“Uh guys, I think we took a wrong turn somewhere.”
Denys Zhadanov, the 25-year-old marketing director of Readdle, a Ukrainian app-development company, peers out from behind the wheel of his gleaming white Volkswagen Tiguan, vainly searching for a landmark.
We’re lost somewhere off Akademika Filatova street, a long four-lane boulevard cutting through Odessa, a sprawling Black Sea port of a million people in southern Ukraine. A brutal winter has given way to February’s slow thaw, the drab surroundings easing into slightly duller shades of gray and brown. Christmas trimmings provide a welcome splash of color: Ukraine celebrates the holiday on January 7th, but a month later many decorations remain, including a giant gorilla in a Santa suit.
Denys hasn’t driven here in years, and it’s easy to understand his disorientation. His older brother, Igor Zhadanov, 30, points the way. Alex Tyagulsky, Andrian Budantsov, and Dmitry Protserov, Igor’s three former university classmates and current colleagues, pull up in a Volkswagen Touareg. The Readdle team steps out of their cars, heading toward a five-story residential building, one of a number of similar-looking orange-yellow blocks built as cheap, temporary housing during Nikita Khrushchev’s tenure as Soviet premier. That was a half-century ago, and today the apartments are still inhabited. At the building’s dark entrance, frayed telephone wires protrude from a gunmetal gray box. A black Labrador, one of Ukraine’s many strays, prowls the grounds; snowmelt flows around discarded tires embedded in the sodden earth.
They’re revisiting Readdle’s first office; six years ago, $400 a month rented a small corner apartment on the Khruschevoka’s third floor. "We were happy here," says Protserov, the quiet, laid-back leader of the company’s design team. "Me and Andrian, we’d cook food for all of us: sausages, potatoes, that kind of thing." Andrian once brought in a cookbook and the two made French onion soup. "Alex was complaining for a whole week after that the flat stunk of onions!" says Budantsov, the CTO, who stands 6-foot-7 with a wispy beard and a Steve Jobsian fashion sense.
Because they worked odd hours and ran their business out of an apartment, the software entrepreneurs were often mistaken for drug dealers. "Now we’re back with English-speaking guys," Budantsov says with a laugh, referring to me and a photographer. "They probably think we’ve gone global." They have, just not in the way their neighbors suspected. After a few photographs and lots of laughter, a babushka yells from her nearby apartment, telling the men to quiet down and cutting short the reminiscing. Igor Zhadanov herds everyone back to their cars, and back to the office.
Because they worked odd hours and ran their business out of an apartment, the software entrepreneurs were often mistaken for drug dealers
Six and a half years ago, Readdle was four friends working out of a rented apartment. Today, the company employs 43 people and occupies most of the ground floor of an Odessa office building; the staff often gathers around catered lunches of borscht and varenyky. Readdle builds unsexy productivity apps like Scanner Pro and PDF Expert — utility products that helped the company recently reach 20 million total downloads. Continually updated software and a dedication to customer service have helped inspire loyalty, too; Igor Zhadanov claims Readdle’s user-retention rate is 10 times the average, with between 500,000 and 1 million users opening a Readdle app every month. And it’s accomplished all that despite being three flights and 20 hours’ travel from Silicon Valley.
That story — a successful company built on unflashy apps far from tech’s center of gravity — seemed simple enough the previous November, when I’d first contacted Readdle. Then things got more complicated. At the end of that month, Ukrainians began to gather in the capital, Kiev. They filled Maidan Nezalezhnosti (literally, "Independence Square") to protest the government’s decision not to pursue closer social and economic ties with the European Union; instead, it appeared to be aligning itself with Russia. Thousands packed the square, occupying it day and night. A police raid quickly turned violent. which galvanized the opposition, leading to riots throughout the city as protesters chanted "out with the thugs" and sang the Ukrainian anthem. They occupied the city hall and called for a national strike. The government was headed toward collapse. "It looks like we have a revolution," Denys Zhadanov tweeted.
When I arrive in February, though, Odessa seems calm. There are no barricades on the streets, no mass protests. There are just leftover the Christmas decorations and that gorilla in a Santa suit. If there’s a revolution happening, I can’t see it.
Daring to think differently
"You've picked a good time and a bad time to see us," Denys Zhadanov says, picking me up at Odessa’s tin-hut airport. "It's a bad time because it’s February and freezing, but it’s a good time because we’re really busy." Readdle’s preparing for Mobile World Congress in Barcelona, rolling out a major update to one of its most popular apps, and working on a secret project. The company is all business, heads down, even as Kiev simmers 310 miles away.
Readdle has always been a focused company. Within weeks of the US release of the original iPhone in 2007, Alex Tyagulsky and Andrian Budantsov both had one, shipped over by a mutual friend. They loved the devices, but couldn’t believe they weren’t able to do what they’d done for years on their Palm PCs: read books. "We read a lot," explains Tyagulsky, the company’s wildly frenetic chief marketing officer. He has the angular features of a gothic comic book character. "It's part of the culture: you read a lot at school and university," he says. "Reading on the phone was very natural for any person of my age and my education in Ukraine."
He slips into faux-valley girl astonishment. "And ohmygod, I can't read books on the iPhone. OH MY GOD! It's crazy! We should change this!" — now smacking his hand against the desk. "This was how it started. I told Andrian: what can you do about this? That weekend, he said, ‘Alex, I think we can do this, this, this and this.’" They started coding. "It always starts from the problem and we find the solution," says Tyagulsky today, summing up the company’s ethos.
An early, rough-around-the-edges first version of their document viewer and manager, ReaddleDocs, caught Apple’s attention. The company asked if Readdle would submit its app for the launch of the new iOS marketplace, the App Store.
"We didn't have any business plan or any other crazy stuff. We just built the app. We put it on the App Store."
The coders didn’t have much time, and hunkered down to work. As a freelancer, Budantsov could make his own schedule, and Protserov and Tyagulsky hadn’t taken time off from work in years, giving them two months’ vacation time to devote to the app. When the App Store launched on July 10th, 2008, Apple claimed it had more than 500 apps — today that number’s more than 1 million. And ReaddleDocs was there at the beginning, selling for $14.99.
It was a gamble. In 2008, admits Tyagulsky, "We didn't have any business plan or any other crazy stuff. We just built the app. We put it on the App Store." A week later, he saw the sales figures. Readdle had made $3,000 in revenues. "I called my boss and told him, ‘I'm quitting my job,’" Tyagulsky says, his shoulders shaking with laughter. "We understood then we had a chance to build the company."
Nine months later, Denys says, "We were all sitting together and suddenly Dmitry stands up and shouts, ‘Woohoo! We’re rich!’ I thought he was drunk." He wasn’t: Wall Street Journal technology journalist Walt Mossberg had listed ReaddleDocs among "some favorite apps that make the iPhone worth the price."
After Mossberg’s endorsement, sales jumped 800 percent. According to Denys Zhadanov, Readdle was pulling in $500 to $1,000 a day. For the four men who’d just wanted to read books on their phones, it was a breakthrough.
From the App Store to the revolution
From its open-plan office, where colleagues are constantly intermingling, to its flexible workday, where employees come and go as they like, Readdle resembles the typical tech startup. But Odessa is not Silicon Valley. At least, not yet.
For that matter, Odessa isn’t even Kiev, Ukraine’s capital and largest city, where most of the country’s (relatively few) venture capitalists, accelerators, and entrepreneurs gravitate. Igor Zhadanov, sitting at a conference room table in Readdle’s Odessa offices, suggests his tech-sector colleagues lack the entrepreneurial zeal necessary to forge new, homegrown companies. Like many businessmen who’ve succeeded through a combination of timing, determination, and not a little luck, he’s looking for the same gung-ho attitude among his compatriots.
The room has the post-collegiate stylings of an early-stage Valley startup — a black leather couch and a foosball table whose dusty plastic players suggest it’s more decorative than functional — but Zhadanov believes Ukraine, less than 25 years after declaring its independence from the USSR, still has some catching up to do. "Timewise, we’re maybe 15 or 20 years behind the rest of the world," Zhadanov says, in everything from traffic signals to Starbucks (there are none in Odessa) to entrepreneurial spirit.
Yet there’s no lack of IT resources in the country. There’s ubiquitous high-speed internet and a modern telecommunications infrastructure. Schools and universities produce large numbers of technically proficient graduates, Readdle’s co-founders among them. Many go on to work at software-development companies in Odessa, Kiev, and Dnipropetrovsk, the three major cities of Ukraine’s IT sector. (Odessa also has a reputation as a haven for hackers and credit card fraud; some evidence suggests the city as the origin of the recent theft of 40 million credit card numbers from Target.)
When graduates get available jobs and competitive salaries, Igor Zhadanov believes, many become content simply to carry out other people’s instructions and ideas. (One estimate pegs Ukraine’s outsourcing market, providing IT resources for Europe and the world, at $2 billion, with more than 50,000 employees.) "That's the core thing the Ukrainian IT industry should learn fast," he says. "How do you change your mind from building something you have been provided with, a design and specification, to something you don't know what it's going to be tomorrow?"
And, he adds, "there’s a huge inflation of titles and salaries." In Readdle’s early days, they could hire a top-quality developer for $800 per month. Today, a graduate working as a basic QA grunt can earn as much as an accountant, says Zhadanov. That’s still a better value than the United States, though. "If we wanted to replicate PDF Expert in the US right now," Igor admits, "it would cost us millions and millions of dollars."
But the business environment is not all cheap, talented labor. Igor Zhadanov doesn’t want to say much beyond admitting that "running a business in Ukraine is challenging," but cronyism and corruption have defined much of Ukrainian society in the generation-long hangover following Soviet rule. In its 2013 index of perceived corruption, the anti-corruption charity Transparency International ranked Ukraine 144th out of 177 countries, tied with Nigeria, Iran, and the Central African Republic, among others. By those rankings, Ukraine has the highest level of perceived corruption in Europe. Similarly, the World Bank ranks the country 112 on its "ease of doing business index," though that’s up from 140 in 2012.
Stay or go?
Readdle’s founders are not revolutionaries. The company has survived the past six years with an established niche: simple-to-use productivity software aimed at businesspeople willing to drop $9.99 on an app. They don’t chase trends; they’re not producing Flappy Bird clones. They base their business on loyalty.
But in six years competition has grown; the game has changed, and loyalty might be in short supply. "Across the App Store the number of paid downloads has decreased," says Denys Zhadanov. "The industry went crazy. It’s a race to the bottom. More and more people just get free apps, and they have no idea of how much effort has been put into the development." Readdle responded by adopting a freemium model for some of its apps, and offering its file manager for free.
Its fundamental proposition, though, its essential ethos, remains the same. "Here’s the deal," Denys says, "you pay us $7 up front. You get this product. You get continuous updates for it, you get customer support" — a large screen in the middle of the office tracks the number of outstanding customer support emails: every day begins at around 2,000, and by the time I leave in late evening it’s dropped back, only to creep up again by the next morning — "and we always listen to our customers and improve our apps. We’re making it a fair trade."
Igor Zhadanov sits down for a meal at Steakhouse, a haute-rustic steakhouse in the heart of Odessa. Nearby, waiters arrive with a butcher’s block laden with raw meat for pre-cooking inspection by the diners. Beef from the United States arrives regularly in the city, Zhadanov says — but it can be hit or miss. He orders the Ukrainian veal.
Why stay in Odessa? I ask.
He lists the obvious answers: it’s cheaper, and that means it’s easier to experiment. He believes there’s just as much talent and knowledge in Europe as in Silicon Valley, and Readdle can draw on that. He’s skeptical about taxes in the States, and believes he’s already built something impressive in Odessa. "The fact that we’re in this building is the result of four different people working really hard for six-and-a-half years," he says.
His younger brother agrees. "We made it work here," Denys Zhadanov says, "and being away from the Valley is on one hand bad. We’re kind of disconnected from the industry." On the other hand, he says, "it’s good to be immersed in the Valley for some time, to drop in and get the spirit of it, then to get out before you stay there. It’s a bubble." A bubble of both easy money and received wisdom, he might be saying. He appreciates his city’s comparatively down-to-earth atmosphere, and thinks it makes his company better, but he’s sometimes frustrated by Ukraine’s lack of mobility, particularly in Odessa. He’s thought about leaving: maybe he doesn’t want to be here in a year, depending on what happens in the meantime. But he’s not willing to leave yet.
Two months later, he’s vacationing in Venice, Italy, taking some time to clear his head. Since December, the revolution has gotten complicated. Russia refuses to recognize Ukraine’s opposition parties as a legitimate government; Ukraine has become the subject of a battle of words between Vladimir Putin and the West. Crimea, the southeastern peninsula formerly belonging to Ukraine, voted to join Russia; Russian troops flowed into the region, with tens of thousands remaining along Ukraine’s eastern border. Most recently, Russian-separatist demonstrators captured Ukrainian armored vehicles sent to reclaim eastern towns for the government in Kiev.
When Kiev began to roil in December, Denys was glued to online video streams, the violence in the background 12 hours a day as he worked. The upheaval didn’t affect Readdle as a company, he emails, but "everyone is affected on a personal level to a certain extent." The company’s staying focused on his customers, and "the spirit inside Readdle is healthy."
As for his country, Denys is optimistic. "With time, I began to hope about a new and better country, with less corruption, with better people, with democracy," he writes. Three months of turmoil have united Ukrainians worldwide, and now Denys wants to help build a better country. He wants to see a democratic state, an educated people, a clean government, and economic growth. "It will be a hard transition period for Ukraine," he writes, "but I really hope that we can build a better country so that people like us can create outstanding businesses that operate globally." And he’s going to be there to help make that happen.