Ukrainian business prospects abroad: the case of ride-hailing service Uklon
In the first months of Russia’s full-scale war against Ukraine, orders of the Ukrainian ride-hailing service Uklon dropped by 80-90%, as Dmytro Dubrovskyi, CEO & co-founder of the company, states. Before the Russian invasion, one of the Uklon development directions was scaling through global expansion into new markets. The start of the war accelerated these plans, and the company launched its international franchise in May. Dmytro shared with AIN.Capital the details of how Uklon managed to enter highly competitive ride-hailing foreign markets during these turbulent times for Ukraine.
On February 24, has sharply called into question not only the existence of our independent state but also the survival of companies whose activities are concentrated in Ukraine. Uklon service, which before russia’s full-scale war against Ukraine united 24 cities, including Mariupol and Kherson, fell by 80-90% in orders with the start of hostilities. At the same time, we were let down by a financial partner. As they say, trouble does not come alone.
The company was saved by our employees, our team, which selflessly continued to work, even in the most difficult hours. We understood that our service is critical for our citizens, so we did not stop it for a moment.
At the same time, they did not forget to help each other and our army. But it was necessary quickly (really quickly) to look for further opportunities for business development because the financial reserve was not infinite. Especially considering that the war may drag on. And we were definitely not going to stop our work and help volunteers and the military.
We considered plans to enter foreign markets at the beginning of the year. However, we had to reconsider the model of expansion, as well as the list of countries where they wanted to scale the business in view of the attitude to Ukraine in the international arena. New countries that have become promising for launch have come into view.
Why did we decide to launch a franchise?
An idea of an international franchise emerged before the russian invasion. A potential partner came to us wondering if it was possible to get an Uklon franchise. We got interested and started researching the opportunities, after which we decided that launching a franchise will be our next move. The war has greatly accelerated our work. In two-three months, we managed to wrap up the offer and introduce the Uklon franchise.
The advantage of the franchise is that this option of expansion did not require large investments from us. After all, part of our financial reserve, which we set aside for international expansion, went to save the team. The service fell 7-8 times in some cities, and in the first weeks, our stocks fell sharply.
We estimate that an initial investment of €1 million is required to launch the franchise. The investment is not small for a potential partner, but it pays off. With this investment, operating profit comes in 2.5 years. Of course, the period of profitable work depends on external factors, including the size of the market and the average check.
Moreover, it is one point to run a franchise in retail, and another is in the ride-hailing service. This sphere requires our franchisees to be a strong understanding of how the sharing economy functions (for example, they worked with delivery or car-sharing services). If a person owned a taxi fleet that might also be an advantage. Generally speaking, experience in ride-hailing is more important than just the experience of launching a franchise in any other industry.
We did a lot of work to prepare all the necessary materials for the franchise package. It is needed to include access to modern software ready for localisation and adaptation, consulting of the support team, a brand book with a developed identity and the ability of local adaptation. It requires a deep understanding of the operational process and readiness to maintain the business permanently.
How did “Joint Venture model” appear?
We came across the idea of a Joint Venture partnership while talking to our potential partners. Some people were interested only in making an investment and choosing a region for running Uklon, meanwhile, they were ready to leave all the operational details on our side. Joint Venture is also a scenario that might work perfectly for us and our partners.
For instance, one partner doesn’t have a significant amount of investment, but s/he would like to receive a stable income without needing to be involved in the operational process. During Joint Venture, we share investments with our partners. In this case, profit is shared between all parts. For Joint Venture, a partner’s share will be less than for the franchise model. The operational process will be on our side.
Ride-hailing business today
Business in the ride-hailing industry is very sustainable. Everyone needs to move around the city, even despite Covid-19 or martial law. Running a business in ride-hailing can be complementary to other businesses (delivery, e-commerce, car-sharing, or car rental). Also, working with mobility services is very scalable: you might start with launching a taxi, and then grow operations to scooter rental, and so on.
Now we are in the negotiation process with one big company that has its own ecosystem of services. And Uklon may be a complimentary service for such business. Ride-hailing may connect their users even more, for instance, insure delivery from their stores or organise logistic support for e-commerce businesses.
In Europe: welcoming Ukraine and banning russian services
We feel the support of our western neighbours. I started receiving letters from potential partners being ready to support us. There was an example when literally the day after the Yandex service was blocked by the Latvian government, a potential partner from Riga wrote to us: “People here have huge support for Ukraine and their citizens. Guys, you need to fill up this market, after Yandex will leave”.
The Baltic States made such a decision since Yandex has access to strategically sensitive data of their citizens. Let me remember that the major share of Yandex belongs to Sberbank of russia. So there is no doubt that russian government controls this company. It was a logical step toward such an aggressive and non-human-centric country as russia is. Data about the citizens are strategic and critical for every democratic country. Having such information about a person’s travels, russia and other dictators’ countries may further blackmail them into planning an attack on that person.
I hope other countries will follow the Baltic States’ example and ban Yandex services in their cities.
However, it is one thing to have the desire to help, and another to negotiate substantively to launch such a technology business as ride-handling. You need to do your best; you need to fight for your clients. A loyal attitude to Ukrainians now doesn’t mean a “green light” to launch your business. Only improving your product and professional teamwork may give you results.
Resume about Uklon & Ukrainian business
In 12 years, we covered a long distance from “garage entrepreneurs” to a well-known Ukrainian IT company. Ukrainians may feel proud of Uklon because it does not yield to global players in terms of technology and functionality. And even exceeds them in certain aspects. During wartime, when the number of service orders has dropped significantly, we do not think of giving up. On the contrary, in difficult times, bold decisions are made.
I believe Ukrainian companies are ready to provide a truly independent and European level of service in any city outside Ukraine.
Written by Dmytro Dubrovskyi, CEO & co-founder of Ukrainian ride-hailing service Uklon