Andriy Dekhtyar was in the closing stages of negotiating the sale of his Ukrainian tech start-up to a British company, when a slight hitch occurred in the arrangements: Kharkiv, his home city and the headquarters of his business consultancy, Rozdoum, came under sustained Russian bombardment.
The would-be acquirer, Adaptavist, had promised to complete its due diligence and get back to Dekhtyar with a final offer by the end of February 2022. But a few days before that deadline, on February 24, Vladimir Putin ordered the full-scale invasion of Ukraine, and Dekhtyar and his 15 employees found themselves on the front line.
“On the 26th I got a message [from Adaptavist] saying, ‘We may pause for a while because we don’t quite understand what is happening,’” he says. “I said, ‘No questions asked guys, don’t worry. I have to focus for now on relocating my people. I’m well and the business is OK.’”
“It was a bit of a strange time,” adds Dekhtyar. “People were being relocated across Ukraine and working in weird locations, some in rented apartments for a few days at a time. But the business continued. On the evening of the very day my employees were relocated, they were coding and delivering.”
Then in mid-April, even as Kharkiv was being hit by missiles every day, Dekhtyar received a message from Simon Haighton-Williams, chief executive of Adaptavist, saying: “We are sorry we took so long. If you are ready, we are ready to do the acquisition.”
When the histories of the war in Ukraine are written, there should be a profitable sideline in business manuals drawing on the remarkable resilience of the country’s tech entrepreneurs and engineers. Nowhere is there a richer seam than in Kharkiv, the industrial powerhouse turned tech centre, which is still targeted by rockets launched from Russia across the border just 20 miles away.
Of the 511 tech companies based in the city before February 2022, 500 are still operating, albeit with their engineers dispersed across Ukraine, says Olga Shapoval, the 41-year-old head of Kharkiv’s tech “cluster”.
In many ways Shapoval embodies the ultimate business recovery plan, offering a cautionary tale for global companies about why contingency plans matter.
“We joke, but only partly, that Ukrainian IT companies have had the most relevant experience in risk mitigation,” says Shapoval, in an interview in Kharkiv late last year. “We really are now experts in which parts of business continuity plans do work — and which don’t.
“Our lesson is how to stay stable in super unstable times. Everyone in our community who we evacuated is alive: it’s our best KPI [key performance indicator]. And only one company in our cluster closed, one out of 270.”
When Kharkiv’s tech hub was renovated three years ago, its Silicon Valley start-up style — airy breakout rooms, snazzy furniture and art installations — reflected the upbeat techie mood of the times.
Before February 2022 there were more than 50,000 software engineers in Kharkiv, Shapoval says, and its 14 universities had almost 100 programmes dedicated to them.
These days the spirit of disruption is real, rather than metaphorical. A neighbouring building was badly damaged by a missile in spring 2022. A few days before we met, one had obliterated a residential block a mile or so away, killing two people and wounding 30 more. All of which makes the survival and in some cases thriving of Kharkiv’s tech companies all the more striking.
Rozdoum, a consultancy focused on how to use technology to streamline businesses, was one of many tech companies back up and running within a week of the Russian invasion. Dekhtyar, 42, says the key was planning, born of experience.
“When in 2014 Russia invaded Crimea and then the fighting broke out in south-eastern Ukraine, we thought, ‘What will we do if the war comes here?’ So we moved everything we could outside Ukraine. We switched hardware to laptops so we could just leave if necessary.
“And then we had Covid, which was a good training ground. We had to switch off our offices in one week. Moving from the post-Covid world to the war was a shock to our logistics — but not to the business. Processes continued to run.
“Business continuity was in our DNA,” adds Dekhtyar. “It was not easy but it was not a weird thing to do”.
In late February 2022, when Kharkiv was under siege, the cluster became an online consultancy, swapping ideas on everything from how and where to resurrect businesses to sourcing generators. Now, after the Russian retreat from the edge of the city back across the border in the late summer of 2022, the cluster has shifted from survival to how to help Kharkiv’s dispersed tech companies expand — and how to encourage more people to return to the city.
Even as they have adapted to having to seek shelter at the sound of the city’s air-raid alarm, they are also wrestling with issues familiar to global businesses in the post-Covid era: in particular how to foster a team spirit when most people are not coming into the office.
“We have people spread out across Ukraine,” says Ievgen Gorovyi, the 35-year-old founder of It-Jim, an image-processing AI company. “I’m constantly driving from location to location to see them.” To bring his people together, Dekhtyar organises a team event every season in a different city.
“Business continuity plans work when you have total trust,” says Shapoval. “The bottlenecks tend to be individuals who are stressed. Plans work best when you are not alone but are in a community.”
Dekhtyar sees trust as the golden thread linking his city’s and his company’s war experiences. Adaptavist’s decision to go ahead with the acquisition of his business reflected the trust in their relationship, he says. The two companies had collaborated for several years and first discussed a possible acquisition in 2017.
“Seeing his email [about proceeding with the deal], I thought this guy has guts,” says Dekhtyar, who founded his company in 2006. The sale was completed in November 2022 on the same terms that had been discussed in late 2021. With 95 per cent of his clients outside Ukraine, and many keen to stay loyal given the country’s plight, his business grew by 30 per cent in 2022.
Many other start-ups also fared surprisingly well in 2022. The tech sector was a lone bright spot in the Ukrainian economy that year, growing by 5 per cent, although it did slow again last year. “It may sound a bit cynical but the war was a kind of a boost,” says Gorovyi. “New challenges appeared but I also took on new risks.”
Instead of firing people at the end of 2022, he opened new areas of research. “In six months it was clear it was the best decision for my business.” Of his 15 software engineers in February 2022, all but one left the city. Gorovyi now employs 30, a third of whom are from Kharkiv. “We have people in cities across Ukraine. I’m not feeling like a founder of a Kharkiv company but of a Ukrainian company.”
In the long run, the sector has aspirations to be a global defence tech industry on the model of Tel Aviv’s. Most of the tech companies have adapted their businesses where possible to help the Ukrainian military, whether for mapping, cyber security, or developing drones, which have played such a pivotal role in the war.
Gorovyi sees vast opportunities for Ukraine. “The war is obviously not like previous wars. It’s a technological war,” he says. “If you know something before your enemy, you can win, even if you have less weapons and less people. You just need the right technology at the right place at the right time.
“It’s not just about building technology to protect Ukraine. We have unique real-time data from the battlefield. We have the potential to sell this to other countries. Ukraine can become a hub of military tech. This is a chance for us.”
But first the war has to be won. Shapoval, other tech leaders and the city authorities are trying to encourage a reverse migration. While the tech companies have proved they can work from anywhere, the city authorities are worried that if residents stay away for too long they may never return.
Software engineers are well paid by Ukrainian standards — with an average salary of €2,600 a month before February 2022 — and their presence, and taxes, have fuelled a satellite service economy of cafés and bars.
Shapoval herself left Ukraine in April 2022 with her mother-in-law, three cats and three dogs, for Italy, and after travelling back and forth, returned permanently last August. “It’s important to come back,” she says. “When I returned I needed to repair furniture damaged in my house, and I took my order to local entrepreneurs. Aid is important but we need to pay local businesses. It’s the only way to make Ukraine really resilient: we need taxes; we need a working economy.”
Since late December the missile attacks on Kharkiv have accelerated, dampening the mood ahead of the second anniversary of the Russian full-scale invasion.
“It’s not that there are many casualties,” says Dekhtyar speaking again late last month from his apartment in the city centre, “but they are targeting infrastructure. And there is a risk people will leave again and we will become a ghost city.”
Ukraine’s tech sector shrank back last year to the level of 2021. Most of the clients of Ukrainian tech companies are based in America, and Shapoval says fears there in the first half of 2023 of a recession led to a reduction of demand for tech partnerships. American clients also have become more cautious over the risk of doing business with Ukrainian companies.
So what is her advice for global companies on keeping business going in a crisis?
“You need to have a plan B and a plan C because a lot of things go wrong,” she says. “You have to be prepared that not everything will be as straightforward as it was when laid out in beautiful charts and tables”.
