Ukraine Through the Eyes of Deborah Fairlamb

In this interview, Deborah talks about promoting investments in Ukraine during the war, shares her expertise in supporting Ukrainian startups, and reveals how Ukraine fosters the cooperation connection between the international tech ecosystem.

The conversation focuses on such questions as economic development, foreign investments, public interests in Ukraine, the tech ecosystem, and Ukraine’s potential to attract more investments.

Deborah, before we dive into the topic of doing business, tell me when you first came to Ukraine. How was that?

I first came to Ukraine in 1999 after marrying a Ukrainian in the United States. I grew up in the U.S. in New Jersey and met and married a Ukrainian there. So, the first trip here was to visit his family in 1999. Ukraine was a very different place than it is now. However, with a bit of hindsight, one of the things that are very interesting is that I could watch Ukraine’s progress and how much it has changed and grown. But I first moved here in 2007 together with my husband. We both quit our jobs in the U.S., sold our house, and came to Ukraine. It was a couple of years after the Orange Revolution, and many things were happening, particularly in finance and banking. Both of us were in that industry. So, we decided that we wanted to come over and support what was happening in Ukraine then, and give our daughter a chance to spend time and grow up in Ukraine so she can understand both sides of herself.

Before coming to Ukraine, as a person without any Ukrainian heritage or background, what kind of ideas did you have about it and this region at that time?

Growing up during the Cold War era, the Soviet Union appeared as this enigmatic monolith that loomed large yet remained incomprehensible to many. I remember being drawn to reading about it, and even during high school, I found myself inadvertently collecting materials focused on Ukraine rather than Russia, which intrigued me.

My interest was further piqued during a business trip to Russia in 1994 with a financial services company. It was a pivotal time, occurring after the collapse of the Soviet Union. What struck me most was contemplating how an entire collection of countries, a vast monolithic entity, and its inhabitants could suddenly find themselves in a world where the familiar structures had dissolved. I marvelled at the resilience of the people as they navigated this unprecedented upheaval. Despite the absence of mass revolutions or widespread societal collapses, the challenges were immense. The fact that individuals could adapt, persevere, and forge ahead in such extraordinary circumstances was truly fascinating to me.

Did you understand the difference between Ukraine and Russia back then? Many people, especially from the United States, think it’s the same thing.

Everything was often grouped together under the banner of the Soviet Union, so there wasn’t a significant differentiation at that point. However, this perspective shifted notably when I met the man who would become my husband. Many of his friends were Ukrainian immigrants to the United States, while we also had Russian friends. It was through these interactions that I began to notice subtle differences in behaviour and attitudes. There was a growing realisation that within this group there was a distinct Ukrainian culture that I hadn’t fully grasped before. It was a moment of recognition, acknowledging the gaps in my understanding. As we spent more time together and eventually moved to Ukraine, these differences became even more pronounced and clear to me.

What are some differences, if you can name an example?

Many Russians often operate from a position of fear, both at the government and individual levels. This fear is pervasive and can impact various aspects of life. In contrast, in Ukraine, there is a notable absence of this pervasive fear. People operate from a desire for freedom, respect for those around them, and a deep love for what matters to them. This fundamental difference in mindset is significant.

Another key distinction lies in the societal structure. Russia tends to be a vertical society, characterised by extreme hierarchy, where authority flows from the top down. On the other hand, Ukraine operates as a horizontal society, where strong and powerful networks exist between individuals within friendships, families, and business circles. This hidden strength fosters a sense of independence and initiative. Ukrainians don’t wait for directives from above; they take action when needed, as evidenced by their responses to events such as the Russian invasion in the East of Ukraine in 2014 and subsequent wars.

Despite these fundamental differences, they might not always be immediately apparent from the outside. However, they play a crucial role in driving the fierce Ukrainian resistance and determination to maintain sovereignty and protect their way of life. In contrast, this level of collective action and determination is not as evident in Russia, where people are less inclined to defend their rights, even against their own government.

You lived in Georgia for some time and worked in banking there. And you moved there right before the Russian invasion of Georgia. How did it impact your experience as well as the whole private sector in Georgia?

First and foremost, I was struck by the willingness of Russians to invade other countries, a realisation that was both clear and shocking. The events unfolding, such as the invasion of Georgia, seemed almost surreal. While the Georgians were aware of Russian troops on the border, the actual invasion caught many by surprise. There’s a prevailing sentiment that such actions simply shouldn’t occur in today’s world. It goes against established norms, international institutions, the rule of law, and basic moral principles. The idea that one individual with imperialistic ambitions can mobilize an entire society to invade another is deeply troubling.

In the case of Georgia, the situation was dire. It’s a much smaller country with limited resources and manpower, making it difficult to resist Russian aggression effectively. The Russian forces only halted about 40 kilometres outside of Tbilisi after advancing through Gori and laying siege to it.

From a business perspective, the immediate response was crucial. We quickly learned the importance of communicating with clients to keep them informed. Operating in a vacuum only exacerbates uncertainty, which is detrimental to business. Ukraine’s approach of sharing information transparently, with President Zelenskyy and his senior team being accessible through videos, was commendable. Such actions help alleviate fears, especially for those who are distant from the war zone. Similarly, in business, it’s imperative to reassure clients, informing them about the situation and assuring them of the safety of their deposits.

After the Russian forces withdrew and returned to Abkhazia, where they were stationed, business operations resumed. While a portion of the country remained occupied, life and business had to continue as best as possible. In such situations, moving forward becomes the only viable option.

You were also partially working in Ukraine at that time. Did you see any differences in how the private sector was developing in Ukraine versus Georgia?

That’s an excellent question. There are two key factors to consider here. Firstly, during the early years of the Saakashvili administration, Georgia pursued aggressive reforms aimed at catalyzing significant changes. While all post-Soviet countries inherited the structures of the former Soviet Union, including laws, regulations, processes, and mentalities, Georgia took proactive steps to overhaul these systems much earlier. Around 2005 or 2006, they initiated bold reforms, such as the mass dismissal of the entire police force in a single day to combat corruption. They also addressed issues like patronage within the university system and simplified the tax structure, condensing 70 taxes into six easy-to-understand categories. These fundamental reforms garnered international attention and propelled Georgia up the Global Index of Doing Business rankings, making it one of the most accessible places globally for doing business by around 2008-2009.

In contrast, Ukraine’s reform efforts were slower due to its larger size and complexity. With a population of 40 million compared to Georgia’s 4 million, Ukraine faced greater challenges in implementing sweeping changes across diverse regions and industries. While Ukraine possesses a more extensive base for business and a highly skilled workforce, including expertise in agriculture, metallurgy, machinery, sciences, and technology, its growth trajectory didn’t experience the rapid spike in international recognition seen by Georgia.

However, it’s essential to recognize that each country starts from a unique baseline, and growth trajectories vary over time. Poland, for example, experienced significant growth post-Soviet era, while Georgia saw its peak in the early 2000s. Looking ahead, there’s optimism that Ukraine will experience a similar surge once the current conflict subsides. Increased awareness and integration with the West, along with a deeper understanding of Ukraine’s potential, are expected to contribute to its long-term growth and development.

One of your significant roles in Ukraine was in UkraineInvest, a government office promoting investment into Ukraine. What did your job entail there?

We began with a team of seven or eight individuals, which eventually expanded to over 20 people. The primary purpose of our office and its role was to serve as a voice for Ukraine to the global community. Our focus lied in publicising business opportunities within Ukraine and making the country more comprehensible for those interested in engaging with it. Investment promotion offices are commonplace in many countries, so our initiative wasn’t unique in that sense.

When our office was established, it coincided with Ukraine’s emergence from the aftermath of the events in 2014. The year 2015 was relatively quiet, but by early 2016, we witnessed a resurgence of activity. Therefore, the launch of our office in 2016 was timely. It served as an entry point for individuals researching Ukraine and provided a platform to disseminate information about Ukraine to a global audience, thereby amplifying our country’s presence on the international stage.

How did the full-scale invasion change the public interest about Ukraine within the investment circles and foreign investments specifically?

Before delving into the impact of the full-scale invasion on public interest within investment circles, it’s important to note the significant growth period Ukraine experienced, particularly in the tech sector, between 2015 and late 2021. During this time, the tech sector exhibited remarkable growth, boasting a compound annual growth rate of 22-23 percent, a notable achievement in any industry. Tech had become a significant contributor to the gross domestic product, accounting for nearly 5 percent of it. Additionally, Ukraine continued to offer tremendous opportunities in sectors such as agriculture, metallurgy, and automotive manufacturing, particularly in regions like western Ukraine where international companies, including German and Japanese firms, were establishing factories.

Moreover, the introduction of visa-free travel for Ukrainians within the Schengen zone further fueled optimism and entrepreneurial spirit. The newfound freedom to travel abroad inspired many Ukrainians to return home, bringing with them innovative ideas and initiatives. This wave of returning talent led to the emergence of small and medium-sized businesses across various industries. As a result, Ukraine’s economy began to show signs of diversification, with a greater emphasis on the growth of small and medium enterprises (SMEs), which are typically the backbone of most economies.

However, following the onset of the full-scale invasion, there has been a noticeable pullback in foreign investments into Ukraine. Investors, understandably, seek stability and a clear path for growth before committing capital. While there is still interest in investing in Ukraine, particularly in the tech sector, where the investment is more intangible and less susceptible to physical risks, traditional foreign direct investment (FDI) has faced challenges due to the ongoing war. Despite this, there are signs of resilience and adaptability within the Ukrainian business community, especially in the tech sector, where remote work and adaptation to challenging circumstances have become the norm.

It’s crucial to distinguish between humanitarian aid and long-term investments. While aid and donations are essential for immediate relief efforts, investments focus on long-term growth and require stable conditions. Despite the challenges posed by the war, Ukraine continues to operate and move forward, driven by a vibrant and determined workforce with a clear focus on the future. Thus, while the headlines may paint a grim picture, the reality on the ground reveals a country that remains resilient, forward-looking, and inspiring in its pursuit of progress.

In terms of investment, what are some other risks apart from the war?

One of the words that come up when people inquire about Ukraine is “corruption”. Over time, I’ve found myself probing deeper when confronted with this question, especially from Westerners, as the term “corruption” can hold different meanings depending on the context. Many Westerners associate corruption with the fear of being extorted or coerced into paying bribes, which was a prevalent concern, particularly during the Yanukovych administration. However, Ukrainians typically define corruption as individuals in positions of power exploiting their authority for personal gain.

It’s essential to acknowledge the significant strides Ukraine has made in combating corruption. Mechanisms such as the business ombudsman office and regional administration channels have been established to address such issues. Additionally, there’s a strong civil society impetus to call out corruption whenever it’s encountered. Yet, the continuous emphasis on corruption by Ukrainians, while imperative for accountability, has inadvertently perpetuated a negative perception abroad.

In truth, corruption exists globally, albeit to varying degrees, and Ukraine is no exception. However, the level of discourse and attention given to corruption within Ukrainian society far exceeds that of many other countries. It’s crucial to recognize that significant improvements have been made, and the challenges foreigners once faced regarding corruption have significantly diminished.

For instance, digitization efforts by the government, such as the Diia platform, have streamlined processes and reduced opportunities for bureaucratic corruption. Moreover, companies operating in Ukraine have adopted a zero-tolerance policy towards bribery, which has further mitigated corruption risks. Thus, while corruption remains a topic of discussion, it’s no longer the overwhelming obstacle it once was.

In sum, distinguishing between the perceptions of corruption held by Ukrainians and Westerners could facilitate more nuanced discussions. Finding alternative terminology to differentiate between coercive corruption and bureaucratic inefficiencies would enhance communication and foster a clearer understanding of the progress Ukraine has made in addressing this issue.

In terms of government policies, you named a lot of these bureaucratic things that Ukraine managed to eliminate in the last couple of years, even before the full-scale invasion of Russia. What other policies Ukraine should implement to bring foreign investment and make this environment more favourable for foreigners?

It’s true that governments can only do so much to incentivize investment, as businesses seek opportunities globally based on factors like tax rates, workforce availability, supply chain logistics, and market proximity. Despite these challenges, Ukraine has been actively working to create a more investor-friendly environment. Initiatives such as Ukraine Invest continue to support investors, while regional efforts focus on highlighting unique opportunities and advantages in specific areas.

However, the lingering physical risk associated with the war remains a significant deterrent to potential investors. Until this risk is mitigated, attracting investment may continue to face obstacles. Nonetheless, some foreign companies, particularly those from neighboring countries, have recognized Ukraine’s potential and have made significant investments after thorough assessments and on-the-ground evaluations.

Indeed, Ukraine is often better appreciated by those who visit and experience it firsthand. Media headlines often distort reality, particularly concerning the unoccupied parts of Ukraine. Therefore, the most effective way to showcase Ukraine’s potential is to encourage people to visit and witness the country’s opportunities and vibrancy themselves. Such experiences often prove to be eye-opening and dispel misconceptions perpetuated by media coverage.

You also worked with the Ukrainian National Startup Fund. It’s a great government initiative meant to foster the startup field, specifically pre-seed and seed startups, and support the tech ecosystem. What are the key strengths and weaknesses of the Ukrainian startup ecosystem right now?

I am incredibly grateful to have had the privilege of witnessing the growth of Ukraine’s tech ecosystem. It’s been nothing short of spectacular. My involvement extended beyond government structures to spending significant time within the ecosystem itself — engaging with startups, tech clusters, and various stakeholders. I vividly recall a meeting in 2017 where members of the tech community lamented the absence of a Ukrainian unicorn. There was a collective desire to support the emergence of such companies, but we recognized that growth takes time.

Fast forward to the following years, and Ukraine saw its first unicorns emerge. Today, we boast eight companies that have achieved unicorn status. It’s a testament to the perseverance and ingenuity of our tech community.

There are several factors contributing to Ukraine’s success in the tech sector. Firstly, there’s a strong emphasis on education, particularly in mathematics, engineering, and computer science, which has produced a pool of talented individuals capable of solving complex problems. Moreover, Ukrainians’ resilience and ability to adapt and innovate in the face of challenges have fueled a culture of creativity and problem-solving across various sectors.

However, there are still areas for improvement. One such area is communication style. Ukrainians tend to provide more context and background in their communication, which may not align with the preferences of Western audiences who often seek concise and direct information. This has been a point of feedback from foreign investors and venture capitalists, emphasizing the importance of clear and focused messaging.

Additionally, navigating unfamiliar markets poses challenges for Ukrainian companies, as they may encounter language barriers, cultural differences, and unfamiliar regulatory landscapes. While this learning curve is typical for any company entering a new market, Ukrainian companies may face a steeper curve due to limited exposure to international markets in the past. Nevertheless, Ukraine’s tech sector continues to evolve and improve, and there’s optimism for continued growth and success in the future.

My next question was going to be about the common mistakes that Ukrainians make when they enter the new market, specifically the West. Is there anything from a business perspective that may still be different?

Ukraine has been generating some truly remarkable ideas, particularly in the areas we are currently considering for investment. There’s a wealth of innovation happening here that’s catching the attention of investors globally. However, it’s important to note that this observation isn’t unique to Ukraine. In many industries, including marketing and software services, there’s often a tendency to focus on incremental improvements rather than groundbreaking innovations. This is simply a natural part of the entrepreneurial journey, especially in the early stages of building a company.

One critical aspect that Western investors scrutinize is the cohesion and capability of the team behind the product. While it’s easy to become enamored with a brilliant idea or product, it’s essential not to overlook the importance of building a strong and capable team to execute the vision. A company’s success hinges not only on its product but also on the strength of its team. Therefore, it’s crucial for entrepreneurs to devote as much attention to building a robust company infrastructure as they do to developing their product. An imbalance in this regard can jeopardize the long-term viability and success of the venture.

What about leadership in startups? How important is it?

It always matters. There are three important factors. You need somebody brilliant in technology who is good at marketing and telling the story. But you always need somebody who is also a leader and a visionary. And sometimes, that leader can be one of these other two people. So it’s sort of the balance of the characteristics among people. But somebody will need to focus on building the company at some point. Not just on building the technology.

What are some Ukrainian startups whose stories or products you find fascinating?

I’ll be honest; I feel conflicted about that because I don’t want to play favorites. There are Ukrainian companies that have excelled and achieved unicorn valuation status. Many have seamlessly integrated into the Western market to the extent that people don’t even realize they’re Ukrainian, like MacPaw or Grammarly. However, we’re focused on companies at earlier stages of development. We’re not targeting those already established and thriving on their own.

Ukraine is producing some impressive fintech products, although they often fly under the radar as they tend to be acquired by larger entities like Goldman Sachs or Citigroup soon after their development. Yet, there are exceptions like Monobank, which is exceptional. Although it may not be classified as a typical tech startup since it operates within financial services, its success is driven by brilliant technology on the back end, representing a hybrid business model. The evolution of Ukraine’s tech ecosystem is intriguing. It’s often easier to build something new than to innovate an old system, a phenomenon recognized across various sectors, including telecommunications. This concept, known as leapfrogging, involves bypassing outdated systems entirely to create new solutions. Banking and telecoms have been prime examples of this approach. Having worked in large banks in New York and Georgia before coming here, I was surprised to find that even in smaller banks, like the one in Georgia, technology was more user-friendly and efficient, particularly in running reports and managing operations. This advantage stemmed from the ability to leapfrog over legacy systems, avoiding the complexities associated with integrating outdated technologies.

This forward-thinking approach is not only advantageous but positions Ukraine as a leader in creating new and innovative technologies. Take Diia, for example, and its success in modernising government services. Other countries are now considering adopting similar backend structures due to its effectiveness in Ukraine.

How can Ukraine foster that cooperation connection between the international tech ecosystems?

Ukraine is making significant strides in addressing its challenges and finding solutions. By focusing on creating perfect solutions that are easy to use, transparent, and cost-effective, Ukraine is naturally attracting attention and admiration. The ongoing digitalization process is poised to bring about even more transformative changes, particularly in how artificial intelligence (AI) is utilised. AI itself is neutral; its impact depends on how it’s wielded. Ukrainians have shown adeptness in countering challenges and innovating new approaches.

Transitioning to a related topic, one area of interest for us in terms of investment is Ukraine’s advancements in drones and space technology for defense and surveillance purposes. The onset of the war highlighted the need for such capabilities, and Ukraine has swiftly adapted, recognizing the potential of utilising drones for defense purposes and intelligence gathering. This demonstrates Ukraine’s proactive approach to leveraging technology for its defense needs.

Apart from drones, do you see any other disruptive technologies within the defense tech sector that you’re curious about from an investment standpoint?

We are focusing on what’s known as dual-use technology, which encompasses innovations with both military and civilian applications. Our investments are not centered on weaponry or explosive devices. Instead, we’re intrigued by developments in optics, artificial intelligence (AI), machine learning, data collection, and predictive analysis. These advancements extend beyond drones to include various components and navigation systems. While the end product may not always be singular or conspicuous, the components themselves hold promise and excitement for their potential contributions to various applications.

How do you see the cooperation between the Ukrainian defense tech and the Western defense tech in the future?

Many ministries and defense departments worldwide are closely observing the developments in Ukraine. There’s a widespread recognition that the nature of warfare has fundamentally changed, as demonstrated by Ukraine’s innovative use of off-the-shelf items to neutralise sophisticated military assets. This shift has shown that with relatively inexpensive technology, such as drones, it’s possible to effectively counter much larger and more expensive military equipment.

Ukraine’s defense sector has evolved significantly, with a focus on adaptability and agility rather than reliance on traditional military structures. The use of drones and other advanced technologies has introduced new challenges, including electronic warfare tactics like jamming and spoofing. However, Ukrainian forces have demonstrated remarkable proficiency in responding to these threats.

It’s clear that the war in Ukraine is not confined to its borders and may serve as a model for future military engagements elsewhere. The lessons learned from Ukraine’s defense strategies, which have led to the elimination of a significant portion of Russian military assets with relatively low-cost solutions, are likely to influence military doctrines and tactics worldwide, signaling a paradigm shift in modern warfare.

You opened a Venture Capital fund in Ukraine in 2023. Don’t your partners or business friends back home think this is a crazy idea? Or how do they look at what you do?

I have a long history in this field, having consulted for various international development agencies. This role necessitated maintaining a neutral stance on investment opportunities to avoid potential conflicts of interest with grant funding. However, last year, I connected with Justin Zeefe, my partner in this venture. His background resonated deeply with me: after over a decade in the U.S. government, he ventured into the cybersecurity intelligence sector, founding a company now advancing into its Series B funding round. Justin’s journey to Ukraine in April 2022, volunteering in medical supply distribution, profoundly impacted him. Having experienced conflict zones like Iraq and Afghanistan, he found the dynamics here uniquely different. Witnessing the solidarity and communal spirit among Ukrainians, he felt compelled to contribute further. Consequently, he chose to step back from his company’s day-to-day operations to establish a firm focused on investing in Ukrainian tech. This decision stemmed from both his expertise and a shared belief in the potential of Ukrainian companies to effect positive change. Our partnership reflects a rare alignment in purpose and long-term growth outlook. We’re privileged to offer not just financial resources but also mentorship, client introductions, and strategic guidance to Ukrainian firms, actively supporting their development.

And what kind of startups are you looking into apart from the ones you named already, in the field of dual-use defense tech?

We’re also exploring opportunities in cybersecurity, leveraging Justin’s expertise, as well as in fintech and cleantech or green tech sectors. Each of these areas presents promising prospects for investment. While we’re currently focused on dual-use technologies, we are aware of other exceptional companies making strides across various industries. For instance, I recently met with a company developing an elegant online marketing platform, which, although not within our investment scope, impressed me with its innovative approach and potential. This underscores the diversity of opportunities available in the Ukrainian market.

And what kind of exit strategies do the investors look to in the Ukrainian space?

Within defense tech or dual-use tech, different sectors offer varying potential for exits. The primary exit strategies typically involve the acquisition, continued growth, or going public. Going public is a longer-term option, usually taking 10 to 12 years. However, within defense or dual-use sectors, acquisitions or continued growth are more common exit routes. We’re particularly interested in technologies with civilian applications as they expand market potential beyond government or military use. For example, drones can be utilized for airport patrolling, firefighting, emergency rescue operations, and even delivery services like Amazon. The key is identifying innovations with dual applications that bridge both military and civilian markets.

As we wrap up, I’m curious, if you were to pitch Ukraine to someone unfamiliar with it — perhaps an investor or someone exploring opportunities in the tech industry or other sectors here — what would your pitch entail?

First and foremost, I would encourage you to visit Ukraine. Honestly and truly, it is the single best way to understand and experience this country. Ukraine is a bit challenging to explain because its beauty lies in its multidimensionality. From architecture ranging from pre-war to Soviet-era buildings and stunning remnants of the Habsburg Empire, Ukraine is an incredible mosaic of history and culture.

This diversity extends to the business landscape and human connections. Ukraine boasts remarkable religious tolerance, with synagogues and mosques alongside Christian churches. The people themselves defy reduction to a single description. They are open-hearted, open-minded, and forward-looking, embodying the best of humanity in how they care for themselves, their families, and each other. To truly grasp the essence of Ukraine, you have to experience it first-hand. Once you’re here, you’ll feel its spirit immediately. If you’re looking to explore without venturing too far, I recommend visiting Lviv, just a couple of hours over the border.