SputnikMedia Investment Jumpstarts VC in the Ukraine Net Sector

The Ukraine’s Net sector is hoping that recent major investment into a local
Internet start-up could spark a minor funding frenzy in the region’s
fledgling Web industry.


SputnikMedia.net announced earlier this month that it had raised $500,000 from
a group of international investors. It is the largest publicly announced
outside investment into a local Internet company to date.


In the wake of the announcement, several other local companies have
revealed that are expecting large investments into both existing and new
Ukrainian Web projects.


Dom.com General Director Felix Starovoytov says that his company also has
netted a six-figure foreign investment from Austrian-based EPIC. The deal was
organized by KINTO Ukraine. He declined to provide an exact figure, but
acknowledged it fell short of $500,000.


A representative of SigmaBleyzer, the owner of another major Ukrainian Internet
company InfinService, said his company will soon publicly reveal
funding significantly larger than $500,000 for several new Web projects.
InfinService is most widely known for their financial Web site.


Meanwhile, GalaMedia General Director Joseph Lemire said that major outside financing is
on the way for his company’s Internet arm, Gala.net, which plans to add four new sites,
including a financial server, to its current network of Web sites.


SputnikMedia.net, Gala.net and InfinServis all placed among the top 10 Ukrainian Web
companies in a ranking published in the Oct. 4 issue of Russian-language Ukrainian computer journal Komuternoye Obozrenye.


Jed Sunden, chief executive officer of SputnikMedia.net, said the investment
into his company bodes well for the entire industry.


“This is a vote of confidence not just for Sputnik, but for the whole Ukrainian
Internet sector,” Sunden said. “It may be small potatoes by the standards of
Yahoo or Amazon.com, but this investment shows that making money
from the Internet in this country is more than just some fantasy.”


The recent funding activity follows a series of summer announcements by several
prominent venture capital firms — including both U.S.-based Atlanta Capital and
Russia’s A. Partners — promising millions in fresh cash for novel Ukrainian Internet projects.


The increased interest in Ukraine’s Internet industry last summer raised hopes that
the country would follow in the footsteps of Russia, where Western
investors have made several multi-million dollar investments into Internet
companies over the last year.


Dollars of that magnitude have yet to materialize in Ukraine, but local investors and
Internet companies alike are optimistic about the growth potential of the Ukrainian market and
its potential to draw venture capital.


“In most sectors, Western sentiment toward Ukraine has yet to improve, but when it
comes to the Internet, most people realize that the same dynamics are
at work here as in Central or Western Europe,” said Kamil Goca,
director at Dragon Capital, the Kyiv-based investment banking firm that arranged
the investment for SputnikMedia.net.


Most estimates put the number of Internet users in Ukraine at about 500,000
(about 1 percent of the population), but most analysts expect that figure
to grow rapidly, to as many as 2.4 million users by the end of 2002.

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