Founded 20 years ago, LED lighting specialist Promavtomatyka Vinnitsya was launched when CEO Mykhailo Ganchuk was just a student. Today, the company has grown into a team of 350 employees and now uses a multi-pronged business strategy that focuses on mostly micro-processing production. Promavtomatyka Vinnitsya now specializes in making parts for smart homes and LED street lamps, and made its name for its brand by becoming the first company to implement LED street lamps in Vinnitsya. With a large R&D team employed by young and talented engineers, the company is currently working on new products, such as a “voltage recorder.” Here, Ganchuk explains how Ukrainian innovation is taking off
How does the local government in Vinnitsya support companies and investors in the region?
The government in Vinnitsya is very committed to supporting business. They aren’t overly involved in our work, which we view as a positive. We do not find ourselves bogged down by regulations and other barriers to doing our business. However, the government is not absent from the private sector. They are engaged and they do try to help us, to listen to us, to organize seminars on business practices, and to provide opportunities for us to engage with one another. They organize dinner meetings every quarter where we speak informally about our work and discuss pressing issues we are dealing with. They also have seed funding for local start-ups and young business owners. We received support from these funds, ourselves.
The government wants to invest $20bn primarily infrastructure, in the next few years to drive Ukraine towards a 2030 target of $60bn in investment, primarily in infrastructure. Your company has crossover with infrastructure. How can your products be used within the infrastructure realm?
LED streetlamps are a big part of our business, and we are working with our government on implementing this product. There have been some very positive changes that male us optimistic about the government’s targets. In Ukraine we’ve previously had issues with clean purchasing tenders’ practices. It was very bad. Projects went out to tender but they were unwinnable because the client had already committed them to firms behind closed doors, for a price. About five years ago, Ukraine rolled out a new e-procurement portal, ProZorro. It was a game changer. We finally started to win tenders, not just in Vinnitsya, but across the country. In fact, we had to restructure and create a whole new department to respond to tenders because all of a sudden, the competition was open. It has started to decline a bit, there was a boom when ProZorro first launched.
The Ukrainian government is implementing a digital transformation in Ukraine, to bring Ukraine to a higher global standard. What are your thoughts about this transformation and how is your company preparing for this transformation?
I support this country’s decision to move towards digital transformation. At first glance, this transition isn’t necessarily good for me, because it will attract new big companies to Ukraine and create fiercer competition. However, it will push us all to develop and become better. If you look at Ukraine ten to fifteen years ago, we developed very quickly. At Promavtomatyka Vinnitsya, we opened new shops and hired new employees, but we were not terribly effective or efficient in our operations. Now, we are slowing down our growth a little, but focusing more on quality and effectiveness. We know that in a few years the global giant competitors are coming to Ukraine and competition will be fierce. We need to be prepared.
What’s your competitive advantage over other partners? Why should investors consider Promavtomatyka Vinnitsya?
One of our top strengths is our R&D department. We’re created new products, and we’re able to do it at competitive prices without compromising on quality We are trying to model ourselves off of European standards and best practices. We meet with European companies to learn from them. Many people in Ukraine have viewed Europe with fear, because Ukrainians were leaving the country to go work in European countries where they could be paid higher salaries. However, that is starting to change. Ukraine is a good place to work and our graduates are staying in Ukraine and choosing to work in Ukrainian companies in greater numbers now.
As Ukraine and the global economy are moving towards a greener energy system, how is your company supporting this transition?
Our company is very committed to green energy and renewables. We are pleading to build our own solar station. We are also building individual private solar stations, and install several new solar stations a week currently. Now, we can proudly say that we have a good green footprint. I also speak at seminars for students and potential clients about the benefits and importance of clean energy. It is our only option. In my talks I always start with a slide on how limited our fossil fuel resources really are. We have only 15 years before the oil and coal run out in Ukraine. We need to have a post-fossil fuels plan.
What green products do you currently carry? Are there plans to expand your green product offerings?
We currently produce our LED lighting, and we do the construction for the private solar panels we produce and install. We also lead corporate social responsibility efforts including a new project where we have transitioned the company to only using recycled paper products. We anticipate that as the green sector continues to grow, so will our product offerings.
What do you think international investors, and specifically Americans, should look at Ukraine now? Why is it the right time to invest?
The climate in Ukraine right now is very positive for investors. As I mentioned, green energy is part of the national strategy. At our company, we want to create a more diversified portfolio and stability. We plan to open two new company locations in the next four to five years. One will be located in a European country, in alignment with our strategy to orient more closely with European standards. The other company will be in the east, potentially in Kazakhstan. Kazakhstan has a rapidly growing market. Because of their growth rate and macroeconomic factors, Kazakhstan has a very good margin, but very little stability. We may choose Germany for our European company location. Their market is very stable, but as a result, there are lots of competitors, so the margins are smaller. That’s the tradeoff. Ukraine is a great market because it is right in the middle. We have a solid margin but in terms of competition, the market is not yet saturated. There is plenty of opportunity, and companies with a good product and a good strategy will do well. We are developing. Maybe not as fast as some countries, but for me, I see it as stable growth.
Do you have a final message for American investors on why they should consider Ukraine as an investment destination?
Like I mentioned, Ukraine is right in the sweet spot in terms of balancing profit margins with macroeconomic stability. But we won’t be in this sweet spot for very long, so the time to enter the market is now. I’m preparing my own firm for several years down the line when the Ukrainian market becomes increasingly competitive and we all will need to push ourselves to the next level. If investors wait until several years down the line we will be inching towards Germany, with high stability and low margins. Now is the time to enter the market and capitalize on the ideal combination of market conditions we have in Ukraine.