Where are the Opportunities in Ukraine’s Internet Market?

By Ken Leaver

Dnepropetrovsk Startup Event

September 2013

What spheres are interesting in Ukraine?

eCommerce Mobile apps

EducationSAAS

DatingMarketplaces

Enterprise

Big Data

So many options… how to choose?

First examine some of the global trends

1. Mobile taking off

In 2013, mobile devices will pass PCs to be most common Web access tools. By 2015, over 80% of handsets in mature markets will be smart phones.

Source: Forbes.com, “Top 10 Strategic Technology Trends for 2013”

2. Social networks becoming a standard way of communicating

Everyone is on social networks. Now businesses are figuring out how to make money off them.

A few more…

Greater personalization of Internet products and services than ever before.

Source: Forbes.com, “Top 10 Strategic Technology Trends for 2013”

Cloud will be center of our digital lives. Synch across devices. Services become more important.

4. Personal Cloud3. Big data opening new opportunities

Some of the trends in Ukraine

1. People getting more accustomed to purchasing and paying online

Less fear associated with buying online. Paying by cards and electronic wallets becoming less of a barrier.

2. Large online shops are scaling and getting into more categories

Successful first movers like Rozetka are following the Amazon “own everything” approach

So if you’re going to start a new Internet business in Ukraine, what do you do?

What industry to target?

Go for a local or a global model?

How to target that industry?These are the 3 questions I will cover today!

Global or Local Model? Look at the landscape first.

Global OpportunitiesLocal Opportunities(Just Ukraine or CIS)

• Strong technical talent that is less expensive than the west

• BUT mainly 1st generation entrepreneurs (US = 3rd / 4th gen)

• Language / cultural / immigration barrier = difficult to distribute in US & Europe

• Successes will be highly engineered products (think Viewdle)

• Market still far from saturated in most areas

• Western Internet co’s not very present yet in Ukraine and unlikely to be in near future

• Market is still small, but this also makes it cheaper to start

• Marketing (eg. Adword) is 5-10x cheaper than in the US

Local or Global Model? Also look at yourself.

Have you done an Internet project before?

Is your product/idea in an area where there is a lot of western competitors?

Do you have a team that can compete against experienced US/European teams? Go Local

Go Local

Go Local

Yes No

Yes No

No Yes

Consider Global

E-Commerce: Overview

The big opportunities are already occupied by big players

Requires relatively large funding

Import problems in Ukraine make certain models very difficult

The Opportunity:

1. Domestic goods (no import)2. Niche goods of high quality3. Direct to customer shipment from

abroad

Selling products from China is already too crowded

1st Industry

eCommerce models to consider

Fab BlueNile

• Groupon-style emails• Focus on style & taste• Difficult-to-find products from small

companies

• Huge assortment• Strong service• Big investment in brand

1st Industry

Marketplaces: Overview

Definition = lots of buyers and sellers

One player typically wins and others lose. That single player tends to just grow and grow with time.

Some models being done by international players already (eg. AirBnB)

The Opportunity:

Niche opportunities (eg. arts & crafts)Services (eg. TaskRabbit)

2nd Industry

Marketplace models to consider

Houzz Etsy

• Home remodeling is very fragmented (lots of small companies)

• Typical marketing channels not very effective

• Reviews are very important to purchase decision

• Also very fragmented merchants• The story of the maker/seller often

an important component of purchase decision

2nd Industry

Travel: Overview

International players currently dominate (eg. Booking.com, OneTwoTrip)

Difficult for a Ukrainian startup to compete with these international titans on the standard models

Need to focus on models where having a local presence is a key success factor

The Opportunity:

1. Online travel agency model2. Last minute hotel bookings that

require signing local hotels3. High End travel

3rd Industry

Travel Models to Consider

Hotel Urbano

Hotel Tonight

• Online travel agency = combination of physical presence + huge email base for lead generation

3rd Industry

• Sell hotel rooms the night before for deep discount = difficult for Booking & Expedia due to existing business

Mobile Apps: Overview

1m+ apps on the appstore = Tons of competition. Tough to be found.

High drop off rates after install.

Need clear, proven way of monetizing.

The Opportunity:

1. Focus only on models that have proven themselves in the west

2. Easier compared to other models to tap entire Russian-speaking region

High user acquisition costs / virality is often a myth.

Ukraine = low smart phone penetration

4th Industry

Mobile App Models to Consider

UberYelp

4th Industry

• Yelp model still up for grabs in Ukraine as no clear leader

• A clear long-term successful model

• Clear efficiency & customer experience improvement over current taxi system

• Uber, Lyft, Hailo and others scaling globally quickly, but will be a few years before they arrive in Ukraine

SAAS: Overview

International players quite experienced at this point but focused on own markets

Easier to focus on the regional / local market

If focused on global market than choose a niche you understand very well (ie. have worked in it)

The Opportunity:

1. Focus on proven areas where int’l products are too expensive or poorly localized

2. Focus on Russian-speaking region

Need to find the pain points of large, local Internet companies

5th Industry

SAAS Models to Consider

CureBit Bizible

5th Industry

• Allows you to know the source of all your customers (PPC, Organic, Email) and their behavior in your site

• Ukrainian eCom companies all working to improve the efficiency of their marketing spend

• A clear benefit to eCom companies as they get 5-10% sales lift with no investment

Education: Overview

Most agree the current education model is not effective. Especially in CIS.

Many professionals need to update their skills on nights/weekends.

The Opportunity:

1. Focus on localizing proven global models

2. Content generation is expensive. Need to license.

Most global models not paying much attention to Russian-speaking market so far

6th Industry

Education Models to Consider

Lynda.com

6th Industry

Eduson.tv

• Creating high quality content in-house and selling it many times

• Completely flexible to student as to when to study and what to study

• Paying for short courses from well known professors / experts

• Licensing of content• Pay “a la carte” for specific classes

Financial: Overview

Financial services improving at an very rapid pace globally

Key players are still banks but online players making key inroads

The Opportunity:

1. Peer-to-Peer lending2. Online investments3. Online banking pureplay

Ukraine is still about 5+ years behind the West…

7th Industry

Financial Models to Consider

Wealthfront.com Tinkoff

7th Industry

• Ukrainians still mainly investing in real estate

• Investing in stocks still perceived as extremely risky, but much more liquid

• Wealthfront provides a safe and easy model that requires no financial expertise

• Pure play online banks are already a fairly proven model

• Still no “Ukrainian Tinkoff”

So many spaces still up for grabs in Ukraine

Eastlabs wants to help entrepreneurs build the future

Eastlabs Unique Value Proposition

InvestmentEastlabs is the only full-scope startup accelerator in the region with the ability to offer seed investment and beyond.

EcosystemEastlabs offers a collaborative office space in central Kiev, where driven, talented startup team members can interact with other like-minded startupers.

Comprehensive MentorshipEastlabs combines full-time, dedicated mentorship with expertise from an extensive pool of entrepreneurs, investors, and specialists.

Eastone ResourcesEastlabs is backed by one of the strongest holdings in Eastern Europe, and has close ties with the Viktor Pinchuk Foundation charity organization.

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