Even though Ukraine has the most talented developers in the world, we have the same number of startups as South Korea. How did that happen?
War is, of course, a significant factor that has impacted the startup rate in Ukraine. This is not something new. The war has been a part of independent Ukraine's life for a long time. However, it's important to note that the war is not the sole reason for the low startup rate, and we need to explore other factors.
The Ukrainian IT market is estimated at $10 billion, and there are about 200k IT specialists working there. Let’s start with the fact that the vast majority of Ukrainian IT specialists work in IT companies that engage in 'outsource/out staff' practices. This means these companies often hire external resources or staff from other companies to complete their projects. There are a few product companies in Ukraine and almost no international offices.
So, by examining how IT companies in Ukraine operate, we will be able to identify market drivers contributing to the country's low startup rate.
The company is a second-family
Cameron and Quinn define four types of corporate culture:
- Clan - Loyalty, feeling like a family. Low bureaucracy
- Adhocracy - All about innovation, risk-taking
- Market - Externally focused on competitors' achievements
- Hierarchy - High level of bureaucracy, focus on following rules and procedures.
Most of the corporate cultures in Ukraine's IT companies. What we call 'Clan culture.’ stars a sense of loyalty and belonging, making the company feel like a second family. You may notice how well IT companies are playing this role. They organize corporate events, give personalized presents, celebrate birthdays and Fridays, arrange weekend outings, provide free snacks, and ensure managers have regular one-on-ones with their team members. These initiatives cost the company almost nothing, but they make employees feel noticed and socially accepted, often leading to longer tenure with the company. After all, who wants to leave a family?
I have nothing against the clan's culture, and I admire it a lot. It is the best culture for work-life balance-oriented individuals. Work-life balance and Clan culture are working hand in hand. Work-life balance says you have a rest, spend time with friends, do hobbies after work, enjoy life, and avoid stress. At the same time, Clan culture gives you infinite opportunities to do it.
However, there is a much darker side to clan culture. Culture is a powerful tool, especially in the Clan. It can easily promote one set of values over another and transform a person from a goal-oriented hustler to a “family member.”
Some corporate cultures do not allow employees to use social media platforms like LinkedIn. It is not something you can control legally. Still, you may get a social punishment and questions like “Do you feel uncomfortable in the company?” showing signs of management being unhappy with what is happening. Such signs of unhappiness may go far beyond LinkedIn. Any kind of professional outside-of-work activities may be negatively perceived because they do not follow work-life balance rules. “Working on something else will drain your energy and impact productivity on your main job.” That is the belief most Clan cultures in Ukraine have. Clan culture is opposite to a culture of hustling, and it doesn’t support having side hustles.
Having a side hustle is the #1 catalyst of outstanding startups, and it goes in a different direction from how most IT companies operate in Ukraine.
Law is not a joke
Every IT institution that deals with outsourcing has a strict NDA that does not allow specialists to work directly with company clients. It is very reasonable for an agency to keep talents inside, but sometimes, it goes too far, and even referrals from clients are considered under NDA. Again, this is hard to control legally if the deal comes to a lawsuit, but it still makes people scared.
Oh yeah, non-competes do apply to co-workers. 5-10 big companies dominate the IT industry in Ukraine; through the career of a senior developer, you can work in half of them. So, it means that you can’t start a startup with half of Ukraine now. The rest of you don’t know.
Most contracts have a period of validity during which you can’t leave the company under any circumstances. The industry standard is a year. If, during a year, you get an opportunity to become a co-founder, you probably need to reconsider that because you have a contract. In the end, an IT specialist gets only a small window of 1-2 months per year when he is available to start working on some new project and be able to leave his job without any legal issues; the rest of the time, he is committed to something. The world is moving fast, and you can’t tell your co-founder to wait six months till your contract expires, so the only way is to make the company fire you or decline the proposal. Making company fire is not a legally valid solution, but that drastically ruins the reputation of your “second family,” so a few are ready to do it. The only solution here is not to sign a contract again, leave the job, and spend months searching for hell-risky opportunities, assuming the consumer habits of a work-life balance lifestyle.
The current landscape presents numerous obstacles to starting a business. From legal restrictions to cultural norms, the odds are stacked against us. However, the time for change is now. We cannot afford to wait for the perfect conditions. We must actively seek opportunities, leverage our networks, and challenge the status quo. This is the only way to overcome the barriers and foster a thriving startup ecosystem in Ukraine.
Solution
Of course, everything described above doesn't apply to 100% of the IT industry, but definitely to the majority of it.
I don’t think I can impact laws, which I would happily do by introducing additional employee protection policies. Still, at least I can try to make people realize the importance of startups—their importance to them, their country, and the world.
Startups are not just business ventures; they are the catalysts of our economy. They hold the potential to transform our country into an innovative hub, elevating our quality of life. This change cannot be brought about by oligarchs or governments alone. We, the IT professionals, entrepreneurs, and policymakers, must pave the way for this transformation. If we want change, we must be the ones to make it.
The first step is to realize the trap of IT companies and try to avoid it at all costs by becoming a freelancer or joining a product company.
Make yourself accessible to 1-year contracts, NDAs, and cultural boundaries. Don’t be afraid to take shares as compensation for your work; the bright time for the economy will come.
Share this article with that senior developer who has been moving from one big IT company to another for five years in search of a bigger salary. The salary won’t make you a millionaire and will not help restore the economy, but starting a company will. My next article will be about that.