“We are not interested in investments with less than six zeros.” — Interview with Releaf Paper

Ukrainian startup Releaf Paper, which produces paper and packaging from fallen leaves, has introduced new products for the Ukrainian market and plans to expand it in 2024. The startup plans to invest minimum €500,000 in its green waste processing project, and in 2025 — increase the current investment round to €16 million.

AIN.UA talked with Oleksandr Sobolenko, co-founder and CEO of Releaf Paper, about the expansion of Ukrainian production and further investment plans. AIN.Capital translated the interview.

Over the past year, we have been actively engaged in business development in the European market: we opened an office in Paris and began to form a local team to work on the factory project, which is scheduled to open in the second half of 2024. The day before, we attracted €2.5 million from the investment fund of the European Commission, which was directed to the creation of our own production facilities. At the same time, we continued to use the production capacities of Ukrainian contractors for the production of final packaging, which was exported to EU countries.

For Ukrainian consumers — small and medium-sized businesses, large corporations, and especially retail — we have prepared many novelties in 2024. Cardboard boxes, paper bags, wrapping paper in sheets and small rolls, even notebooks for those who appreciate forests are now available in limited quantities. All these products are made from Ukrainian leaves collected by municipal services. Unfortunately, leaves are usually burned in our country, so we are glad that we can reduce CO2 emissions, as well as create a product that will help businesses show that they have an environmental component among their values.

Earlier you said that you used to focus on foreign markets, but now you plan to focus on Ukrainian. Why do you think now is the time for this?

Releaf Paper as a technology for the production of paper from fallen leaves and as a company was born in Ukraine, we found our first customers right here. Both the founders and the majority of the team are Ukrainians. Ukraine has always been and will be significant for us, although the focus of the last two years shifted to other markets due to the war, we still promoted the Ukrainian product. We understand the market of Ukraine and we believe in its potential. We see the demand for ecological products, that is why we decided to resume full commercial activity. We continued to receive requests from Ukrainian consumers even during the full-scale invasion, and now we have the opportunity to satisfy them.

What investments does the expansion of Ukrainian capacities require?

All products will be made from our material (Releaf Paper) at local Ukrainian contractors. At this stage, our investments will be directed towards marketing and personnel. For the Ukrainian market, we have a separate structure and team in order to respond very quickly to all consumer requests. Vitaliy Godzula, who previously held managerial positions at Lenovo, will head this team as the commercial director.

We have chosen an eCommerce business model — our products will be available to customers through orders from our online store. In addition, we are negotiating with a number of online shopping sites, through which our products will also be sold, increasing the reach. We also count on Ukrainian large and medium-sized retailers, for which we have formed a B2B department focused on direct sales. A good signal is that some representatives of large companies have already contacted us several months before the official announcement.

From the second half of 2024, we plan to start working on a raw material production project in Ukraine, which will process green waste into filler for paper production. This, in fact, is the innovation of Releaf Paper, but as of now, we do not have this type of production in Ukraine. The initial investment will be €500,000. If we later decide to replicate our format as a full-fledged pulp mill, the investment will increase to €5 million.

Last year you talked about plans to raise €8 million and the search for a new lead investor, how is the progress?

Our cooperation with a strategic partner (investment fund of the European Commission) consists of two parts: grant and investment. We have already received €2.5 million in co-financing for a pilot factory in France. Negotiations regarding the investment component and due diligence continued for most of the last year, and in the end we agreed on more favorable terms for ourselves.

This round will take place in 2025, and its amount will double to €16 million. By that time, the implementation of the pulp factory project in France will have been completed. This will significantly increase the value of our company in negotiations. All funds will be used to expand existing production facilities and create new ones.

The venture fund of the European Commission always provides only 50% of the investment in the round, the other 50% we have to attract from a third party investor. Since, as of 2023, we were not yet aware of the final terms of EC participation, we did not actively search for a co-investor. However, we still received a lot of inquiries and investment proposals, mainly from Western Europe. Most of them do not meet our expectations, because they are ready to invest very little in exchange for a significant share.

Currently, Releaf Paper is worth more than €20 million, and we, unlike many Ukrainian startups, are not interested in investments of less than six zeros. We will continue the search for a co-investor in the second half of this year — we will give preference to specialized European funds. We will make every effort possible to become a unicorn.