Kyiv Post 19.01.2017
Kyivstar and Microsoft are the pioneers of corporate startup acceleration in Ukraine. Kyivstar sponsors the VDNH Tech telecom startup acceleration program. Neither Kyivstar nor Microsoft took any equity from startups. Kyivstar usually offers the few chosen startups to become their launching customer.
Participants of the Kyivstar-sponsored telecom startup acceleration program VDNH Tech pose for a photograph on Oct. 11, 2016. (VDNH Tech) As more and more startups are being founded in Ukraine every year, the infrastructure around them is catching up as well. While the last few years have seen a number of startup incubators and accelerators of mixed quality and success, the year 2016 was marked by a few initiatives in a new field — acceleration programs launched and sponsored by major cor-porations. Similar programs are popular around the world. Companies like Telefonica, Deutsche Tele-kom or Philips look for early-stage entrepreneurial teams working on something they could potentially use. In Ukraine, the first company to introduce this model was Kyivstar communications provider, which concluded its first acceleration program in October in cooperation with VDNH Tech. In addition, Microsoft Ukraine is running another program with a somewhat different model. Blast from past Although Kyivstar and Microsoft are indeed the pioneers of corporate startup acceleration in Ukraine, they’re not the first corporates here to try and embrace startups. «First corporate accelerators and incubators appeared in Ukraine in 2006,» said Denys Dov-gopolyi, founder and managing partner at GrowthUP Group who advised Kyivstar and VDNH Tech on building their accelerator. «By 2010, Ukrainian software development outsourcing companies launched around 10 of them, but none was successful. The main reason of their failure was that they took 80% of startups’ stake, which effectively turned entrepreneurs into hired managers with stock options.» Neither Kyivstar nor Microsoft took any equity from startups that participated in their acceler-ation programs. The companies, however, had quite different goals in mind when launching them. Launching big Same as most corporate accelerators in Europe, Kyivstar basically offered the few chosen startups to become their launching customer. Initially, 119 teams applied for the three-month program, of which 11 were approved. «Our message for startup teams was that if they want to launch, they can do it here in Ukraine, in a partnership with a large corporation,» said VDNH Tech’s Olena Kalibaba who managed the program. «Our goal was to have at least one project to start working with Ky-ivstar, but currently there are three of them are gearing up towards launch.» The startups working with the corporate are push notification service Gravitec, phone-based loyalty program inCust, and virtual travel platform Virbox. They will work with Kyivstar at a revenue share model. The other graduates will continue growing on their own, leveraging the experience they’ve gained. Partners in cloud Another Ukrainian corporate acceleration program is Microsoft’s IoT (Internet of Things) Lab. First seven startups graduated from there in October, and the second batch with 17 projects distributed between Kyiv, Odesa, and Kharkiv is already underway. «Unlike other corporations, we’re not looking for startups we can buy something from,» said the head of IoT Lab Sergii Poplavskyy. «Our interest is that all startups we accelerate use Az-ure, Microsoft’s cloud platform. The more clients the startup has, the better for us.» Same as Kyivstar and most corporate accelerators around the world, IoT Lab takes no equity in startups. The participants receive free access to all Microsoft’s products, as well as a subscription to the Azure platform for the duration of the program. In addition to that, Microsoft purchases equipment the teams need to work and covers costs of travelling to and exhibiting at different conferences. «Our goal as a platform company is to accelerate startups that create ready-made solutions based on Azure,» Poplavskyy said. «When we come to our customers and sell the cloud, we don’t even mention the word ‘Azurem’ but offer the solutions from startups.» After the six-month-long program, startups get a status of «independent software vendors» (ISV) and can continue working with Microsoft as partners. They also keep the free cloud ac-count for another 2.5 years. The new wave According to both Dovgopolyi and Kalibaba, this is only the beginning of an influx of corporate accelerators in Ukraine: in 2017, we should expect to see up to 10 new initiatives of this kind. «There are two reasons [why more accelerators will launch in Ukraine],» said Dovgopolyi. «First, local corporations are seeing success stories from the West and want to repeat them. Second, Ukrainian branches of global companies could receive directives-and budgets-from their respective HQs to launch a local program.» There are already at least two newcomers on the market: Privatbank has recently launched the first batch of its KUB program, while EY has announced a program of its own. One of the requirements for the latter, however, is that the participating startups need to have their HQ in the EU. It’s yet to be seen whether other global corporates will impose similar requirements. «The more startup accelerators there are, the better. All startups are different and need help in different aspects of their growth,» Dovgopolyi concluded. «As for the corporates, building an accelerator is the most expensive way to scout for startups, however it raises their profiles in the entrepreneurial ecosystem.»