Odessa eyes status as Ukraine's Silicon Valley

A southern port city on Ukraine’s Black Sea coast, each year Odessa lures a growing number of travellers with its sun-swept beaches, rich culture and Unesco-preserved architecture. In 2015, the city welcomed 1.2 million tourists, up from 250,000 in 2003 – and in the years since Ukraine’s air traffic hit a nationwide low in 2014, Odessa’s air traffic increased by 32.5%, compared with a meagre average of 3.8% across most Ukrainian airports.

But there is more to this city than its allure to holiday-makers. Graduating approximately 1000 IT students each year, Odessa has become home to a growing number of technology companies, including R&D outsourcing services for Volvo, BMW, Luxoft and more. In 2015, Forbes ranked Odessa the top city for business-friendliness in Ukraine.

Local success stories

“We see a lot of investment opportunities here, especially with start-ups,” says Yuri Warczynski, co-founder of Dutch professional services provider HYS Enterprise. Local success stories include Kwambio, Augmented Pixels and Looksery – the latter of which was purchased by US social media app Snapchat for $150m.

Nearly 200 IT companies occupy the city, many with a staff count of less than half-a-dozen. And Odessa’s tech community has started to mobilise, developing private-public initiatives such as Startup Odessa, which works with the city council to improve conditions for entrepreneurs and provide training and mentorship.

HYS Enterprise is part of Odessa IT Cluster, an organisation aimed at promoting the interests of the city's tech community. The organisation encompasses 17 companies and nearly 3000 IT specialists – about 45% of the city’s total. Also part of Odessa IT Cluster is Danish-founded Ciklum, one of the top five IT outsourcers in Ukraine with more than 200 international clients, employing 3000 people across the country and 160 in Odessa.

“As an external benchmark, we all want to become Ukraine’s Silicon Valley,” says Oleg Shkuropat, Ciklum’s branch manager. “Of course, this requires capital and knowledge process, but entrepreneurship is in Odessa’s DNA. People here have created amazing products and solutions that have become global.”

Ukraine’s San Francisco

Award-winning mobile app developer Readdle, which designed the first app enabling book and document reading on the iPhone when Apple’s App Store was first launched in 2007, was founded in Odessa and employs most of its 107 staff there. Readdle has now seen more than 65 million downloads across its eight productivity-enhancing apps, which include Scanner Pro and PDF Office.  

“From a cultural perspective, Odessa is to Ukraine what San Francisco is to the US,” says Readdle co-founder Igor Zhadanov. “It is a port city. We have 100 nationalities, and the city’s history is very cosmopolitan. This influences how people do businesses: you have a concept of diversity.”

Mr Zhadanov cites Israel as an example for Odessa to follow, with its government support for accessing funding, legal advice and international currency going a long way in boosting start-ups. But besides this, he maintains that the best role for government is a small one. “What it takes is not so much financial assets as vision and a long-term perspective. So we need to inspire people and let them do their work. Government participation is not so necessary for that,” says Mr Zhadanov.

Retaining the talent

“We have to create the infrastructure that will help bright minds stay in Ukraine,” says Victor Bezer, head of supply at Odessa-born video advertising platform VertaMedia, which is headquartered in New York but has operations around the world. Mr Bezer cites inadequate start-up infrastructure and inefficient business regulation as the reasons many Ukrainian entrepreneurs take their ideas elsewhere.

“In Odessa things are moving in the right direction, because we have private universities training engineers and IT companies building networks through events such as the Black Sea Summit,” says Mr Bezer, referencing the yearly tech summit in Odessa, which in 2016 brought together more than 1000 participants. “We have a huge community of people trying to improve things, and we see the new generation making that change,” he adds.