Venture builders have been around since as early as 2014 and are yet being discovered by many founders, so if you haven’t yet heard of venture builders you are not alone and please allow me to introduce them to you.
In the early days, they were organisations that build companies using their ideas and resources — also known as tech studios, startup factories, or venture production studios. The model has since evolved with venture builders realising that they could also sell their services to entrepreneurs and corporations that invest in innovation. There are now different models of venture building, however, at their core, they remain the same; focusing on developing the tools and processes to systematically build new companies and helping those companies grow and succeed. Venture builders work on different companies at once. The ones identified as most promising receive more resources and capital to accelerate their growth.
There are five core activities in which venture builders engage: identifying business ideas, building teams, finding capital, helping govern or manage the ventures and providing shared services.
But why are venture builders important in the ecosystem? I think the simplest answer is the poor success rates of startups and investors. Of all startups, only about 1% manage to raise even an initial Series A round of funding. Of that 1 %, only about 10% succeed to generate returns for their investors.
The low success rates of startups in equalised favourable business environments has pushed even the most seasoned investors and founders to look for ways to increase their chances of a favourable outcome. Some have even ventured into completely new ways of building and supporting their ventures. As investors scramble to modify their age-old investment strategies to provide more human capital, a completely new model has emerged to increase the success rate of startups. The “venture builder”, also known as the “startup studio” model, has been formed to build and support startups under one roof to be able to provide extra human capital at the earliest stages of development when it is needed most.
There is not a single VC that would not list the “founding team” at the top of their investment criteria. The failed search for the amazing founding team is exasperated from the investor side where many fail to spot talent simply because they are inundated with noisy deal flows and/or suffer from decision biases.
Venture builders offer the opportunity to assemble a dream team for a venture or project for a fraction of the recruitment time and cost. In addition to time and cost savings, it gives the founders access to a pool of different skills on-demand to build and scale their teams. Forget about those long recruiting processes and learning curves.
Businesses go through different stages during their lifecycle. These stages require different sets of skills. By providing a skilled team with years of experience, Venture builders bridge the skills gap between these stages with a “plug and play” solution.
John Borthwick (Betaworks (NYC) Founder) is one of the more vocal supporters of the startup studio model and believes it is especially a good fit for emerging markets where there is more friction in doing business. The acceleration and the successful results from the startup studios are being increasingly noticed by the media. The Internet is now full of articles about startup studios. What was once a niche topic only for technology media has now become a frequent topic in mainstream media.
With such a fluid model it is easy to mix venture builders with outsourcing, incubators and accelerators. Follow me for a deeper analysis on what is the difference between these and other players in the startup scene. My next post coming out soon: The difference between Venture builders and the rest of the startup ecosystem.