Ukrainian cyber market grows amid war but still lacks support and funding, report says

Ukraine's cybersecurity market has grown rapidly in recent years, driven by rising threats, increased digitization and international assistance. However, new research shows that the sector remains heavily reliant on foreign aid and faces significant challenges, including insufficient investment, a lack of competitive advantage and weak regulations.

The report by the Ukrainian consulting firm DataDriven tracked the value of the country’s cyber companies over the past eight years. Over that span the market increased fourfold, reaching an estimated value of $138 million last year. 

Cyberwar's impact

The ongoing war with Russia has contributed to the market’s growth: The more attacks organizations face, the more they try to defend their networks. According to the latest data, Ukraine’s computer emergency response team (CERT-UA) detected over 4,300 cyber incidents last year, almost 70% more than the previous year.

“Large-scale cyberattacks on critical infrastructure networks, telecommunications, and financial institutions since the beginning of the Russian invasion have led to increased awareness of threats,” the report said.

In addition, Ukraine’s position as a frontline state in a cyberwar makes it an attractive market for testing new security solutions.

“Service providers can refine their products using unique data and evaluate their resilience against advanced threats,” researchers said.

Foreign favorites

Yet, the share of the Ukrainian cyber market on both the global and regional scales remains small. Neighboring Poland’s market is valued at $800 million, while Ukraine’s biggest ally, the U.S., boasts an $81 billion market. 

One reason for this is that Ukrainian customers prefer cybersecurity products from international companies. According to the report, big foreign vendors provide more comprehensive solutions, leaving Ukrainian cyber firms struggling to compete. As a result, local firms primarily focus on developing automated tools that deliver quick fixes, such as encryption, DDoS protection and multi-factor authentication systems.

Researchers attribute this reliance on automated solutions to the urgent need for rapid responses to war-related threats and the limited talent pool.

The government and critical industries such as telecommunications and energy also rely on foreign support to protect their networks. Since the start of the war in 2024, U.S. cyber assistance to Ukraine has reached $82 million, while the European Union allocated $10 million in grant aid to strengthen Ukraine’s cybersecurity.

International aid programs, which primarily fund cybersecurity products and services in Ukraine, often favor companies from their own countries, overlooking local options. Researchers expect Ukraine’s cyber market growth to slow over the next few years due to reduced funding and interest from donors, as well as a lack of domestic funds in Ukraine to invest in cybersecurity.

Lack of state support and investment

Another hurdle to local cyber market growth is flawed legal regulation, according to the report: Cybersecurity standards for the public sector and critical infrastructure do not fully align with best practices, and their implementation is inconsistent.

War-related risks and economic instability also create an unfavorable environment for investing in the industry. There have been no notable success stories of cybersecurity startups in Ukraine, unlike sectors such as defense-tech, researchers said.

The Ukrainian market also struggles with hardware production, “putting it in a vulnerable position,” while many of its cyber specialists prefer to outsource their services to foreign companies or have moved abroad due to the war.

To compete with global companies, local specialists need a competitive advantage — such as offering their services to industries not dominated by international companies, like education, small and medium-sized businesses, and public organizations.

To boost the growth of the local cyber market, the government should focus on programs that enhance the competitiveness of the national industry, learning from its experience in fighting the ongoing cyberwar. The state should also actively support public-private partnerships — “not just in theory, but in practice,” the report concludes.