Ukraine’s tech startups attracted a record volume of investment money last year — $323 million, according to the annual investment report “DealBook of Ukraine.”

The report was prepared by local venture firm AVentures and Ukrainian Venture Capital and Private Equity Association (UVCA), and published on May 14.

The research indicates that investment in Ukrainian tech increased by 22 percent compared to 2017, when Ukrainian high-tech firms attracted $265 million. This means local startups have attracted $1 billion over the last five years, making Ukraine one of the top funding destinations in Central and Eastern Europe.

However, just three firms attracted the most money this year, receiving 70 percent of the $323 million: GitLab ($120 million), Bitfury ($80 million), and ($30 million). And although all three of them have Ukrainian roots and local offices, they’re not considered chiefly Ukrainian, as they work with foreign clients and investors and have foreign headquarters.

The report includes the list of all the tech startups that attracted money in 2018, specifying the stage of investment and the sum raised.

Roughly 90 percent of the money came from foreign investors, with companies in the United States contributing most of the funding. Goldman Sachs, Y Combinator, and Soros Fund Management are among the biggest U.S. investors in Ukraine’s IT startups. The report authors suggest this is the result of the success Ukrainian tech companies frequently have on the U.S. market.

Yevgen Sysoyev, a co-author of the report, thinks this leaves significant room for the development of local early-stage funds. So far, the report names 10 local firms that make early-stage investments, including Digital Future, WannaBiz, AVentures, Genesis, and TA Ventures.

Ukrainian investment firms like Dragon Capital and Horizon Capital typically invest in more mature startups. “These funds are investing in Series B or the growth stage, at tens of millions in revenue and (earnings before interest, tax, depreciation and amortization) positive business,” Sysoyev told the Kyiv Post.

Measuring the local tech potential, the report counts 172,000 tech people working in Ukraine, and 23,000 new ones graduating every year. Over 50 percent of Ukrainian tech labor works for software outsourcing companies like EPAM, SoftServe, GlobalLogic, Luxoft, and Ciklum.

Only five percent of techies work for information technology startups.

Sysoyev said: “I think the Ukrainian tech ecosystem went through tremendous changes, positive ones, but the next five years will contain new challenges: for founders, to learn how to build (ten-times) larger businesses and compete on a much larger scale with international competitors. For investors, to return the capital from previous funds and create second funds. For the Ukrainian tech ecosystem, to be more integrated into (the ecosystems of) the U.S. and Europe.”

The Kyiv Post’s technology