Investing in Ukraine

Lenna Koszarny on why today’s Ukraine is a ground-floor investment opportunity powered by “brains, hands, and grains”

Investing in Ukraine
About the interviewee: Lenna Koszarny is Founding Partner and Chief Executive Officer at Horizon Capital and Chair of the Board of Directors at the American Chamber of Commerce in Ukraine
Business Ukraine magazine
Monday, 19 July 2021 19:49

As Founding Partner and Chief Executive Officer at Horizon Capital and Chair of the Board of Directors at the American Chamber of Commerce in Ukraine, Lenna Koszarny is one of the most prominent members of Ukraine’s international business community. Born and raised in Ontario, Canada in a Ukrainian diaspora family, Koszarny first came to Ukraine in 1993 with her grandmother and mentor, Babusia Olena. She has remained active in the business life of the country ever since. As Ukraine marks thirty years of independence, Koszarny sat down with Business Ukraine magazine to discuss key milestones in the country’s economic evolution, Ukraine’s competitive advantages as an investment destination, and why she’s so excited about the Ukrainian tech sector.


Ukraine celebrates thirty years of independence this summer. What strike you as the most significant developments in the evolution of the Ukrainian investment climate during this period?

The most significant developments over these thirty years have been creation of a market economy from scratch; banking sector reform; the building of strong financial institutions – including the National Bank of Ukraine and Ministry of Finance – enabling close cooperation with the IMF and Ukraine’s bilateral partners, resulting in the macroeconomic stability that exists over the past five years; signing and ongoing implementation of the Deep and Comprehensive Free Trade Agreement with the EU, and related EU-Ukraine Association Agreement which are catalysts for Ukraine’s pivot to EU as its No. 1 trading partner.

Of great importance is the rise of tech and its significant impact both in the private and public sectors. Exports of IT services have grown from a USD 110 million industry in 2003 to USD 5 billion in 2020, with over 200,000 IT specialists driving this growth – the largest IT labor force in Europe. Rapid digitalization is also notable in the public sector. Under the leadership of Mykhailo Fedorov, Deputy Prime Minister and Minister of Digital Transformation, Ukraine is the first country globally to fully legalize digital passports and the fourth in Europe to issue digital driver’s licenses. Today, over 10 million Ukrainians use the country’s digital app, Diia. Online business registration may be completed in less than one minute via Diia, and the business community is working very closing with MinDigital to develop and launch Diia.City, which is expected to result in Europe’s most attractive tax rates of circa 7% for its tech/creative industry residents.

Finally, my personal dream has always been for Ukraine to develop capital and organized commodity markets. Ukraine deserves modern capital markets to leverage its strength in agriculture, commodities, tech and much more. Ukrainian companies deserve strong domestic markets that they can list on to access domestic capital. Ukrainians deserve to be able to invest, earn residual income, and save for their futures through listed shares of Ukrainian companies and instruments on Ukrainian exchanges. Today, people dream of owning Apple or Amazon stock. One day, I hope they will dream of backing Ukraine’s champions. In June 2021, the Government of Ukraine, EBRD, USAID and AmCham signed an MoU to develop a model for trading in capital and organized commodities in Ukraine, called NEXT-UA. With focus, hard work, and cooperation, I am confident that we will be able to look back and trace multiple “Made in Ukraine” IPOs to the signing of this MoU.


Your Ukrainian heritage and strong family ties to the country no doubt played a key role in persuading you to move to Ukraine in the 1990’s. What convinced you to stay?

The first time that I came to Ukraine was in August 1993 with my grandmother, which was a dream of mine since Ukraine gained its independence in 1991. I was a graduate of the Ivey Business School at the University of Western Ontario, had obtained my CPA, and was enjoying a successful career at Coopers & Lybrand (now PWC). During my three weeks in Ukraine, I fell in love with this beautiful country and its generous, talented, wonderful people and decided to join a technology fund and move to Kyiv.

What compelled me then and continues to inspire me today is my desire to live a mission-driven life driven by passion, purpose, and pursuit of excellence. Ukraine has transformed immensely since 1993, in particular in the global mindset of the new generation, and it is this new generation of visionary entrepreneurs who inspire me the most today, especially those focused on tech and cutting-edge opportunities.

It is extremely rewarding to contribute to the success of the visionary entrepreneurs whom we back and the successful companies that we invest in. I am also proud of our significant contribution to the development of Ukraine, including attracting new institutional and foreign investors to the country, creating jobs, and expanding trade opportunities for Ukrainian companies globally, which leads to increasing the prosperity of Ukrainian citizens.


During your time in Ukraine, the Ukrainian economy has gone through a prolonged period of rapid and often dramatic change. Which aspects of this transformation have surprised you most?

I remember arriving at my place of work in Zhovti Vody in December 1993. Computers were a rarity; much was done in a manual way. There were many people creating the impression of being busy with little access to technology and poor efficiency and productivity levels. It was definitely a very different business environment than today’s Ukraine which is powered by a technology boom and, in terms of digitalization of banking and government services, is much more sophisticated than in the West.

While the economy has been impacted by external shocks impacting countries globally, including the financial crisis of 2008 and the Covid-19 pandemic that began in 2020, country-specific events have had an enormous impact on Ukraine’s economy. These include the major economic and investment expansion witnessed in the years following the 2004 Orange Revolution and then the huge contraction, followed by economic rebound, after the 2014 Revolution of Dignity.

What has surprised and impressed me most is how resilient Ukrainians are in times of crisis. Ukrainians were determined to forge a future in Europe, pursuing a democratic path with greater EU and Euro-Atlantic integration despite this trajectory requiring difficult and painful structure reforms. The rise of volunteerism, of everyday Ukrainians taking responsibility for their communities and country – whether running for public office, joining the government, starting SMEs or NGOs – this is truly transforming the country for the better.


Ukraine is often depicted as a land of vast untapped potential. Which sectors of the Ukrainian economy currently offer the most exciting investment opportunities?

We are tremendously excited about the tech sector, including digital services, product platforms as well as telecom infrastructure, and high-growth sectors including e-commerce, retail, and many more. This focus on high growth sectors has propelled Horizon Capital to over USD 1.1 billion under management and USD 800 million invested in Ukraine and the region in over 150 companies that employ more than 57,000 people, and catalyzing USD 2.2 billion of capital to the region.

Today, 60% of the assets in our latest fund are in the tech sector. Based on the Digital Ministry’s estimates, this sector is expected to grow from USD 5 billion to USD 17 billion a year, representing 10% of GDP and 450,000 jobs by 2024. The high growth of the tech sector powers the impressive growth we see in our portfolio, which is delivering median revenue compound average growth rates (CAGR) for 2016-2020 of over 35%, with four companies growing over 100% over the same period.

Our tech investments include Genesis, an online media company focused on frontier markets that has successfully spun-out Jiji, BetterMe and many more success stories; Intellias, providing advanced software engineering and R&D services; Ajax, smart home security system manufacturer; and one of our most recent investments, Creatio, Inc., a global developer of low-code software leveraging its market-leading position and strong Ukraine-based platform to achieve impressive product reach into 110 countries worldwide.

Of course, IT platforms need solid telecom infrastructure, thus we were truly thrilled to back leading broadband fiber operator Datagroup in acquiring Volia in May 2021 in a landmark transaction financed with USD 65 million provided by the EBRD, and further enabling Datagroup to launch a USD 20 million network modernization based on Cisco equipment, under the leadership and guidance of Mikhail Shelemba, CEO and fellow shareholder.

E-commerce is extremely hot, both generalist e-commerce platforms as well as niche e-commerce. We are delighted to invest alongside visionary entrepreneurs who are transforming their sectors and the country, including Vladyslav and Irina Chechotkin, founders of Rozetka, and Mykola Palienko of EVO, who have made Rozetka-EVO Ukraine’s No. 1 e-commerce and online marketplace champion. We are proud to back MakeUp, the fast-growing e-commerce leader in the beauty segment with a successful track record of international expansion to 14 countries led by Serhii Volobuiev. One of our latest e-commerce investments is in Liki24, a platform for medicine delivery, recently expanding from Ukraine to Poland, founded by Anton Avrinsky.

Finally, we have recently re-entered the offline retail space, investing in July in Avrora, a leader of the dollar store retail segment in Ukraine. This investment will accelerate roll-out of new stores in Ukraine from 650 today, expand logistics infrastructure, and finance Avrora’s entry into new regional markets. We see Avrora as an exciting future IPO story, capitalizing on the appeal of the dollar store retail format globally.


What competitive advantages does today’s Ukraine offer as an investment destination?

We view Ukraine as a ground-floor opportunity powered by “brains, hands, and grains,” specifically IT, manufacturing, and agriculture. Ukraine has numerous competitive advantages as a large country with over 40 million well-educated citizens, with competitive labor and manufacturing costs powering multiple high-growth sectors. Its proximity to

Europe, only 2 truck days away from European capitals, while also having 19 free trade agreements in place with 47 countries, position Ukraine as a strategic hub to the EU, Middle East and Asia. The country offers a huge growth opportunity relative to peer countries with a significant consumption gap vs. peers in basic categories, from e-commerce to pharma; and a major consumption gap in select categories such as life insurance and parcel delivery.

Since 2018, Ukraine has risen 12 places in the World Banks’s annual Doing Business rating to number 64 globally ahead of countries such as Greece, Qatar, Columbia, Brazil, and Argentina. In 2020, Ukraine reached forty-fifth place in the Global Innovation Index in front of India, Turkey, Brazil, Romania, and Russia. In 2021, Ukraine rose to thirty-sixth out of 165 countries in the Sustainable Development Goals Index.

Of course, the most important advantage that Ukraine has is its talented people. From our vantage point, this means the visionary entrepreneurs that lead the success stories making headlines globally. These include Jooble founders Roman Prokofiev and Yevgeniy Sobakarev, who built the number two job aggregator in the world, second only to Indeed; Oleksander Konotopskiy of Ajax, the home security systems manufacturer shipping to over 90 counties; Vladimir Mnogoletniy, of Genesis, a venture builder which has launched Jiji, the dominant online marketplace in six African territories, and also BetterMe, one of the fastest-growing health and fitness apps in the world led by Victoria Repa, and many others.


In the three decades since gaining independence, Ukraine has consistently under-performed compared to the country’s Central European neighbors in terms of attracting international investment. What needs to be done in order for Ukraine to catch up with neighboring EU member states?

As Chair of the Board of Directors at the American Chamber of Commerce in Ukraine and in our role as the voice of over 600 members, what is most important to attract significant international investment to Ukraine is political will, trust, transparency, and rule of law. These fundamental requirements, along with protection of investor rights and predictable and stable taxation, monetary and fiscal policies, are truly “must-haves” for Ukraine to attract significant private sector investments which are essential to its long-term economic stability and prosperity.

During the Ukraine Reform Conference held in July 2021 in Vilnius, Ukraine’s bilateral partners communicated the need for Ukraine to prioritize “rebooting the judiciary and anti-corruption institutions,” “implementing transparent corporate governance,” “guaranteeing rule of law,” and “de-oligarchization.” Investor sentiment echoes that of Ukraine’s bilateral partners. According to the latest survey by AmCham together with Citi, lack of rule of law (66%), corruption (54%), and lack of bold reform agenda (45%) were identified as the top three obstacles to doing business in Ukraine.


What’s your life credo and key principles in life and work?

My main credo, one that we often speak of at Horizon Capital, is “start with the end in mind” then “leave no stone unturned.” Most people focus on where they are and then take steps from this point when moving forward. Personally and professionally at Horizon Capital, we start in the future and work back. Starting with a bold vision and then working back provides a strong road map for what needs to be done to realize your vision. Once you have set a bold vision then “leave no stone unturned” to realize this vision.

This is fundamental to both my approach to life and professionally at Horizon Capital. Every six months, our partners and core team come together to review our vision, mission, principles, and set the strategic road map for realizing our renewed vision. The 13-room chateau at Purcari wineries in Moldova, a company that we led to IPO in Bucharest and then re-invested from our latest fund based on their exciting growth plans, is perfect for these sessions. Once we have together aligned on our vision and key milestones to reach along the way, each of us has full freedom to contribute our unique talents and skills to ultimately achieve the seemingly impossible. This is where a third credo comes in, “focus is power.”

We are thrilled about what we have achieved together, though we are more excited about what the future brings. Onward and upward!


In your professional life, you often come into contact with international investors. What aspects of Ukraine do investors tend to be most interested in and how have perceptions of the country changed over the years? What do you regard as the most effective means of raising Ukraine’s profile and getting the country onto international investment radars?

Ukraine is already on the map for global investors, and this is largely the result of “made in Ukraine” global tech companies such as Grammarly, Reface, Jooble, Genesis, BetterMe, Jiji, GitLab, and more.

At Horizon Capital, we encourage investors to look past the headlines and understand that investing while others are waiting on the sidelines enables accessing outsize investment opportunities with high return potential. What is most impactful is for investors to travel to Ukraine and experience the country directly. The intellect, tenacity, ingenuity, and resilience of the Ukrainian people will definitely impress. Coming to Ukraine will enable investors to see for themselves that the country is transforming powered by its new generation. Today, Ukraine is indeed attracting investor attention among those willing to look beyond headlines and find opportunities with strong fundamentals, companies led by entrepreneurs with a global reach, and cost-competitive platforms powered by talented Ukrainian professionals.


In your roles at Horizon Capital and the American Chamber of Commerce in Ukraine, you regularly engage with many of the country’s most successful businesses. Are there are particular features that these individual businesses all have in common?

The American Chamber of Commerce in Ukraine has over 600 members who have invested more than USD 50 billion in Ukraine and remain committed to the country. What our members have in common is strong principles, a commitment to transparency and corporate governance, exemplary leadership, and visible contributions to the country and to individual communities. We often say that AmCham member companies are the best ambassadors for doing business in Ukraine and they truly are.


What is your advice to anyone considering Ukraine as a possible investment destination?

Go beyond the headlines. Travel to Ukraine and make your own judgment. Find partners whom you trust and build a long-term, mutually-beneficial relationship with them. Join forces with other like-minded people by becoming a member of AmCham, thus contributing to improving the business and investment climate for all. Be part of the transformation of Ukraine, and reap the rewards of doing so.


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