Ruslan Tymofieiev is the founder of the Ukrainian venture fund Adventures Lab. Back in his studentship, he created the successful CPA affiliate network Everad. However, soon his interest in investing turned out to be stronger: Tymofieiev sold his own stake in Everad, founded a venture fund, and completely plunged into financing startups. The portfolio companies of Adventures Lab now include such well-known services as Reface, SALO, EduDo, and StreamHero.
In November, another high-profile project—Narrative BI—joined Adventures Lab's portfolio. This is an American marketing startup created by Michael Rumiantsau, ethnic Belarusian and a member of the Forbes 30 under 30 list in 2019. A Ukrainian startup for music and video production Pibox has recently become another fund’s investment.
How does the fund choose startups for investing? What mistakes do novice investors make? Why might even a very strong startup fail to make a hit in the end? Ruslan Tymofieiev answers these and other questions in an interview with our outlet.
- When did you get interested in investing?
- This activity has always interested me. But I started making my first financial investments in 2014. At that time I was still actively developing Everad. At the same time, I started investing in various projects.
- For instance?
- In Kyiv taxi service. Something like Uber. But the first step is always troublesome. The founders regarded that project as a technical toy. They believed that it was enough to create an application and everything would work by itself. But this is an operational business, an interface alone is not enough. As a result, the project failed.
- Did you suffer significant financial losses?
- Not critical ones. Up to 100,000 dollars. Then I also invested in other projects. They were not entirely successful. But this was the first experience that must be gained if you want to engage in investing.
— What, in your opinion, a novice investor who is only intending to invest in a project should initially do?
- One needs to start with theory. One should thoroughly consider the other investors’ experience. The more useful information you have, the higher your own expertise is. Then you will not make most of the childish mistakes and will not lose money out of the blue. It is always better to learn from someone else's negative experience than from your own.
Adventures Lab founder Ruslan Timofeev. Photo from personal archive
— What were the main mistakes you made at that time?
- Naivety, investing in a project without proper expertise, incorrect assessment of the market, competitiveness, and founders’ opportunities. I was relying on emotion, not on good judgment. I liked the idea—I invested money. And this is categorically wrong. There was no full-fledged analysis; the first available project seemed to be potentially successful. Now, for example, we at Adventures Lab finance one or two out of a hundred startups under consideration.
- And does it happen now that a founder comes with a project and you want to invest in it immediately?
- It happens. But all decisions are made only after a detailed examination. Although sometimes I retrospectively analyze our fund’ first deals and understand that we would not have sealed some of them at this stage.
- What are your main selection criteria? What do you pay attention to the most when choosing a startup to invest in?
- First of all, I carefully study the market and the niche. How highly competitive they are, whether the startup will be able to take a significant market share. Often, everyone starts to analyze a project with its team and founders. But I initially assess external factors, with market factors. How capacious it is, how overheated it is. And only then do I pay attention to the founder role. The founder must have a sufficient level of competence.
Adventures Lab founder Ruslan Timofeev. Photo from personal archive
- Does it happen that the founders have created a product that is excellent in all respects but market factors indicate that the startup will not make a hit?
- It happens. We are not interested in an overheated, but rather in a "warmed up", dynamically growing market. There was a case when guys came to us with a project excellent in all respects. But after a thorough examination of the market situation, we concluded that they would not make more than $30,000 in net profit. In the niche they chose. Because the market itself was not capacious. You may not be a senior manager, but having a growing market could be a criterion for success.
- You said that the founder should have a sufficient level of competence. What other requirements are there for them?
- Strange though this might sound, the founder should be replaceable. Because there can always be an option for the manager replacement, as it was in Reface. And the startup should not suffer from this. There should be a person in the team who can take over corporate management if something happens, because the circumstances can be different. Such a person is either hired, or one of the employees evolves to such a level. Moreover, the founder’s network effect is important, their communication skills, because a broad network of acquaintances and contacts automatically increases access to valuable information. And this, among other things, allows the founder to make the right decisions and be ahead of the field.
- How does Adventures Lab select projects for investing now? What is the main highlight?
- The fact that we select not the good, but the best. The main focus is for the company to have an unlimited market. We have to turn down a lot of really good startups with strong founders, excellent teams, and systematic approaches. Because you have to turn down good offers in order to invest in the best ones—that's the truth. And diversification happens to the best companies, not the good ones. It’s better with more risk, but significantly more profit in the end. If the check is 500,000 dollars, then the risk will be very high, but the potential reward is unlimited. As in the case with Reface: we took a huge risk, but now the project has grown tenfold and fully paid off this risk. And the profitability allowed us later to invest in 30 companies with the same check.
- And the last question. In what trends in global and Ukrainian IT is Adventures Lab ready to invest in the coming years?
- The trends will most likely include the Internet of things, artificial intelligence, and mobile. But the trends are not the point. We invest not in trends, but in something we have expertise in. In something we are well versed in and have high competence. But at the same time, one cannot give up on any area. There is always a founder who will discover something new even in the most trivial areas.