TechMagic has grown twice as much since 2021: IT company founders talk about 10 years of business history and scaling during the full-scale war

In an interview with Forbes BrandVoice, TechMagic CEO Oleg Dats, CTO Andriy Kuzmych, and Co-Founder Lidia Dats covered the topic of global market challenges, business transformation from 3 to 330 employees, and measures that contribute to the companyʼs successful scaling.

What is happening to the Ukrainian IT market in the wake of the war and the global recession that the world tech industry is experiencing?

Andriy Kuzmych: According to research by the Lviv IT Cluster, Ukrainian IT exports decreased by 8% in 2023. This year, we recorded a 5% drop in the first quarter alone, and as predicted this trend will last for the next two years. The reasons are complicated. For instance, the global recession affects startups that depend on foreign investment. Due to the economic crisis, they are not receiving investments, and therefore do not order software developments. Thus, it is getting harder and harder for IT companies that focus on this type of client to attract projects.

The IT sector, involving enterprise clients, has other challenges. Large customers have the money, but due to conservative security policies, they are not ready to outsource development to a country where a full-scale war is underway. And while many IT-based businesses have managed to retain their current customers, it is nearly impossible to get a new one, unless the company locates its development centers not only in Ukraine.

Besides, a full-scale war and increased mobilization measures pose personnel risks for all businesses, including IT. The current procedure for booking employees allows us to ban only 2% of the team. We need at least 15%: Delivery managers, the business development team, and key engineers. The loss of one key employee can lead to the loss of a contract worth hundreds of thousands of dollars. And the state will lose exports. 

Lidia Dats: The global recession, multiplied by a full-scale war, has caused the Ukrainian IT industry to break down. The market has been showing negative dynamics for the first time in 32 years of independence. The crisis also affects IT experts. According to Djinni, the number of job seekers is now 12 times higher than the number of open positions. It is an unprecedented situation for the industry.

How does TechMagic perform in the market? How do external circumstances affect the companyʼs revenue?

Oleg Dats: Some clients have reduced their turnover due to the global economic recession. We are now attracting twice as much sales budget to ensure we get the same number of contracts as we had two years ago. However, we consider the risks associated with martial law and mobilization to be even more threatening.

At the same time, TechMagic is growing even in a crisis. In 2023, revenue increased by 45% and exceeded $13 million. By the end of 2024, we plan to reach $15 million.

Overall, the business has doubled since 2021. We scaled up the most in the companyʼs history in 2022 – by 70-75%. Our acquisition of Dynamo played an essential role in this. If we look back at the last 5-7 years, except for the pandemic year of 2020, we have been growing by at least 30% annually. This is our typical pace.

How did you manage to boost growth after the full-scale invasion?

Andriy Kuzmych: We provide our customers with high-quality service. We have a high customer satisfaction rate (NPS) of 84%. Therefore, at the beginning of the full-scale war, TechMagic retained all its customers. Only one of them opened another location for hedging and later closed it. Some projects ceased operations, but this was due to a lack of funding on their part, not because of the war in Ukraine. Additionally, we got a lot of new customers through recommendations. 

Another factor of crisis resistance: in 2021, we decided to become a key IT service provider for our clients. We would rather take on a small client and be number one for them than the fifth or tenth vendor for a large business. It was a good decision as when the crisis hit and companies began to optimize costs, they couldn’t abandon their key or only IT partner. Their projects remained with us.

Our development driver is also a strong Ukrainian development team. After the full-scale invasion, we started looking for engineers from all over the world, including Eastern Europe and Latin America.

We conducted a lot of interviews and realized that Ukrainian engineers are head and shoulders above all others in terms of experience, knowledge, and diligence. That is why 90% of all our hires since 2022 have been Ukrainians. Despite any military threats and blackouts, Ukrainian talents provide the highest quality of work.

Oleg Dats: I’d like to add that from the first day of the full-scale war we invested in sales a lot. Out of the three co-founders, one and a half are engaged in this area: I work full time and Andriy spends half of his time. As programmers, we have an analytical approach to sales: we build a lot of graphs and are attentive to numbers. We have 30 other people working with us in the sales team: data analysts, content writers, designers, etc. 

A systematic approach to sales sets us apart from an average IT company. Five years ago, the market was so overheated that it was enough for an IT business to create a website and customers would come to it. Now it doesnʼt work anymore, and not all companies have managed to rebuild their strategy. But this is a necessary condition for growth, especially in a crisis.

Could you tell us about the company’s start 10 years ago? What was the first team like?

Oleg Dats: Andriy and I used to be programmers ourselves. In our 3rd and 4th year of university, we got to the Softserve training center and became friends there. Later, we worked for five years in various IT companies, gaining experience in the industry. And then we decided to quit and try to launch our product. Then Lida joined us, bringing non-technical expertise. We managed to attract investment in two of our startups, but the business model did not prove available, and we subsequently shut them down. At that time, the Revolution of Dignity had just begun, and the economic and political situation in the country was precarious. We realized we needed to start a new business focusing on foreign clients. Thatʼs how a service company TechMagic was founded in June 2014.

The first team was the three of us. We found our first client on Upwork – a startup from Amsterdam that was creating a platform for dating in nightclubs. We signed a contract with him and started working. We worked 12-14 hours a day, often on weekends, but thatʼs how we laid the foundation for further growth. The number of contracts and the number of employees gradually increased.

What were the next turning points in business development?

Oleg Dats: The first turning point came after 6-7 months: for the first time, we set aside a reserve of funds enough for three monthsʼ salaries for the team. Before it happened, the 15th of the month was approaching every time, and we were concerned about whether we would be able to pay our programmers. 

The thing is that startups aren’t stable clients, they often have problems with financing. There was a story: one of our first customers owed us money and offered us a deal: «Look, thereʼs my car. You can take it if you want!» Itʼs funny to recall now, but I remember how we finally exhaled, having formed a money cushion.

At that time, we took no more than $200 a month as dividends for ourselves, for food.

Lidia Dats: Then we continued to grow and moved to a new office nearly every year – remote work was not yet common. So, together with Oleg and Andriy, we did a lot of office renovations.

The business moved to a new level when the team reached 100 employees. Before that, we, as co-founders, managed all the main company’s departments. We formed development strategies, hired people, conducted interviews, and reviewed salaries. But, with the growth of the staff, we realized we could no longer personally comprehend such a huge number of issues and decisions.

So we started building a different approach to management. The company hired Delivery Managers, who gained more and more authority over time. Experience shows delegation is one of the best management decisions. We unloaded ourselves from operational activities and were able to think more about strategic tasks. Often, owners hesitate to take this step, but then the business loses development opportunities.

Andriy Kuzmych: Another important moment for TechMagic was when we started working with Salesforce technology. One of our core clients wanted to integrate their web platform with Salesforce and asked if we would do it. He said that otherwise, he would turn to another IT company. We didnʼt have the necessary expertise then, but at the same time, we didnʼt want to lose the customer.

So we agreed to the project. We hired a Salesforce developer who still works with us. He now heads the Salesforce department, which accounts for almost a third of the company and is the fastest growing.

What cooperation and achievements are you most proud of?

Andriy Kuzmych: TechMagic is a key vendor for Salesforce development for the world-famous luxury hotel chain. We also develop the primary IT product for the company, which is responsible for building and maintaining all roads and bridges in the UK. Our clients include a mobile childcare app used by more than 2.5 million American families. We also work with Princeton University to create a platform for mammalian brain research.

We are proud that our clients have stayed with us for a long time. We have 60 active customers, and 6 of them are crucial, accounting for 40% of our revenue.

Some companies came to us at the startup stage and have reached a valuation of hundreds of millions of dollars. We developed the first version of their product and still remain their primary IT service provider. 

Another example: an entrepreneur contacted us 9 years ago for the first time and then successfully sold the company. After that, we developed a second product for him, and he sold it again. Now, we are working together for the third time.

Could you share your charitable and volunteer initiatives? Why is it important for you to invest in them? What are the core results and achievements?

Lidia Dats: I’ve been volunteering for over 15 years and co-founded two charitable foundations. But before the full-scale war, I used to separate my activities: business here and charity there. But now the time has come when supporting the country should become part of every conscious business. So, I started developing a culture of charity in our company.

Since the beginning of the war, TechMagic has donated more than UAH 22 million to the frontline. We, as co-owners, try to be a role model for the team: we constantly broadcast the idea that all Ukrainians should be involved in the joint effort. Previously, we had a corporate award for the most productive employees, but, last summer, we decided to recognize our top volunteers publicly instead. This is crucial to popularize charity in society.

In total, we implemented 28 projects to support the army. One of the most striking was the Day4Defenders campaign: we donated our daily revenue to the military and encouraged 11 other friendly IT companies to do the same. We bought attack drones, pickup trucks, and excavators to build defensive positions. We raised money on Starlink together with the rock band Epolets. Instead of a corporate event, last summer, we organized a charity stand-up stream and raised almost UAH 2 million for the Azov brigades. 

We also opened a new blood donation center at Unbroken in Lviv. And we regularly develop a culture of blood donation: we organize corporate donor days so that employees can donate blood right in the office.

How and when did you launch your IT academy? How many people have you trained and employed so far?

Oleg Dats: Since Andriy and I are graduates of a corporate training center ourselves, we always wanted to create our own. A more advanced one, considering all the shortcomings we had encountered. So, we started this project at the beginning of the companyʼs second year. Over time, it developed into a full-fledged IT academy. Now about 20% of TechMagic employees are graduates of the academy.

Lidia Dats: At first, we focused exclusively on developers and testers. We selected the most promising students, taught them for free, and hired the best ones to join the team. The rest of the graduates also had no problems finding jobs in the IT market.

Since 2022, we have added training in DevOps, Security, LeadGen, and B2B Marketing in IT, and recently launched a course in cybersecurity. Thus, we now have 7 training areas. Over the years, we have held 32 programs, which 212 graduates have completed.

In the spring of 2022, TechMagic became one of the first IT companies to resume corporate courses for a wide audience. «After the full-scale invasion, many people lost their jobs and were looking for a new profession, so we took a chance and launched a recruitment drive. We received a record number of applications – more than 1500 in the first three days. We selected the most motivated ones, and as a result, this graduation class has become one of the strongest in the history of the IT Academy.

Our position is not to reduce investments in education in any way, despite any crisis. After all, people are the key component that drives the companyʼs growth.