Tech In Ukraine

What Happens Next

Now that Putin has invaded Ukraine and eventually will take the whole country. We have to assume that he will. There are some big questions to be answered.

A lot of companies I heard pitches from over the past decade or so would outsource their technical development to Ukraine. You always knew that there was a chance the Russian Bear would upset that tea kettle but it was really hard to measure the exact probability of the threat.

Ukraine had an army. It didn’t have nuclear capability since Democratic President Bill Clinton told them to get rid of their nuclear missiles in 1994. He assured them that NATO would have their back. In 2014, Democratic President Barack Obama allowed Putin to waltz into the Crimea with nary a peep. Today, Putin ignored the tepid pleas of Democratic President Joe Biden and entered Ukraine. Hint, sanctions don’t deter a dictator. Neither does tough talk.

By the way, the elite class treated Ukraine as a honey pot after the Cold War. John Kerry, Nancy Pelosi, Joe Biden, The Clintons and plenty of others either profited or had members of their families profit from Ukraine. When you hear a politician talk about defending Ukraine, see if you can follow the money.

One of the problems with trying to decide whether to actually do something about Putin is that Ukraine’s government isn’t exactly a picture of ethical purity. It’s hard to get excited about defending a corrupt government and it doesn’t end well as we saw in Vietnam.

Over in Asia, things are happening. If China decides to mount an attack on Taiwan, and it’s certainly within the realm of probability today, does anyone think tough talk and sanctions will deter them? This morning, Chinese Air Force fighters entered the Taiwanese air space.

That brings me to the tech companies that are outsourcing their tech to places like China and Ukraine. How secure is it? Who will own the intellectual property? What’s the likelihood that a copycat company can emerge? These are legit questions when you are trying to invest in and also build a billion-dollar company.

I recall one company (which will remain unnamed) that came through Hyde Park Angels which outsourced tech to Ukraine. This was over a decade ago. HPA’s executive director said we couldn’t invest because of that, and because the entrepreneurs were from there. We had a bit of an internal battle but we didn’t invest. Some people invested on their own.

I have invested in companies that have outsourced tech to places like India. India has a rule of law, is a free country, and you feel more secure about it. A place like Poland has totally turned away from looking like a “behind the Iron Curtain” country and would feel safer to outsource tech to. However, the closer a country is to Russia and China, the more insecure things like that feel.

I don’t know the answers but I do know if you are an investor in venture-backed companies you better really understand and run through the permutations of outsourced tech.