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Ukraine to have its own Silicon Valley

21 February, 00:00

During his annual address to parliament, President Yushchenko unveiled plans to create a “Silicon Valley” in five Ukrainian oblasts. “There is already a draft order to support the initiative with the working title ‘Ukrainian Silicon Valley,’ which has been proposed by Ukrainian businessmen,” the Ukrainian leader said. As part of this project, international technological centers will be created on the basis of academic institutions and universities in selected regions of Ukraine. President Yushchenko expects this project to attract close to $100 million in investments and create 1,500 jobs. The president announced the strategic goal of building an intellectually oriented economy, pointing out that its future depends on high technology.

The president’s statement may be rightfully called a milestone event for the Ukrainian hi-tech sector. This is the first time that the state’s plans to build a new economy on the basis of information technology have been proclaimed from the nation’s highest office. A good opportunity is shaping up for Ukraine to occupy a unique niche in the international IT market whose annual turnover is estimated at close to one trillion dollars. This could transform the structure of the Ukrainian economy and the entire business environment.

In the light of the president’s statement, there is more encouraging news: DFJ Nexus, Ukraine’s first venture fund focused oninvesting in the hi-tech industry, has started operating in Ukraine. During the next five years it plans to invest $100 million in hi- tech companies in Ukraine and the CIS, which have great potential for growth and are presently at an early stage of development. The fund’s goal is to help these companies expand into the international market.

DFJ-Nexus was jointly established by the Ukrainian venture company Techinvest and the American investment company Draper Fisher Jurvetson (DFJ), a global leader in venture investments in technological companies. DFJ is headquartered in California’s famous Silicon Valley (US).

According to Techinvest president Serhiy Loboiko, DFJ- Nexus has begun selecting investment projects that were proposed for a nationwide hi-tech competition that Techinvest announced in 2005. Organizers expect to select promising business projects and ideas for venture investments in the sectors of information technology, nanotechnology, biotechnology, and energy technologies. According to Loboiko, the winning author of the best business plan will receive $100,000. According to DFJ-Nexus managing director Roman Kizyk, DFJ-Nexus has already found 15-17 interesting projects. The fund plans to finalize its investment portfolio of projects in the first quarter, after which it will determine the size of investments for the current year.

Ukraine’s first technological venture fund was not started from scratch. Its creation was preceded by the successful track record of Techinvest and the Aventures Group, which have proven that venture investments in hi-tech companies are highly profitable. Meanwhile, there are no doubts about Ukraine’s scientific, technical, and intellectual potential, which was demonstrated during last year’s road show of Ukrainian technologies in the US.

USC-Ukraine general director Volodymyr Bilodid believes that Ukrainian research and development institutes as well as individual groups of developers have tremendous potential, which is something Western companies are very interested in. Notably, this is not about outsourcing software development, but about developing custom technologies. “The heart of the matter is not software or man-hours but intellectual products that Ukraine can proudly present in international markets,” Bilodid said.

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