How Ukraine startups deal w/engineer shortages; HIMERA seeks new funding

BLUF: We explore the shortage of engineers in the Ukrainian miltech sphere AND six local adaptations/policy proposals to address them. Who attended Counteroffensive.Pro’s launch party in Kyiv? Ukrainian secured comms startup HIMERA is near closing a second round of fundraising. The new products being developed by RoverTech, specializing in demining drones.

UNDERWAY NOW: Star-studded ‘Rebirth of Ukraine’ trade mission currently underway in Washington D.C., showing the emerging links between the two countries:

• recently-departed U.S. Special Representative for Ukraine's Recovery Penny Pritzker (email us if you know what she's up to next)

• Arina Paliashvili, CEO, U.S.-Ukraine Business Council; Henry Shterenberg, founder of Economy of Trust Ukraine; Yuliia Chufistova, CEO of Mayors' Club of Ukraine; Ricki Garrett, CEO of Cities International; Hiroshima Matano, CEO of MIGA; Teta Jo Lewis, President of Exim.

• Philipp Hildebrand, Vice Chairman of BlackRock; Jose Barroso, Chairman of Goldman Sachs; Paradox Public Relations; private international development firm Chemonics.

• not to mention a sizable number of folks from Biden cabinet: Energy Jennifer Granholm, Ag Tom Vilsack, Commerce Gina Raimondo, Veterans Affairs Denis McDonough, and USAID Samantha Power.

• PLUS: Congressional backers — Sens. Durbin, Wicker; Reps. Kaptur and Fitzpatrick.

THE BIG STORY: Here’s how Ukrainian companies are coping with engineers being mobilized for the military. We spoke to: Airlogix, producing ‘GOR’ reconnaissance drones (UKR); Piranha Tech, specializing on Electronic Warfare (UKR); and Brave Inventors, Ukrainian private accelerator platform for Miltech innovations, (UKR): 

All of them told us they have an engineer shortage, which diminishes their R&D potential.

Meanwhile, there is intense competition on the market for skilled specialists. From April 2023 to July 2024 the number of vacancies in IT has increased from less than 50 to 257. Here, miltech companies are competing with better-paying civilian IT companies.

Here is how they’re adapting, or urging the government to adapt:

1. Simplifying internal R&D processes. Anatolii Khrapchynskyi, deputy director of Piranha Tech: “We practice hiring engineers with less experience. We create product flow charts that show what should be done first. This makes it easier for engineers to understand the process.”

2. Additional internal training. Via Brave Inventors: miltech companies are hiring new workers and giving them all internal training to grow specialists inside. Combined with mobilization exemptions, and strong retention incentives, this could solve the problem in the medium term. 

3. Offer a purpose-driven job with clearly defined mission. Lokotkov: “We cannot propose a salary for engineers like in IT, but what we can offer is to become part of a project that will bring the victory in the war closer”.

4. Government could change laws to return mobilized specialists to defense enterprises.

5. Government could create more exemptions to mobilization for key defense sector engineer roles.

6. Government could put more effort behind specialized training for key defense tech education. For e.g.: The Ministry of Digital Transformation/ Kyiv School of Economics launched a master’s programme in Unmanned Aerial Vehicles to train drone development engineers.

How do companies get exemptions from mobilization for defense company? Companies holding contracts with the government, state-owned enterprises or military units, or those receiving grants from the Brave1 defense innovation platform, can receive mobilization exemptions for their staff. More than 50 percent of the company's total output must be defense-related goods, works and services.

To address the shortage of specialists in Ukraine, the issue needs to be solved through both government action and business incentives. Meanwhile, businesses need to adapt by offering a genuine sense of mission, and internal training programs within their companies.

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SPOTTED at the Counteroffensive.Pro launch party this past Saturday in Kyiv: Deborah Fairlamb (Founding Partner of Green Flag Ventures), Guillaume Ptak (Correspondent at The Washington Times), Roman Steblivskii (Head of Sanctions Department at State Watch), Roman Pohorilii (co-founder of DeepState), Julia Petryk (Senior PR Manager at Slova Tech PR), Kateryna Mikhalko (Director-General of Tech Forces in Ukraine), Helen Yushchenko (Communications Manager at Tech Forces in Ukraine), Valeriia Krutskykh (Jr. Partner, PR Director at SLOVA Tech PR), Daria Chaika (PR Manager at SLOVA Tech PR), Anatolii Krapchinskii (Deputy Director of Piranha Tech), Viktor Lokotkov (CMO at Airlogix), Alyona Artemenko (Project Manager at Brave Inventors). About 80 folks showed up. Thanks for the support!

Will you be in IT Arena in Lviv later this week? Shoot me a message if you’d like to meet up with our team to chat ideas!

BUSINESS LUNCH TOPICS: What our reporting shows!

1. HIMERA CLOSE TO CLOSING SECOND ROUND OF FUNDRAISING: Mikhaylo Rudominskii is the co-founder of HIMERA, a Ukrainian company producing a secured communication system resistant to EW. They want to grow 2-3x this year, which is why they’re seeking new investment.
   
   For now, manufacturer doesn’t have any orders from the government, but Mikhaylo is confident that it will happen, because their product is unique and affordable. Russians don’t have a comparable version, he said, and if they will get their hands on the HIMERA G1 handheld radio they won’t be able to copy it, because 70 percent of its specialized tech is in its software.

2. REGULATORY CHANGES FOR EXPLOSIVES MANUFACTURERS: The absence of production lines for explosives is a serious challenge for Ukraine. Now the Ministry of Digital Transformation is opening the market for manufacturers: on September 3, the government simplified the regulatory process. Now it takes only one month to prepare all the documents, instead of 12–18 months. To obtain a license, manufacturers need to submit documents on the ‘Diia’ portal.
   

3. ROVERTECH+UKRAINE MILITARY: Ukrainian company Rovertech, which produces the demining machine ‘Zmij,’ is working on new products for Ukrainian army. Borys Drozhak tells Counteroffensive.Pro that they have technical requirements from some Ukrainian units.
   
   They are working on: improving the ‘Zmij’ demining drone; developing a kamikaze land drone; and creating engineering land drone.

4. UKRAINE MILTECH GROWTH, IN NUMBERS: per new study from DataDriven, a consulting firm specializing in defense/demining: In 2024 the sector is expected to reach $800 million, nearly doubling its value of $400 million in previous year.
   
   Startups play a pivotal role in domestic miltech. The crown jewel of sector is UAV manufacturers: making up 19 percent of the industry; followed by robotics with 13 percent. Export restriction and lack of expertise within Ukraine are barriers which hinder more widespread investment.

5. More than half of Ukrainian Miltech companies are relocating abroad or thinking about it. This according to Tech Force in Ukraine, an association of manufacturers of innovative technologies.

   For 70% of manufacturers, the main reason is restrictions on defense tech export (see our coverage of that here). Another 62 percent cite the risk of Russian strikes. Opening exports and more orders from the state could improve the situation. Companies are thinking about relocating production lines (86 percent), IP (76 percent) and R&D offices (43 percent).

ON THE MOVE: Professional movement, promotions and industry news.

Know someone in the defense tech space who has made a professional move? Drop us a line at [email protected]! 

• Sviatoslav Sviatnenko become chief operating officer in venture company ‘Mission Possible’. Previously, he was editor-in-chief in Ukrainian media company Vector.

• Sergiy Oleksiyenko is starting a new position as Chief Financial Officer at ‘Ukroboronprom.‘ Previously, he was a member of the Supervisory Board at ‘PrivatBank.’

A message from our sponsor:

Palantir is proud to have supported Ukraine with our software since Putin’s illegal invasion. That same software can provide the established foundation that helps other defense tech innovators to fast track their journey to the frontline. Find out more.

MUST READS:

• The EU Defense Innovation Office in Ukraine is fully operational. It will support joint military innovations, and will help to integrate Ukrainian defense industry into European defense industrial landscape.

• Ukrainian strike unit ‘Fatum’ of 3 Assault brigade disassemble the warhead of Javelin to use it as a drone munition.

• For the first time, the Ukrainian army joined a NATO counter-drone exercise that took place this past month. More than 60 counter-drone systems, jammers and cyber interceptors were tested live.

• President of Ukraine Volodymyr Zelenskyy visited an ammunition plant in Scranton, Pennsylvania. They are producing components for artillery and mortar shells.

• Ukrainian-Estonian investment company Darkstar invested €600k in Ukrainian platform Farsight Vision. Developers have created an intelligence and situational awareness platform for AFU.

• Indian arms companies have been transferring ammunition to Ukraine through Europe for more than one year. Russia has been trying to protest, but New Delhi has not intervened, Reuters reports.

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