Want to invest in Ukrainian startups from the US? This platform promises to be the bridge
Hans Braunfisch wants Americans to invest in Ukrainian startups, but there’s a problem: there’s no clear path for individual investors to put money into the more than 26,000 Ukrainian startups out there.
The former PwC consultant plans to change that with Pravo Venture, a platform streamlining foreign investment for Ukrainian startups. Think of it like a meeting point for Ukrainian companies and U.S. investors accredited by the Securities and Exchange Commission who want to support the country with capital instead of aid.
While co-heading PwC’s Ukraine Taskforce, Braunfisch attempted to persuade clients to invest in Ukraine’s entrepreneurs to help its economic recovery. But he couldn’t convince the big institutional investors to go for it.
Searching for options for individual investors, Braunfisch also couldn’t find any Ukrainian companies listed on U.S. stock exchanges. This sparked his idea for an online investment platform to help local entrepreneurs and communities, with Ukraine as an equal Western partner.
“We want to shift the narrative that Ukraine is a short-term charity case to Ukraine is an opportunity for a much longer-term business and collaborative partnership,” Braunfisch told the Kyiv Independent.
He researched and spoke to Ukrainians over 18 months about ways investors could help, eventually founding Pravo alongside Ukrainian-American Alex Inshin and Hamburg-based Vlad Sutea.
In June, the small team launched Pravo — which means “rights” in Ukrainian — on a tight budget of under $200,000. Currently, the platform lists two startups: Mosqitter, which makes non-toxic mosquito repellents, and Promin Aerospace, a rocket producer.
Ukraine’s startup ecosystem has tripled in five years, even during Russia’s full-scale invasion, to become the second most valuable in Central and Eastern Europe at $28 billion. IT startups make up 4.4% of the country’s gross domestic product, with Ukrainian-origin unicorns like artificial intelligence writing tool Grammarly and software development platform Gitlab used globally.
Despite a partial rebound from a steep 30% economic decline in 2022, foreign investment in Ukraine remains sluggish. Ongoing war risks and images of destroyed cities have deterred foreign investors, while levels of domestic capital is either limited or redirected to military and defense needs.
“We get the tragic images of aerial attacks, but we typically don’t see the innovators building something in Dnipro or Kyiv or Lviv — those people are still there, but they’re not getting the recognition they deserve,” Braunfisch said.
Ukrainian innovation, American capital
Pravo is currently only open to U.S. investors who are SEC-accredited, meaning they make at least $200,000 annually or have a net worth of $1 million. Pravo’s target is Ukraine-friendly American investors looking to invest smaller sums, like $5,000 or $15,000, with a starting goal of 1,000 people on the platform in the first 12-18 months.
“Pravo allows more individual investors to follow through on their interest in Ukraine, while directly investing in community-level entrepreneurs,” said Mark Simakovsky, former USAID deputy assistant administrator for Europe and Eurasia and founding partner of Heartland Global Advisors, a strategic advisory firm based in Washington, DC.
On the Ukrainian side, Braunfisch partnered with Eo Business Incubators, a Ukraine-based mentorship program for startups led by an international team. For now, Pravo will only hire graduates of the incubator, many of whom go on to the prestigious Techstars accelerator program, due to Eo Incubator’s Western approach and standards.
“Startups are starved for cash, especially Ukrainian startups, and they need that cash to reinvest in their business, build their products, and pay their employees in Ukraine.”
With Ukraine producing 150 investable startups annually, Braunfisch hopes to add two to three companies monthly. Quality is more important than quantity, he says.
For Mosqitter founders Anastasiia Romanova and Olga Diachuk, the incubator's mentors helped them understand and meet Western investor expectations. They hope Pravo will help spotlight Mosqitter and increase access to U.S. investors and new partnerships.
"There is the opportunity to tell a broader audience of U.S. investors about Mosqitter, about our product, and potentially raise funds," Romanova told the Kyiv Independent.
"There's nothing similar on the market," Diachuk added.
Companies need to tick a checklist before joining Pravo. Research and development needs to be in Ukraine, while the company should be legally domiciled in the U.S. so fundraising can be in dollars into a U.S. bank account, which helps mitigate risks, said Braunfisch.
The Kyiv IndependentDominic Culverwell
Challenging environment
Convincing investors to put money into Ukraine during the war is no easy feat. Braunfisch says trust is key to winning people over. Working with reputable partners like Eo Incubator and Dealmaker, which handles the whole investment process, helps build that trust, he said.
The team is also ensuring that startups get most of the cash. Instead of charging them a cash fee, Pravo takes a 1% passive equity stake, which also incentives Pravo to make sure startups do well. But even if a startup fails, Pravo would still have accomplished its goal of getting money to Ukrainians, Braunfisch said.
Unlike some crowdfunding websites, which can charge as much as 11% of every dollar invested, Dealmaker, which handles all financial transfers, charges a one-time 1% transaction fee. Pravo doesn’t take a cut.
"We understand that startups are starved for cash, especially Ukrainian startups, and they need that cash to reinvest in their business, build their products, and pay their employees in Ukraine," Braunfisch said.
Pravo is also working in a challenging environment wherein risk appetite for early-stage investments has dropped in recent years. This is a problem as Ukraine's startup culture is at a much earlier stage compared to the U.S. or Western Europe and requires risk-taking to develop "blockbuster" hits like Grammarly.
While this means it will be harder for Pravo to convince venture capital firms or smaller family offices to invest, it opens opportunities for individual investors, said Braunfisch. With fewer investors going after early-stage startups, those willing to take the risk and help Ukraine will see better returns.
"Ultimately, we have an advantage because there is no other way for my friends in Arkansas who want to support Ukraine to do so, aside from giving to charities and paying taxes," he added.
Note from the author:
Hi, it’s Dominic, thank you for reading this story. One of the things I love about my job is getting to meet and visit Ukrainian startups. There is so much creativity and ambition here that it makes me optimistic for Ukraine's future. Despite the war, Ukraine's entrepreneurs refuse to stop. To help us keep bringing you stories like this, please consider joining our community for as little as a cup of coffee a month.
The Kyiv IndependentDominic Culverwell
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