for an IT company depends on its specificity, business direction, and main sources of income.

Conclusion and Recommendations

The IT sector will remain the most active in terms of M&A, but the reasons for mergers and acquisitions have significantly changed. Now, it is a business support tool for small companies and expertise consolidation for large ones. Valuing an IT company will play a pivotal role in the decision-making process. It will help determine an objective price during the purchase or sale of a company, assess potential synergies and risks associated with business combinations, and prevent price dumping during market turbulence.

Author: Serge Hancharevich, Managing Partner of Capital Times