The love of paint and laser shooting sports helped Yurii Lavrenov and Mykhailo Obod, both from the city of Kharkiv in eastern Ukraine, build a global business selling laser tag equipment.
And Ukraine’s urgent need to train thousands of soldiers in real warfare gave impetus to the development of tactical training systems.
Thanks to military simulators designed by Skiftech, a Kharkiv company, Ukraine has managed to reduce the number of fatalities on the battlefield by a third. Its military simulators are now available at every training ground in the country, Skiftech’s founders say.
Now, their ambition is to ensure that Skiftech is in the top three companies in its field globally by 2025, along with such giants as Saab and Lockheed Martin.
How are they going to do it?
Skiftech started from Forpost, a paintball club founded by Yurii Lavrenov back in 2005 and joined by his partner Mikhail Obod four years later.
Surprisingly enough, it was children who provoked the entrepreneurs to enter the military niche.
"At one of our strategy sessions, we were thinking about how to expand the range of services available at the club. We saw that there was a gap among our clients – children aged 6 to 10 were not comfortable playing paintball," Yurii recalls.
They found a way out by purchasing laser tag equipment – laser devices that shoot safe infrared rays instead of paintballs that could hit hard and cause pain.
"The first devices we bought back then in Russia turned out to be very primitive and unreliable. So we decided to make our own. Before we knew it, we had our first customers," Yurii explains.
Now, laser guns, sensors, and software designed by Kharkiv entrepreneurs and their company, Netronic, are used in more than 1,900 projects in 76 countries.
But how did a hobby for paintball and laser tag turn into a business that helps save the lives of thousands of Ukrainian defenders?
In 2013, Mykhailo was approached by a tactical training instructor at the tank school where he had studied.
"He wanted to have a tool to train his students in practice," the man recalls.
Paintballs and laser tag blasters were not suitable for that. Something that could be attached to a realistic machine gun model was needed.
"We decided to take on this challenge and developed special electronics that can be mounted on real Kalashnikovs to train tactics," says Mykhailo.
When the entrepreneurs saw the tank school students using the equipment, they realised they needed to work further in the area.
"Even before the events in Crimea and Donbas took place, we set ourselves a goal to supply training equipment for the Ukrainian army," he adds.
Initially, the new business did not go well, Yurii admits. They showed Skiftech’s equipment to Ukraine’s political and defence leadership, but they never made it to the Armed Forces.
The first large order was received in 2018, when Skiftech supplied equipment to the Yavoriv training ground, in the Lviv region, for peacekeepers. After testing, Skiftech started receiving even more orders for simulators for other systems, including rocket-propelled grenades (RPGs), anti-tank guided missiles (ATGMs), and simulators for artillerymen and military engineers.
In the first months of Russia’s full-scale invasion, the founders managed to relocate the company from Kharkiv to western Ukraine.
The war forced Skiftech to significantly accelerate the pace of work. In the shortest possible time, it started manufacturing both existing simulators and brand new ones for NATO-standard weapons at the request of the military from different parts of the country.
"For instance, we developed the Stugna ATGM simulator in 2.5 months. It was record-breaking fast – we spent the night in the office and travelled to test sites at night," Yurii recalls.
The team has also developed simulators for several mortars, man-portable air defence systems, anti-tank and anti-personnel mines, and armoured vehicles.
Skiftech devices are special individual kits, with a vest, a bullseye, and a hinged unit that are attached to real weapons and equipment, the company’s founders explain.
Currently, they have ten different types of simulators, each with its own subtypes. "That’s about 35 separate products," says Yurii.
All the equipment is connected into one ecosystem, a special software that allows real-time analysis of what is happening during training.
The Netronic group of companies now employs 250 people, with about a hundred working directly in production. Last year, Skiftech managed to produce about 400 individual kits and 50 other training systems, the founders say.
There are no exact figures, but according to the instructors, up to 600 soldiers a day train on Skiftech systems, Yurii says.
Skiftech is now focused on a project of building a centre where up to one million military personnel a year can train, and its US partners have agreed to provide the funding.
Before that, all investments in Skiftech were the company’s own funds, which were hardly accounted for, the businessmen say.
"We were so passionate about it. We collected everything that we earned from the paintball club and threw it in."
How much did the development cost? According to Yurii’s rough estimates, it was about USD 2.4 million, although the calculation is complicated since some simulators are developed contrary to business logic.
"For example, the Shilka air defence system is a 1970s system that has long been out of production, but the Armed Forces have several of these systems, so we decided to develop a simulator. We consider it our own contribution to the victory," he explains.
In total, Yurii says, Skiftech has already developed five simulators that "cannot be sold abroad, but are needed here and now."
What is Skiftech's business model?
"We invest our money in development and then sell the equipment to the Armed Forces, the National Guard or border guards, the Security Service of Ukraine, military academies and training units. Our equipment is now available at almost all Ukrainian training grounds," Yurii says.
Currently, the Ukrainian market accounts for 80 to 90 percent of Skiftech’s sales as the Kharkiv-based company claims to have monopolised it.
Since the ambition of Skiftech's founders is to conquer the world, they are actively working on exports. In fact, Mykhailo speaks with LIGA.net before a meeting with his American partners.
According to an April study by SNS Insider, a consultancy, the global market for military simulators was estimated at around USD 10.5 billion last year, and is projected to reach USD 16.86 billion by 2030, growing at an average annual rate of 6.1 percent, the fastest of any segment.
To get their share of the pie, the Ukrainians will have to compete with five to seven global companies with big names and billions of dollars in turnover. Skiftech sees as its key competitors American giants Lockheed Martin Corporation, Cubic, and General Dynamics, Swedish-based Saab, and Thales from France.
Last November, while participating in an exhibition in California, the founders of Skiftech were approached by a representative of a government office that selects products for the US military. And early this year, the Ukrainians went to present their product at the national training centre in California.
When asked if they are ready to sell Skiftech if they receive a good offer from one of these competitors, Mykhailo does not hesitate to answer.
"We have no plans to sell the company in the near future. Our goal is to become one of the top three companies in the world by 2025, along with Saab and Lockheed Martin."
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