Venture Builder: A flexible model for creating start-ups


The venture Builder (VB) model stands out with its flexible models that are also called "Start-up Studio", "Venture Studio", and "Start-up Factory" - all formed with different strategies and aims. Venture Builder companies aim to increase the success rate and sustainability by creating a different process and model that will remove the reasons for failure, especially for start-ups.


VBs feature process, model and close support for the success of the start-up. They somehow experimentally apply the models they believe are able to adapt their potential the most effectively. They're able to aim for start-ups that will get the most support from them instead of aiming for every start-up. This and the huge number of model names show that there are many different types of VBs being created.


Some common points are becoming clearer as we start seeing successful examples among the operating models of the VBs.


The main reason why VBs are able to gather all of these different types and models under one name sources from the common points below that create consensus-based on observation of practices' success.


Early Stage: VBs aim to create start-ups with a repeatable process and portfolio logic. Therefore they're active in earlier stages such as pre-seed and seed.


Human Resource Support: Aside from offering financial support, VBs mostly offer human and technology support and focus on their competencies that can create a difference. One of their focuses is creating and implementing a start-up team.


Shared Resources: VBs use shared resources or create synergies between the start-ups in their portfolio to implement competencies that start-ups in the early stage have difficulty creating and making sure that they focus on their main work.


Duration of Investment: VBs offer long term supports for at least 6 months, and generally from 1 to 3 years.


Higher Rates: VBs usually get a higher share than other investment alternatives thanks to the profound support they give.


Focus Points and Expertise: VBs usually focus on certain expertise areas and chose narrow verticals where they can create synergy.


Developing Ecosystems: VBs are more successful in developing ecosystems, especially where access to funding and expertise is more limited.


VBs include differentiation in more than one dimension and mixed models: usually the combination of those different types.


The areas with the most debate about VBs are what their types are and how they are supposed to be categorized. Whether it is more beneficial to examine the types on a dimensional basis in order to set forth investments more clearly, is still being evaluated.


Financing Resource: Some VBs, especially ones created by independent founders apart from a company, have more financial aims with a separate fund such as a VC; while others work as the sub-company of an organization and make investments using balance sheets with their predefined capital.


Source of the Idea: VBs can either create ideas within the company or progress in a manner that will support external ideas. The external ideas can be start-ups in the pre-seed stage, or they can be ideas of the founder candidates, which are tested in the field and then actualized with a team.


Synergies (Shared Resources): VBs stand out more with their human resources rather than their financial resources. The resources can come from internal entrepreneurs or even from a brand new start-up team. The resources for the start-up can also only be supported by support services such as accounting, finance and law.


Sectorial Focus: VBs can choose to use their synergy potentials and expertise in a sector actively. They can also give more vertical independent or horizontal supports such as entrepreneurship, technology or ecosystem power.


Stock Shares: VBs can be the minority or the majority depending on various criteria such as the source of the ideas, the amount and variety of the support given, and the duration of the investment. Aside from this, it's possible for them to be a little higher up in terms of share ratio than the correlating models; compared to the accelerators and VCs.


Level of Investment: VB's can be the only start-up investor in all investment rounds starting from the first round. They can also work in a model where they join the first round and not join other rounds. Usually, VBs aim to create a synergy for an organization similar to a Corporate Venture Capital fund from peer-to-peer, while VBs that focus synergies on achieving financial goals by creating more independent start-ups usually continue with external investors in the following rounds.


Executive Team: VBs can start projects with joint resources or form a start-up team from scratch. VBs that have been operating from the starting level usually prefer to use joint resources.


VBs can be analysed in 3 different main categories.


In the Pure VB model, the ideas are created internally, and the aim is to start successful business models in different geographies. The founders of the start-up and the early-stage employees are employed in the company. In this model, the human resource is bigger than the financial resource and the needed investment amount is higher.


In the VB model with a Venture Capital Character, external ideas and start-ups are supported financially. The human resource is limited, as there is already a team. Therefore the financial support is much higher. Even though a ratio can be determined in the framework of the given support, these kinds of VBs get a minority stock just like VCs.


In the VB model with an Incubation Character, the ideas are externally sourced. These are short term start-up programs where founders are involved in the process with their ideas, have more responsibilities, and where the VB gives human resource support.


Reference


Ref: insead


Umut Esen

Managing Director


Sources

Business Foundations, Company Builder,

Deloitte UK, Venture Path Helping corporates grow like startups

Maximilian Hamida, Understanding The Startup Studio Incubation Model ,University of Gothenburg School of Business, Economics and Law

Playbook Innov8rs Connect Business Design & Venture Building

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PLDT Investment in Rocket Internet AG: Global Investment and Strategic Partnership, PLDT LIVE DIGITAL

Scaling to Startup Studio 2.0: An Industry Overview, Cachaça Consultancy LLP, November 24,2014

Venture Building Series Topic 1: Introduction to Venture Building, The 97 Fund by Innovation Village

Venture Capital Back to Basics, Builders

Louis Coppey, Why do VC firms become Platforms, jul 5, 2016

https://medium.com/startup-grind/why-do-vc-firms-become-platforms-or-why-a16z-is-so-successful-be12b2d7ce2e

https://cofounderslab.com/discuss/can-a-full-stack-accelerator-work-better-than-existing-vc-models-for-early-stage

https://mfishbein.com/startup-studio/

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