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Urban-Space 100. Ukrainian Crowdfunded Fintech and Franchise Expands Globally

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Michal Gromek

Large murals, new playgrounds and another 104 initiatives in the southwestern Ukrainian city of Ivano-Frankivsk are being continuously funded by a unique financial program - a crowdfunded restaurant ‘URBAN SPACE 100’. Already being replicated in Kyiv, this social entrepreneurship based franchise model is now exporting its blueprint to cities and communities abroad. 

'Due to the ongoing conflict in 1300km distant Donbas, it has been difficult for us to brand Ukraine as a destination for Financial and Social Entrepreneurship so it is personally very important to all of us that we can brand an innovation like ‘Urban Spaces 100’ which could change the lives of so many as ‘Made in Ivano-Frankivsk’ - Marta Gladka, the coordinator of Urban Spaces 100 at Teple Misto.

More than 200 cooperation requests for social Fin- and Food-tech franchise from all around the world have arrived so far in an email box of a nearly 100% female-run operational team of an NGO called Teple Misto (ua. ‘Warm City’) in Ivano-Frankivsk. 

Marta Gladka

As for centuries, individuals have been putting money together to create community projects such as places of worship in old towns of ancient cities, the initial funding process to raise 100k USD started with a mix of equity and donation-based crowdfunding. Technically the restaurant is owned by 100 individuals but practically, as the restaurant only very rarely performs an IPO, the likelihood of the shareholders to receive back their funding remains rather limited. Since the end of 2018, the makers behind Teple Misto have been able to create a social-franchise that dedicates more than 80% of restaurants profit towards social initiatives within the city.

We had to set the entire code of conduct to make sure that backers are not requesting rewards, like life-time free coffee, as this could be a race to the bottom because such demands could cover discounts, free dinner for friends or family members. But luckily the crowd understood that each purchase during quarterly meetings results in a door renovation in an old town or renovation of a park bench in the old town” - Julia Kryzhalka, the communication coordinator of Temple Misto. 

As the founder team has been unaware of platforms like Seeders or Kickstarts back then, Yuriy Fylyuk (the founder of the initiative) has asked his closest network of partners to find 100 individuals who would be willing to donate rather than invest 1000 USD. The amount of 100k USD was required to open a restaurant, pub and brunch place called ‘Urban Space’. A mix of ordinary citizens, local musicians, IT company owners and public figures have followed.

The initial project has been created with the help of a quarterly offline meetings and a closed Facebook group in which individuals could invite other contacts that had to receive a pre-approval before joining the ‘online community’. The community had to facilitate a share issue process and agree about an initiative not unlikely process in which the restaurant could create losses that would have to be compensated by the entire community of backers.

The raised 100k USD should cover only the cost of real estate purchase, renovation and furnishing of a modern meeting place. The remaining 20% of the profit is being sent to a professional restaurant management entity that ensures smooth operations sufficient quality of the product and supplier chain for other seven restaurants within the city - with only one being dedicated to profit sharing.

Differently to aid programs or donations the goal of Urban Space has been to provide ongoing financial support to a variety of local social projects and to create a community of engaging community leaders, who would participate in the quarterly meeting in which they will make a democratic decision how the funding might be spent on has to be spent.

Since the start, more than 100 initiatives have been financed in full within the city, partly or also with the financial aid of the local city council. After the success of the restaurant in the Ukraine, it has been decided to expand the project towards: Urban Space 500 with a financial need of 500k USD in Kyiv, which has already been launched in December 2018. The project in Kyiv is operated by another NGO and Restaurant Management company but features the same characteristics and profit sharing requirements.

Currently, the goal has been to allow international partners to profit from the know-how of both the restaurant, the management company, the experiences of the team and to open new locations with a ‘social-based entrepreneurship franchise model’. Each completed restaurant project in a new city requires a payment of a ca. 3% franchise fee to Teple Misto, which would increase the budget of this foundation that can be spent primarily on more local social projects.