Entrepreneurship has a challenging process with low success rates
In spite of its nature open to innovations and full of uncertainties, the world of entrepreneurship has had its own classical and conventional order for a long time, of which is acknowledged. A classical startup has an organizational structure as follows: (I) The founder's idea is tested in the field whether it turns into sales. (II) Then, it aims to achieve scalable growth through productising the idea. Many entrepreneurs start with big dreams yet they fail in this challenging journey; approximately 9 out of 10 startups are unable to succeed. Startup incubators, accelerators and VCs (Venture Capital) play a significant role in the rising success of startups. So, startups, regardless of financial support, are gradually losing their chances in a highly competitive environment. The more they move away from significant ecosystems, the more success rates decrease. Geography becomes destiny.
Though there are many reasons why startups fail, having analyzed 101 unsuccessful startups, the CBInsights research defines top 5 reasons: (I) no market need (II) ran out of cash, (III) not the right team, (IV) get outcompeted, (V) pricing / cost issues
The Venture Builder (VB) model is an entrepreneurial model with the aim to enhance success in startups.
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. The goal of VB companies is to improve the success rate and sustainability, forming a different process and model, especially to eliminate the reasons behind the startup failures.
VB models share some notable features although they are varied depending on (I) the first startup building stage, esp. at which stage the idea & the founding team are formed, (II) the decision makers, (III) the investee, (IV) the share percentages received in the ventures with the VB's support.
Addressable market and area of expertise
VBs concentrate on addressable markets above a certain size and their goal is to start a venture with the right formula by retrying the problems in these markets. Generally targeting certain markets of their expertise, VB companies hold the view that it is not impossible to start a successful venture if enough number of tests can be conducted with the right strategies & people with the focus on the right market.
Unwavering support in specialized markets from an early stage
VBs support their startups at earlier stage in the pre-seed funding or seed funding periods. In these periods, processes such as problem validation, product development and product market validation stand out to a high degree. VBs support these operations through expertise, process and techniques before the startups are incorporated.
More manageable cash flow with long-term partnerships rather than investment
Providing longer-term support to their ventures, usually with the goal of 1-3 years support, is another common point for VBs. VBs mostly provide competent human resources, especially technology resource, rather than providing financial resources. Such resources generously support financial resources. Plus, they provide a longer-term, trustworthy environment for the startup besides a more manageable cash flow.
Building the Right Team
The goal of VBs is to build startups in a sustainable way. So, VBs have distinctive competencies to find CEOs and CTOs, briefly founders, and build a cohesive team with employees at the early stage. They have expertise processes using tools which are able to consider personality inventory, competency analyzes, and team dynamics to select people suitable for entrepreneurship & teammates - their to be companions. Ventures are usually first built within VB and then spin-off. In this way, the formation of stock & option strategies and a compatible team are correspondingly carried out, reducing the incompatibility chances that are irreversible.
Creating Competitive Advantage
VBs generally aim to enhance the success chance through targeting their expertise verticals or the related industries as well as using their knowledge & partners in the ecosystem. VBs provide close support to startups, with the goal to develop competitive advantages through consultancy and access to resources -beyond mentoring. VBs generally give individualised support to smaller number of startups since they provide greater support with hard efforts compared to financial investors.
Advantages of Providing Shared Resources in Cost and Pricing
VBs enable the shared use of competencies between startups since these competencies such as devops, mobile app development, cloud management, artificial intelligence which need human resource management, user experience design, and technical expertise can be high-priced to develop at an early stage startup. In this way, VBs provide a more sustainable cost and pricing up to the scaling level. Shared resources enable for economic growth while key resources for the startup are positioned in the startup. VBs also guide startups in operational issues such as regulation, law, accounting, finance, and formation of some common process managements.
Because of their experimental nature in some degree, VBs do not have one pattern and indeed, they have various names. The experiences of VBs having the goal of building sustainable startups paved the way for the above-mentioned common approaches and strategies in time. As a result, they have begun to define this model. Targeting various gaps in entrepreneurship, this model aims to build different models for each need rather than one approach to all startups and to include organizational innovations in entrepreneurship.
Umut Esen
Managing Director
Sources:
Deloitte UK, Venture Path Helping corporates grow like startups
Insead, The Emerging Role of Venture Builders in Early-Stage Venture Funding, Oct. 2018
Efounders, Building Startups The ‘’3rd Co-founder model’’
Startup studios emerge as a growing force, Sparkling Partners, May 2019
