23/01/2018 35 min read

Why Israeli companies should build R&D in Ukraine

The entrepreneurs have to deal with many problems on their road to success. One of the major challenges that companies face at the beginning is building the perfect R&D team.

So, you validated your idea by talking to potential customers who might also become your MVP's users. As an entrepreneur, you need like-minded people, who are excited about the idea and are capable of bringing it to life.

The company might also have a limited budget or no budget at all.

The problem of finding skilled labor in Israel is not new. Yes, the level of Israeli experts is very high. This is confirmed by a strong presence of research and development offices of the high and mighty of this world (Apple, Microsoft, Google, IBM, Cisco, HP, ebay, etc.). While you are reading this, another tech giant is opening its R&D office in Israel.

In such a highly competitive workforce market, it is quite difficult for young companies to attract IT experts for positions in their cozy team, perhaps even with shares, but without any guarantees of a stable and successful future, social benefits, and other bonuses.

Fact is: the average job closing time for a Senior Software Engineer in Tel Aviv is six months.

What kind of start-up can we talk about, if companies cannot even start building a product?

So where does a young company find a CTO for their team?

If you have Mark Zuckerberg or Ehud Shabtai among the co-founders, you can breathe freely and concentrate on your business goals.

There will also be fewer problems if you have excellent business acumen and you are as lucky as Steve Jobs and have a friend who is a great fit for a CTO position like Steve Wozniak.

Of course, every team has its own history. Some companies are started by the CTO themselves, and in the early stages, they do not need extra hands.

But what should product owners do if they have an idea, a clear vision of the product’s introduction to the market, a beautiful pitch, but have no way to compete with Intel for the best developers of Tel Aviv?

How to get at least to the MVP mark, so that there is something to talk about with investors?

Why go to Ukraine

There’s an enormous amount of options for expanding the team beyond the borders of Israel, but I’ll tell you why it should be done in Ukraine because I am most experienced in this particular jurisdiction.

Let’s go directly to the list of advantages of working in Ukraine, and then we’ll break some of them down:


Convenient location

Ukraine is located in the central part of Europe; although it is called “Eastern Europe,” geographically it is located in the center, between Western Europe and the European part of Russia. However, the most important thing is that Ukraine and Israel are in the same time zone. The cherry on the cake is the opportunity to get to the major cities of Ukraine (Kyiv, Kharkiv, Dnipro, Odesa, Lviv) in 3 hours, via a direct flight from Tel Aviv. And yes, if you need to bring someone from the Ukrainian team to a meeting in Tel Aviv, they will be able to depart on the same day because there is no need in getting visa.


Familiar mentality

No, I’m not going to tell you that the mentality of Ukrainians is similar to that of Israelis. On the contrary, it is completely different, although it has similarities, given Ukraine’s eagerness to withdraw from the post-Soviet bloc and move towards the values of a democratic society.

The most important thing that is good to remember is that the wave of repatriation of Ukrainian Jews, which continues since the 1990s, is considered to be the most successful of all waves, bringing thousands of qualified employees to large Israeli corporations.


Positive experience of other Israeli companies

The best arguments towards Ukraine are the success stories. In every major city of Ukraine, there are R&D offices of successful Israeli companies. And many of them had launched their offices in Ukraine even before they became successful. All these companies managed to pass from start-up to a successful business with the help of Ukrainian specialists:


If you are Israeli, I’m sure you have friends who work in these companies, and they can share their experience of working with Ukrainian counterparts.

Ukrainian engineers are recognized even at the governmental level. In 2016, the Israeli government took unprecedented measures—a quota for 5000 work visas was granted to Ukrainians for Israel.


Considerably lower costs

Oh yes, in addition to the fact that finding a tech expert in Ukraine is simpler, the total costs including taxes, which the Israeli company pays when hiring developers in Tel Aviv, are in general 2.5 times lower. Tempting, isn’t it?

FRONT-END DEVELOPER$500 - $2,800$3,500 - $7,200
MOBILE DEVELOPER$500 - $2,800$3,400 - $6,500
BACK-END DEVELOPER$400 - $3,000$3,900 - $9,100
UX/UI EXPERT$300 - $1,800$4,100 - $7,200

Average difference - 250%

Things you should know about Ukraine

I would be wrong if I didn't mention the issues which the Israeli entrepreneur might face while working with a Ukrainian contractor or a team in Ukraine.

  • Despite the pro-European government formed after the revolution of 2013–2014, some economic reforms have not yet been carried out, although the positive trend is noticeable.
  • Government bodies responsible for business registration and collection of reports from legal entities are still learning to interact with foreigners.
  • Hebrew. It is difficult to find a Ukrainian who speaks Hebrew, although not impossible.
  • Different working week schedule (Mon–Fri).

Your team in Ukraine

In order to summarize the above, it makes sense to estimate the costs required for the Ukrainian team, then to compare them with the costs of setting-up the team in Israel.

Let’s say you’re going to run another UBER or something else that requires the same set of team members, so it might look like:

  • Product manager
  • CTO (this person will also have to take care of the back-end side)
  • iOS developer
  • Android developer
  • Front-end developer
  • UI/UX expert
  • QA

You might also need an office. If you are in Israel, you would go with something like WeWork in the beginning. You have this option in Ukraine too, however you can rent a good-looking 150 sq. m. office for $1300.

Let’s see the difference between Israel and Ukraine based teams for the same set up:

TEAM SALARIES$10,900$39,300
OFFICE COST$1,300$2,600
TOTAL PER MONTH$12,200$41,900

Here is the information to consider when opening an office in Ukraine for the Israelis. Looks simple but it’s actually not. Entrepreneur faces the same problems he experiences in Israel, he still needs to do his best to find those people who understand the company’s goal, but for now Ukraine offers more options which can also be pretty cost effective.

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