With the term “venture building” gaining popularity in the startup and innovation ecosystem, VCs, incubators, accelerators, technology transfer offices (TTOs) and other similar organisations have all started to label themselves as venture builders.
The truth is, however, that they are not really involved in the “building” of the venture, but rather only facilitate certain functions of the venture building. Additionally, although they will benefit from a successful venture because of their indirect involvement in its “building”, none of them will actually generate sustainable revenue from the “building” itself.
Let us break down several of these organisations.
VCs obtain a sustainable income from their management fee of the funds. Incubators and accelerators operate based on the sponsorships of corporates or VCs.
TTOs hardly run a profitable IP license business and usually survive based on the government budget of their parent public organisations. They create a portfolio of startups, leaving the venture building to the entrepreneurs and simply keep their fingers crossed, hoping for a unicorn to show itself.
The struggles of a startup are the least of their worries and each startup becomes just another number in their portfolio. With no dirt on their hands, there is no skin in this game of venture building.
What makes a good venture builder
A venture builder distinguishes itself by its deep involvement in the venture building and how it aims to generate sustainable revenue from that. With its own infrastructure and venture partners, they bring or create multiple, closely related startups under a single umbrella, allowing them to share resources and develop strong business synergies.
Furthermore, they are directly involved in the venture creation process and the business operation as a co-founding party. Fundamentally, there are three steps to generate a profitable and sustainable venture building business, drawing parallel to a healthy garden.
Firstly, plant the roots. Venture builders identify the soil with the fortune and plant their roots there. It can be a particular industry, regional market or category of customers where they have identified growing business opportunities and are able to create, maintain and grow their advantages over other competitors.
The roots of the source are created by building a team, setting up the operation and establishing key business partnerships. The roots are strengthened and able to further reach outwards with the progress of the individual venture companies and the business synergies among all of them.
It is the ability to hold onto the soil, look for water and extract nutrients that will be reinforced, providing an even better foundation for other new venture companies being built.
Secondly, grow the stems and leaves. With strong roots deep into the soil with buried fortune, venture builders can start growing the stems and leaves – building the ventures. The key to this part is to create interconnected venture companies with strong business synergies and team culture synergies.
By sharing the nutrition from the root and similar DNA (the team culture), the associated businesses or the connected stems will be able to utilise their resources efficiently to maintain and develop the vitality and adaptivity of the venture building ecosystem, as a whole.
Every startup in the venture building ecosystem is important because they are deeply connected and support each other in the small ecosystem, and this integrated approach also divides vulnerabilities and risks, making the system “antifragile”.
Lastly, keep the fruits but not forget the seeds. The thriving venture businesses and the growing revenue is not the end goal of a venture building business.
Venture building does not only create the businesses, but also the entrepreneurial talent who have acquired valuable knowledge and experience during the process from 0 to 1 to 100. Because of the synergies in business and culture among the ventures created, the skill sets, knowledge, experiences and connections from these talents can be reused and further improved for other venture companies or new venture projects.
This positive feedback loop reinforces the core competencies of the venture builder. Talents are the seeds that drive future venture building projects, making the whole venture building ecosystem even more vibrant and sustainable.
A startup is like a single cell organism: surviving and growing in a dynamic environment filled with countless dangers and uncertainties.
Venture builders create a joint force consisting of a small group of closely related venture companies. Together, they survive with their joint ability to extract and share resources through their business synergies. Just as life, while looking for new opportunities, they also reproduce and grow with their common DNAs: the entrepreneurial culture of the venture builder.
source: e27
