Mentorship and Support for Startups: What Are Venture Builders and How It Help in the Development of the Entrepreneurial Ecosystem

Venture Builders

Singh Anusha

Dec 15, 2023 — 5 min read

What Are Venture Builders and How It Help in the Development of the Entrepreneurial Ecosystem

Rapid technological progress lays the foundation for the development of the venture industry and stimulates the emergence of innovative products. It can be argued that startups are now becoming a key driver of the economy, and the ratio between the number of startups and the population of a country determines its potential and influences GDP.

For example, the United States has the highest number of startups per 1,000 people — 219.27, while the country also has the highest Global Startup Ecosystem Index and the highest GDP of $20,544,343 million.

This indicates that startups shape the entrepreneurial ecosystem and contribute to the country's economic development. However, according to statistics, only 1 in 10 startups successfully navigate the so-called 'valley of death' and become profitable. On the path to success, startups lack financial, strategic, and mentoring resources. So, what should Ukrainian startups do to avoid a crisis, survive in a competitive environment, and improve the country's economic indicators?

In search of an answer to this question, the founder of CLUST, Ruslan Tymofieiev, as an investor, turned to the format of venture studios. Such collaboration helps increase a startup's chances of survival from 5-10% to 40-50%.

What Are Venture Builders, and How Do They Support Startups?
Problems of Startups Solved by Venture Builder
The Impact of Venture Builders on the Development of the Entrepreneurial Ecosystem

What Are Venture Builders, and How Do They Support Startups?

Ruslan Tymofieiev explains that a venture builder is a unique blend of a venture fund and a startup studio. In other words, it is a company that operates under a business model that allows it to create businesses from scratch and support them at all stages of development, leveraging internal financial and intellectual resources.

To put it simply, these are companies that professionally launch and develop startups. However, unlike funds, they don't just write a cheque; they share the founders' vision, taking on the roles of mentors, investors, and facilitators, helping startups achieve success.

In other words, venture builders:

Provide financial support: At pre-seed, seed, and round A stages, venture builders attract internal investments, meaning founders don't have to seek investors and pitch their product idea dozens of times.
Help build a business model: Venture builders professionally launch startups and, therefore, know how to construct a business model and strategy for various products.
Share expertise: They share research and assist startups with legal, operational, and managerial issues.
Expand the network of contacts: They help establish connections and develop partnerships with market players.

Venture builder model is based on receiving a percentage of the startup's profits. This percentage varies depending on the level of involvement in operational processes.

Problems of Startups Solved by Venture Builder

Ruslan Tymofieiev mentions several noticeable red flags that signal a startup is at risk of not overcoming the «valley of death».

The «valley of death» is a period when a startup spends its initial investments, and operates, but has not yet become profitable. Most startups cease their activities precisely at this point.

Here are common mistakes that can 'sink' your startup:

1. Poor Market Research = Overly Ambitious Plans

Typically, a startup is founded by a small number of people — on average, 2–5 individuals. This team may lack a professional economist or strategist. To save costs, internal teams often handle research, unit economics calculations, and business plan development. This can lead to a significant disparity between projected and actual figures. Incorrect calculations at the start can be costly.

What to do: Pay a lot of attention to research even before developing the MVP and write a business plan based on the analysis results, not assumptions.

How a venture builder helps: provides resources for quality analysis. Often, venture builders start collaboration at the stage when there is only an idea. In their team or through outsourcing, they have experts capable of calculating unit economics, making realistic forecasts, and more.

2. Weak Competitive Advantage

Competitors exist in all markets. If your product doesn't have them today, it doesn't mean they won't appear tomorrow. Therefore, you must have a clear value proposition, genuinely solve user problems, and build a strong emotional connection between them and your brand to retain the target audience even in the presence of competitors. Often, young entrepreneurs focus solely on solving a problem and forget that it's important to communicate their value to the user.

What to do: To overcome this problem, Ruslan Tymofieiev suggests to develop a strategy for engaging users with the product.

How a venture builder helps: With their experience, venture builder employees know all potential points of contact with the audience and will assist with the promotion strategy.

3. Hype

The abnormal success of your startup and rapid user growth at the start does not guarantee that the product will remain successful and profitable. Often, after the first wave of customer influx, retention starts to decline at a rate of 60-70% per month.

Does anyone still remember the Clubhouse app? Three years ago, it gained rapid popularity among iPhone users, and owners of Android smartphones eagerly awaited its version for their platform. However, by the time it happened, everyone was already indifferent to Clubhouse.

What to do: think not only about how to attract users but also about how to retain them.

How a venture builder helps: share developed methods of users’ retention.

4. Ignoring Feedback

Feedback is crucial on the path to a successful startup. It helps identify and fix product weaknesses, working with insights from users. When a startup ignores feedback, it risks becoming static and uninteresting.

What to do: Be flexible.

How a venture builder helps: Provides resources for hypothesis testing, allowing quick changes and adaptation.

5. Very Small or Very Large Team

5 people cannot develop a successful project. To grow and thrive, it is necessary to involve professionals in your team. However, having a team that is too large is also bad because it can lead to spending all the financial resources from investors before turning a profit.

What to do: hire and fire wisely.

How a venture builder helps: build a hiring strategy and assist in finding professionals who align with the startup in terms of hard skills and values.

6. Lack of Funding

The absence of a planned budget for development and product promotion can lead to a situation where a startup suddenly finds itself without funds and opportunities for further existence.

What to do: plan at least one year ahead, seek investors, have a Plan B in case of unforeseen expenses.

How a venture builder helps: contributes their own funds and, if necessary, assists in finding external investments.

7. Founders’ Confusion

When the old business model proves ineffective and the new one is not yet created, founders can get stuck and lose precious time.

What to do: test new hypotheses, adapt the product to market needs quickly, and update the marketing strategy.

How a venture builder helps: save time and change a product on the fly.

The Impact of Venture Builders on the Development of the Entrepreneurial Ecosystem

The startup life cycle is filled with challenges. In this context, venture builders become reliable partners for development, increase the chances of survival, and thus directly impact the number of successful products in the market.

That's why it can be argued that venture builders are an integral part of creating and supporting the entrepreneurial ecosystem in the country. They play the role of mentors, investors, and facilitators, contributing to the success of startups.

In addition, venture builders organize events, conferences, and webinars aimed at supporting and developing startups. These initiatives foster knowledge exchange, create a conducive environment for innovation, and promote collaboration among various players in the entrepreneurship ecosystem.