Lustrated Ukrainian naval officer founds startup to equip army
Navy man Igor Kabanenko, 55, dedicated over 30 years to his military career. Now out of the military, he’s gone into business with a startup to produce military equipment.
His career had its ups and downs: in December 2013 former Ukrainian President Viktor Yanukovych transferred Kabanenko to the reserves on medical grounds — right after the Security Service of Ukraine accused him of disclosing state secrets in October of that same year.
Later, Kabanenko was a volunteer during the Euromaidan Revolution, and soon after reentered the Ukrainian military as a deputy defense minister. But when Verkhovna Rada passed a bill on lustration in September 2014, he was among the first to lose his post.
While the official reason was “occupying a high position during the Yanukovych regime.” Kabanenko thinks professional, rather than political, motives were behind his removal.
Out of the military again, he co-founded a tech startup that produces innovative security technologies.
“I have not changed my principles,” Kabanenko told the Kyiv Post in an interview. “My goal is still to defend the country.”
Kabanenko’s startup, called UaRpa, produces high-tech military gear, including battlefield control and intelligence equipment, and training simulators, with the aim of “improving the army’s performance.”
“We’re doing our best to support the troops – we understand that in a war we can win only with help of technical resources,” Kabanenko said. Only a professional army can gain victory, but “it isn’t enough just to hire contractors. In order to win, they need to have technological superiority.”
Igor Kabanenko speaks to the Kyiv Post during the interview on March 31 in Kyiv. (Photo credit: the Kyiv Post)
The idea for UaRpa started to grow in mid-2014, when an IT volunteer group named Army SOS developed software that digitalizes topographical maps, which can then be transferred to tablets, and then used by commanders to maintain tactical control over troops in the battlefield. The software runs on tablets with the Android operating system.
“I was among the volunteers at that time, and I talked with many of them,” Kabanenko said. As a volunteer, he was involved in coordinating various groups, but about a year ago he decided to start UaRpa, which united the talents of several volunteer groups. Army SOS was among them, and the software it had developed became the first company’s working product, which is now widely used in the Ukrainian army.
UaRpa now has a product range of 143 items of military equipment, including flight simulators, digital shooting ranges, laser systems for detecting snipers, communication systems, equipment for intelligence support, and modern helmets.
“What we do are not halfway solutions, but high-tech products,” Kabanenko said.
The biggest advantage of UaRpa, according to Kabanenko, is that equipment constructed and produced in Ukraine is much cheaper compared to that made in other countries, due to the low cost of labor. The quality, however, is as good as in other European countries. Some of UaRpa’s products are now NATO certified, he said.
Unfortunately, the company says it can neither properly defend its intellectual property rights nor make a profit under current Ukrainian legislation, Kabanenko said.
“The regressive ‘made in the USSR’ development model won’t work in the kind of social and economic environment Ukraine wants to build,” he said.
Danil Sytnikov, another UaRpa co-founder and the company’s chief technology officer, told the Kyiv Post that Ukrainian laws dictate that any military equipment made in the country basically belongs to the state.
“There’s lots of bureaucracy – lots of problems,” Sytnikov said. “That’s why private investments aren’t coming into Ukraine.”
Ukrainian investment and technology holding KM Core has a majority stake in the company, he said, and UaRpa has already invested millions of dollars in developing equipment. It has sold some of its products to Poland and Germany, but the products it supplies to the Ukrainian military have to be sold at state-regulated prices, restricted to a 15 percent markup of prime cost – and that means selling at a loss.
Potential and motivation
However, Sytnikov believes all the company’s problems are solvable.
“The prospects are colossal,” he said. “The whole army has to be modernized. If I were an investor I’d pay serious attention to this industry.”
Kabanenko agrees, saying that the project itself is “attractive,” although it’s not “super-profitable.”
Together with leading auditing company KPMG, Kabanenko has drafted a bill of amendments to Ukrainian legislation that would allow public-private partnerships in the military sector. This, according to Kabanenko, will allow military producers to set the price of military equipment they make by themselves, boost competition, and help the industry develop.
But he says the authorities are still reluctant to let private business into the state-dominated military sector.
“It’s now all about volunteerism, stoicism,” Kabanenko said. “But the current shaky situation in the country needs such success stories (as ours).”
“Against all the odds, we still want to do things that are important for the people, for the country.”
This story first appeared in the Kyiv Post, a syndication partner or Ukraine Digital News.