The Ukrainian company Ugears sells fine wooden toys all over the world. Founded in the midst of the turmoil of 2014, the start-up has long been a success story. Now the US giant Disney has knocked.
Large parts of Ukraine are on fire in spring 2014. In February, more than a hundred demonstrators died on the Maidan in Kiev, President Viktor Yanukovych fled abroad, in March Russia annexed Crimea, and in early May 48 people died in street fighting in Odessa. The economy is also down: in 2014, the gross domestic product shrank by almost seven percent, in 2015 by ten percent.
In such a situation, most people probably don’t think about starting a start-up. Gennady Shestak did it. “At that time, Ukraine was at the center of global public attention,” he says today. And if you look at it soberly, you can see the perfect moment to invest in an idea that is to spread from Ukraine to the whole world.
The start-up Ugears was actually founded in Kiev in May 2014 and produces mechanical models made of wood: for example a fire engine, a tram, a theater or a safe, finely worked with many details. The three-dimensional models can all be put together without glue. The only part that is not made of wood in some figures is a rubber belt for the drive.
What sounds pretty retro in the age of smartphones, tablets and Wiis appeals to many people: when the start-up was first crowdfunded in November 2015, it raised $ 406,000 – an estimated $ 20,000. Three other fundraisers on the Internet have since raised more than half a million dollars.
Shestak is happy. The 44-year-old trained shipbuilder from southern Ukraine worked as a production manager for a Ukrainian publishing house before Ugears started. Since this year he has not only been the managing director, but also the sole owner of the start-up, he has bought co-founder Denis Okhrimenko whose quarter share. Shestak says: “We knew the risk, but we believed in this project.”
A small rented workshop has now become 2500 square meters of its own work space with 150 employees in a suburb of Kiev. The wood for the plug-in kits comes from Ukraine, Russia and Belarus. Depending on the model, the wooden figures are a real patience: the combine harvester consists of 154, the fire engine with turntable ladder consists of 537 individual parts, estimated time for assembly: 14 to 16 hours. The puzzle pieces are cut out in the workshop with a laser and only have to be removed by the buyer.
Ukrainian start-up: locomotives, fire engines, trams
Shestak currently estimates the value of the start-up at around one million dollars. In August Ugears was among the top 20 taxpayers in the Kiev region – not a matter of course in Ukraine. “Corruption is always a huge issue in Ukraine and tax administration is the biggest problem,” says Robert Kirchner, economist at the Eastern Europe consultancy Berlin Economics and member of the German Advisory Group in Ukraine.
Overall, however, the country’s economy is on the right track: “It caught on last year and is growing at a moderate pace,” says Kirchner. Of course, everything could go faster, but you also have to set the right standards. “I’ve been in Ukraine since 2006, and what has happened there over the past two years has been by far the most ambitious economic reform I’ve ever seen.”
Ukraine was still bankrupt in 2015. The International Monetary Fund (IMF) pledged an aid package of $ 17.5 billion at the time. So far, almost half of the money has been paid out. In return, the IMF demanded economic reforms.
“Symbol of the intellect and clever innovations in Ukraine”
It was never an option for Ugears to leave Ukraine because of the economic situation. On the contrary, Shestak says: “Ugears is a symbol of the intellect and clever innovations in Ukraine.” It is important to them to pay taxes there and to give Ukrainians work. The start-up is international nonetheless. The currently 25 different wooden models are sold in 80 countries – the instructions for assembling the figures are in ten languages. There is an exhibition room in Kiev, the rest of the trade is done through the online shop and foreign dealers. Ugear kits sell best in the United States and China.
The success story could go even further. Because the start-up is currently in negotiations with a giant that could finally bring it a breakthrough: Walt Disney. If this deal worked, it would mean: Ugears Ukrainian wooden models in Disney stores around the world. The talks for this have been going on for four months, there will be another exam in September – “and then there is a real chance,” says Shestak.
He and his colleagues have already fought for one thing: Should this happen, the 3D characters specially designed for Walt Disney will continue to run under the name Ugears. It is important to them because it stands for “Ukrainian gears”, Ukrainian gears.