Horizon Capital, an international investment company, remains one of the leading investors in the Ukrainian tech sector. Despite the war and the downturn in investment activity, it successfully closed a $350 million fund in February, exceeding its members’ expectations by $100 million. Since then, the company has already invested part of its capital in five Ukrainian companies.

AIN talked to Horizon Capital’s senior partner, Vasile Tofan, about the company’s current situation, his forecasts for the next year, and Ukraine’s attractiveness to foreign investors.

Cover image: American Chamber of Commerce in Moldova

How do you see the investment climate in Ukraine today?

I am not a fan of illusions. Of course, the situation is complicated. But at the same time, we remain constructively optimistic about Ukraine. We recently closed a new fund of $350 million. Over the past 12 months, we have invested over $100 million in five companies. These are the EdTech company Preply, the MarTech startup Viseven, the online programming school GoIT, and the IT company Creatio. Another investment is still under wraps. So, we are optimistic about Ukraine.

I think those who are brave enough to invest now can get some of the best possible returns. As the American entrepreneur Warren Buffett says, “Be fearful when others are greedy, and greedy when others are fearful.”

What challenges are investors currently facing when investing in Ukrainian companies?

First, the situation is difficult for investors worldwide, not just in Ukraine. High inflation has led to high interest rates, which have reduced investment activity. Of course, the war exacerbates the problem in Ukraine, but things are difficult outside of Ukraine as well. Conditions for investors are improving, but they are still tough. The years 2022–2024 have been challenging globally.

Secondly, I believe that for investors like us, the biggest challenge in Ukraine right now is the impact on human capital because we invest in businesses that need people, not assets. And, of course, the mobilization and outflow of people abroad have had a significant impact [on investor behavior and the situation in startups].

Because Ukraine has so much talent, we still find very attractive opportunities. But if I were to single out one challenge, apart from the security situation, it would be the potential impact on human capital. We are investing in a business with a large staff, and the possible risks associated with human capital are critical for us as investors in the export IT sector.

Which companies in Horizon Capital’s portfolio are performing best?

There are many leaders among our portfolio companies. Just look at the recent Datagroup-Vola and Lifecell deal, led by Xavier Niel’s NJJ, one of the most dynamic forces in the European telecommunications sector. This was a very large transaction, financed by the EBRD and IFC for $435 million. The total investment in this deal amounted to $1.5 billion. It is obviously a very big success story — one of the most significant investments in Ukraine since its independence. Not to mention the fact that it happened after the full-scale invasion began.

Creatio closed a $200 million round in June 2024, valuing the company at $1.2 billion. For a company engaged in research and development in Ukraine, this achievement with such a high valuation is striking.

Ajax Systems, a security products company, is doing very well and is a global leader in its niche.

The Aurora chain of stores is not a technology company as such, but it is very technological in its retail processes. When we first invested in Aurora in 2021, the chain’s total sales were $300 million, and now they have surpassed $1 billion. And this is not an exporter but a domestic company. Aurora has expanded into Romania, and this allows small entrepreneurs selling in Ukraine to export their goods.

You said last year that you planned to open 500 Aurora stores in Romania. How are these plans being implemented?

We have already fulfilled this plan by five percent, and I think we will complete it 100% within a few years. We already have 26 stores, and we are focused on opening new retail locations.

What are Horizon Capital’s three biggest deals in 2024?

I think it’s the acquisition of Datagroup-Volia by Lifesell, the investment in Creatio, and the closing of a new $350 million fund.

You have already invested $100 million raised through Horizon Capital Growth Fund IV. Where do you plan to invest the remaining $250 million?

We will invest in leading Ukrainian and Moldovan companies. We will also focus on technology companies and examine companies in other sectors.

The defense tech industry is developing rapidly in Ukraine. I remember you saying that Horizon Capital invests in businesses that employ a large number of people. Are you considering investing in the defense industry?

I am very positive about the future of Ukraine’s defense and technology cluster. There are many attractive opportunities here. However, our company operates under a mandate, and some of our investors are restricted from making investments in the defense sector.

What is your forecast for 2025, and what are the most promising directions for investment in Ukraine?

The last two years have been very challenging for the IT sector, particularly for service companies, due to high interest rates, which have negatively impacted corporate spending [by customers], including on IT services.

Now, rates are falling, so corporations are resuming spending. Accordingly, the demand for service-based IT is expected to grow. Therefore, if we look at the forecasts of service companies for 2025 — EPAM, Endava, Globant, and Grid Dynamics — they are projected to grow at a double-digit rate. I think service-based IT companies will recover, and investor interest in such companies will increase.

What attracts investors to Ukraine?

Investors are, of course, waiting for the war to end. Ukraine will need between $500 billion and $1 trillion for reconstruction. This will be the largest reconstruction program in Europe since the Second World War. Many investors are attracted by the immense opportunity to rebuild Ukraine, combined with the possibility of EU accession. When will this happen — in five or ten years? I don’t know.

However, if you look at previous EU enlargement cases, the member states’ main growth occurred before their EU accession. Again, talking about Ukraine joining the EU now might seem overly optimistic, but the combination of reconstruction efforts and the prospect of EU membership will create significant opportunities for Ukraine.