Yuriy Fylyuk, the CEO and founder of the Promprylad.Renovation project, co-founder of the urban platform Teple Misto, entrepreneur, restaurateur and civic activist, spoke about impact investing, businesspersons’ “karma” and the development of “world cities” that are using the ideas from Ivano-Frankivsk.
LDaily: You are actively developing the Ivano-Frankivsk city. Please, tell us more about the Teple Misto project.
Y. Fylyuk: This is a platform for integrated city development, whose goal is to activate the city in a modern way by bringing together various participants. We teach, draw public attention to problematic issues, try to increase social activity and develop solidarity.
The Teple Misto platform is now almost six years old. During this period, we have implemented more than 400 projects aimed at the development of modern education, art, new economy, urban science, sports, ecology, energy efficiency, media, and social entrepreneurship.
LDaily: What other projects have you implemented in Ivano-Frankivsk or other cities? For example, what about Kyiv?
Y. Fylyuk: We focus our activities mainly on Ivano-Frankivsk. However, we are an open-source platform and try to create social transformation models across different sectors through engagement. This experience can be later implemented in other cities and even countries.
One example is Urban Space 100. It is a community restaurant opened thanks to bringing together 100 people. Each of the founders made a one-time non-refundable contribution of $1,000. Thanks to this common investment, we have opened a catering establishment. 80% of the profits are reinvested in various development projects throughout Ivano-Frankivsk. Today, we have over 300 franchise requests or replicates of this model in other cities and countries. We have received requests from San Francisco, Berlin, Kuala Lumpur, Toronto, New York, etc. Today, the only current operational franchise is in Kyiv – Urban Space 500. We are planning to open the next one in Mariupol. If everything goes well, we will soon start gathering participants for that project.
Teple Misto has several projects that started on the platform as community initiatives and eventually grew into full-fledged businesses. For example, the Frankivsk Half Marathon, which has been held for six years in a row. It has now been transitioned into a semi-commercial independent project.
Our goal is to activate different environments, social movements and businesses that already exist in the new paradigm. All of them are part of a wider ecosystem. Teaching other participants to interact with each other constructively is the mission of the Teple Misto platform.
LDaily: How was the idea of creating Urban Space 100 born? What were your main tasks at the beginning?
Y. Fylyuk: Urban Space 100 is an unusual place – it combines business and community. The idea appeared by chance while chatting with friends over a cup of coffee in Ivano-Frankivsk, and within a year, Urban opened its doors to visitors.
The first task was to create a civil society support and development fund, essentially a grant program. More than 100 projects have already been funded. Over five years of its existence, the Urban Space 100 has supported 113 projects totaling more than 2.8 million UAH.
The second task was to create a place where proactive people can gather together and where various activities can take place. This is the point of activating society in the public space.
The third task was the precedent of uniting 100 Ukrainians in order to implement a common plan that has been systematically generating common added value for five years.
LDaily: How did you get people involved in the projects? Was it that easy?
Y. Fylyuk: The idea was simple yet sophisticated. It was like: “We are building a restaurant and are looking for 100 co-founders, and then they decide which projects of the city development will be funded by 80% of the profit”.
We had a website with 100 blank cells on its homepage. During our launch press conference, we showed the first seven friends who took part in creating the idea and confirmed their participation. Next, we announced that we are looking for 93 more partners to work with us.
In my opinion, our offer tapped into a “romantic” ideal – anyone could become a co-owner of a restaurant by investing just $1,000. At the same time, from a legal standpoint, these 100 people became members of a non-governmental organization specifically created for the Urban Space 100 project. In turn, this NGO was the sole founder of a limited liability company that was an active business entity. None of the founders has ever received any dividends. That is, for $1,000 you buy a unique ticket to participate in the project with the possibility of further voting on projects to be funded. This happens due to the decision making within the general meeting of other participants.
LDaily: Are other mayors seeking advice from you on the development of their cities?
Y. Fylyuk: Many people ask for advice including mayors. These progressive people understand what modern development of territories is. So, such communication occurs from time to time.
LDaily: So, what’s next? Are there some projects implemented in cities?
Y. Fylyuk: All our efforts are now focused on the specific geolocation of the Ivano-Frankivsk region. However, as an open-source system, we spend at least 30% of our resources on sharing experiences in different ways. People often visit us or invite us to participate in conferences, forums or professional events. Therefore, we are not directly involved in projects outside Ivano-Frankivsk so far.
LDaily: So far. What about your plans for the future?
Y. Fylyuk: Everything is possible. We want to grow and develop naturally. The mission of the Teple Misto project is to create social development models that can be tested in Ivano-Frankivsk and could be implemented anywhere. It is important that they later take root in other cities of Ukraine. Our first precedent had a good effect. It is crucial that at least one person demonstrate principles, approaches and tools can be used. So, we are focused on these tasks at the current stage in the evolution and development of our platform.
LDaily: Could you please tell us about Promprylad.Renovation?
Y. Fylyuk: Today, it is our most ambitious project that is exactly four years old. We were looking for the next big step in the development of Ivano-Frankivsk and decided to focus on Prompribad. This is an area of 2 hectares in the center of Ivano-Frankivsk. The total scale of the project is approximately 40,000 square meters of infrastructure, which we are transforming from an old semi-abandoned factory into an innovation center. We are developing an ecosystem at the intersection of four major areas – non-formal education, contemporary art, the new economy, and urbanism.
We are creating an infrastructure to support multiple functions. First, it is a place for offices of modern companies that create high added value: incubators, accelerators, a food market, a children’s development center, art galleries, MakerSpace, etc. The project will house a technology laboratory, multifunctional event venues, forums, art events, and so on.
All this should completely reinvigorate the city and region; drive it from the post-Soviet context to the modern era. Promprylad.Renovation has the potential to connect the region with global markets in every respect. This should help us create the preconditions to attract and retain talented young professionals so that they do not leave Ivano-Frankivsk. This is a problem for almost all small towns in Ukraine. Unfortunately, talented professionals flow to Kyiv or even leave Ukraine. even leave Ukraine. even leave Ukraine. The slogan “There are 52 million of us” is not relevant anymore. However, this is not a tragedy, and people can return, but we must create the right conditions to attract them.. We have a project that combines social and economic objectives; it is attractive to invest in, and at the same time, solves important social developmental tasks.
The project is officially included in the Ivano-Frankivsk development strategy, as well as in the list of landmark projects – “Magnets of Ukraine” – which is a direct initiative of the President and the Prime Minister.
LDaily: You call it an impact project. What does “impact” mean in this context? Why did you choose this model?
Y. Fylyuk: Impact investing is a new financial trend. People have used such tools before. The world has been lately focusing on a paradigm where a business is the main indicator of efficiency. Long story short, it is about how much one square can maximize the value-added per unit of time? Don’t ask me how we do it.
Business is evolving and the question is: “What do we want to introduce to this world”? Let’s say, one-tenth of the profits is donated to charity or social development. This is the second extreme point – the charity market with its donors and civil society organizations that are curators. Still, this compensatory approach can’t solve the number of problems arising not locally but globally – environmental and social challenges, post-truths, populism, etc. This approach is no longer working for these issues. We can consider the example of a tobacco company that creates a fund to fight cancer and says that 10% of their profit goes to the fund. A new paradigm says: Let’s try working without these extreme positions! We should look for new forms that will simultaneously combine a dual performance system.
First, we do not initiate new issues but immediately do what organically fits into the ecosystem and meets the standards of the United Nations’ global development goals.
Second, it must still be business. Public projects have a common problem – they are not in the system, they are not self-sufficient or sustainable. Money runs out, and this is a vicious circle, they need to look for new sources of money again. Of course, this market has its pros and cons. Still, it has to be economically self-sufficient and profitable.
And the last criterion – they should have a specific measurable effect of social development or environmental influence.
The impact investing trend was created in the USA. We learned about this trend at Stanford. Interestingly, we have been involved in the project for two years from the moment we had been informed about what impact innovation is. We now understand what falls into this category and can explain how it works. We had a similar situation with Urban Space 100. We opened it, and someone called it a social enterprise. These were intuitive decisions for us. We were looking for ways to solve specific problems. We found a solution, and it turned out that it corresponds to certain global trends.
Thanks to this, Promprylad has many international partners interested in the project not from the standpoint of a classic Ukrainian development project, but from the perspective of keeping Ukraine afloat. Investors are interested in expertise. They say that we are building a circular economy with an inclusive social responsibility. The international community often states that the developed world is entering a turbulence phase. This is the beginning, and we are “children of turbulence.” We were born in conditions of constant instability and we are now living in them. Promprylad has a diversified system – more than 400 co-investors and 13 different foundations and institutions supporting it. There is also absolute transparency in terms of doing business and compliance with all international standards.
It is also noteworthy that our built-in social component provides a sense of shared pride. If you ask: “Who is the new owner of Promprylad?” the answer in a broad sense is “society”. However, this society has very clear boundaries of responsibilities and shared interests. Investors, NGOs, foundations, and everyone have their interests. All of this combines to provide the project with a fairly high level of sustainability, especially in the face of our political and economic risks. We are sufficiently resilient, so people invite us to various international discussions. Our project has the SRI International Stanford Institute’s expertise. We are the SRI’s first experience cooperating with a post-Soviet country. SRI is a billion-dollar enterprise that specializes in creating innovative ecosystems for further capitalization. They noticed something useful and valuable here.
LDaily: Did they find and contact you?
Y. Fylyuk: I am not sure of this. At first, they somehow found out about us. Then we started communicating with them. We have been negotiating for half a year. When they had learned enough about the project, they agreed to cooperate. They did three types of research for us: a macroeconomic analysis of the region (to identify emerging sectors to activate), a design of the Promprylad ecosystem, and a basic business plan.
LDaily: What advantages and disadvantages of the model of impact projects can you mention?
Y. Fylyuk: The main advantage is the direction in which all traditional business should evolve. A few years ago at Stanford, we saw that even classic and venture funds, in addition to the three classic metrics – risks, liquidity and return on capital – add impact as a necessity.
The essence of impact investing is that companies need to fit their product into the ecosystem in a broader sense – they need to think more globally. Otherwise, they will simply lose the competition and leave the market. This is a question of viability. Everything is coming to our country a little late, but on the other hand, not everything is now moving along the classic linear evolutionary trajectory. Unexpected things are now born in unexpected places. I believe we can set these trends. Actually, the external interest in Promprylad is proof.
As for the disadvantages, such projects usually have slightly lower profitability from a commercial point of view. Nevertheless, this is paid off by higher stability and positive karma. It is a pleasure to invest in something that you are not ashamed but proud of.
LDaily: How did you raise money and what was your budget for the project?
Y. Fylyuk: Our overall budget is $30 million. $5 million from this budget is to be raised by grant funds, and $25 million in commercial investment. As of today, we have raised the first $5 million (125 million UAH) from the first emission, which we have sold out. Additionally, we have raised about $800,000 in grants. Over the next four years, we will raise all this financial volume that will be used for a gradual reconstruction. We have already purchased the plant. So, we own it and will gradually reconstruct and develop it. In the following stages, we will use different financial tools, be they credit resources or part of the reconstruction granted by partners.
LDaily: And who are the investors?
Y. Fylyuk: Let’s start with motivation. Almost all of our investors understand that they are getting involved in a major transformative project. It is not a regional or even national project – it is international. We will implement it in Ivano-Frankivsk, and then it will be franchised in other cities. The second point is commercial motivation. The project has great potential and capitalization, a market rate of return that is competitive with traditional, investment projects. So, either this balance or the combination of interests is a good motivator.
Our investors are very diverse people. The minimum investment in the project is $1,000. Professional investments start from $100,000. Among our investors are MacPaw, two partners Viacheslav Klymov and Volodymyr Popereshnyuk from Nova Poshta, Andriy Fedoriv, Volodymyr Shapovalov from Goodwine, Ihor Lisky, Taras Lukachuk, HD Group, CAPS Business School. What’s more, we cooperate with the governments of Sweden, Canada, the Renaissance Foundation and others for grant support.
LDaily: What companies are ready to have their offices established?
Y. Fylyuk: Today, we have commissioned the first 5,800 square meters. And we currently have requests for more than 60,000 square meters. These are different companies, some of them are from Ivano-Frankivsk, Lviv, Kyiv, and some are international companies, which names I can’t reveal. These are mainly innovative companies that create new added value and meet our defined cluster areas. There are several areas including eco-farming, agriculture and technology in agriculture; food, and food technology; information technology; design; the wood industry and everything related to it; green energy; film industry and animation.
We are open to cooperation in these areas. Maybe seven is really many. We are testing them now, and as a result, we have to turn three of them into a common regional cluster direction.
LDaily: Finally, could you please share your plans for the future?
Y. Fylyuk: We are now in the active phase of project implementation. According to our business plan, we plan to phase out and fully launch the project over the next four years. Of course, we understand that at least every regional center has the potential to create such “lights of regional activation”. So, we are looking for ways to best convey our experience so that similar projects start emerging in other cities. I am convinced that many new ideas will be born through local collaborations. And Promprylad is the place where these new projects and ideas will be born and developed.
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