The war in Ukraine concerns us all

Many German start-ups are currently showing their solidarity. But we must also question our ties to Russia, writes Bettina Engert.

For the most part, images from war-torn regions are met with shock and sympathy. However, they do not always trigger widespread readiness to take action from abroad. The pictures from Ukraine are different. The reports about human fates, the refugees and remaining people on the ground meet with an unprecedented wave of solidarity in this country. Also in the German start-up scene.

Many actors, companies, founders and teams are positioning themselves and using their platform to campaign for an end to the war. Within a very short time, local startups also launched countless initiatives for Ukraine: they range from the logistics of relief goods, to helping arriving refugees find jobs and housing, to large-scale transportation to safe neighboring countries. The speed with which the startup community has organized to help is remarkable.

Helping colleagues on the ground - humanitarian commitment and employer responsibility.

The impetus for this willingness to help is, on the one hand, certainly the regional proximity of the conflict and its political background, but above all, the close links between Germany's startup ecosystem and the Ukrainian tech scene.

An excellent developer community has formed here over the past ten years. Local startups have been working closely with freelancers from Kyiv or Kharkiv for a long time, hardly any team can manage without developer colleagues with Ukrainian roots, and some have even built up their own local tech teams - such as Solarisbank from Berlin or Laserhub from Stuttgart. Here, field reports show the full absurdity of the situation: Ukrainian employees who were drafted while visiting their homeland at the beginning of the war, and now, instead of powering up the laptop, are being trained at the gun. Since men between the ages of 18 and 60 are not allowed to leave Ukraine, their German HR colleagues are now prioritizing assistance in getting relatives out of the country, organizing donations in kind and money, and making sure the extra help and pay from abroad arrives.

Countless examples show that young companies in Germany are aware of their responsibility as employers in this exceptional situation. And they have to be! Because apart from the humanitarian obligation to help, the local start-up industry is also economically dependent on its colleagues from Ukraine in view of the shortage of skilled workers.

Capital from Russia and the question "Where is my money coming from?"

In addition to solidarity with Ukraine, however, the war also raises questions about the German ecosystem's ties to Russia. In recent weeks, sensitivity and diligence in reviewing existing as well as future shareholder structures in funds as well as portfolio companies have increased significantly. Start-ups and VCs are currently facing critical questions about the origin of their capital.

The majority of local venture capitalists have traditionally been reluctant to invest in LPs (limited partners) outside the EU. Nevertheless, the current conflict seems like a noticeable caesura. The discussion about "Putin's oligarchs" and their support of a Russian war of aggression have once again made it clear that neither soccer clubs nor startups should care where their growth capital comes from.

Europe's startup ecosystem can only benefit from more transparency and integrity in venture capital funding. Dependencies on Russian money were already worrisome in the past, and now they have become unsustainable.

Hoping for stability, sustainability, security... and above all, an end to the war.

Speaking of financing, it remains to be seen how the Ukraine war will affect the European venture capital market in the long term. While the focus here was on chasing records just a few months ago (see also "The risks of the cash flood for German startups"), a sharp drop in the number and volume of financing rounds was already noticeable at the start of the Russian attack. According to statistics, EU startups raised 70 percent less money in the first weeks of the war than before. Planned financing rounds were delayed, IPOs that were considered safe were canceled.

During the Corona crisis, the digital and technology sector was still able to profit massively. At present, investors are unsettled by the developments in Eastern Europe and the high volatility on the stock markets. Many are now shying away from risky bets - which are based on the fastest possible growth, the fight for market share without regard to profitability. Their success also presupposes free trade, smooth supply chains and unrestricted access to capital. All of this is at risk in the current situation.

However, as in the Corona crisis, certain areas of the start-up industry could benefit. For example, the conflict with Russia, a major gas-and-oil power, is once again increasing the pressure to seek alternatives to fossil fuels and solutions for reducing energy consumption. "Green start-ups", i.e. business models around sustainability, currently have all (investor) doors open.

Thesame applies to the area of cybersecurity. The war is currently being fought not only on the ground, but also in the network. Here, whoever can protect themselves against cyberattacks, sabotage and disinformation has the upper hand. German start-ups like SoSafe are currently being inundated with capital and orders. The only bottleneck for further growth here is the lack of developers.

But whether an economic beneficiary of the situation or not, what unites all startups in this country is the hope that the war will end soon. For their employees, their colleagues and all the people in Ukraine.