What is a Venture Builder and how to design one?
A venture builder differs from other capital funds in that it depends mainly on the quality and dynamism of its networks (INSEAD, 2018). It means that a venture builder must find out which the best resource combination for creating the most explosive outcomes for it to gain market greater share faster than its rivals.
Corporations tend to use VB to reduce the chances of negative black swan exposure while raising their positive black swan exposure (Thng, 2019). According to conventional knowledge, business enterprises’ systems, structures, and procedures focus more on delivery and performance than on change and innovation (de Alvarenga et al., 2019). Firms must pursue the former to succeed in today’s competition, but they are likely to jeopardize their future well-being if they overlook the latter. Many companies have tried versatile structures or techniques like open innovation to balance effectiveness and creativity. Among these approaches, establishing incubator groups to create relationships with emerging start-up enterprises is a significant contemporary method (Massiera, 2021). The logic behind it is straightforward: VBs tap into new business models and talent pools while also transforming their own corporate cultures in return for helping new ventures deal with the risk of newness and evolve into more stable organizations (Cryptix, 2022). The venture builder environment is significant because they attempt to improve new venture success rates.
Goals and purpose of Venture Builder
Venture investors have a clear edge over firms that are leveraged or rely on grants for financing; it’s a possible solution to the funding gap that has been a challenge for early-stage companies (Massiera, 2021). Any start-up owned by the Venture Builder will almost certainly have some equity taken. Still, the start-up has the potential to accelerate in its early stages with the installation of shared services, expertise, and salary (Tkalich et al., 2021). It becomes a win-win situation for both parties, which boosts their chances of success. Venture builders either hire professionals or rely on extensive expertise and commercial experience. They exchanged technical experience with competent developers who can produce swiftly with the correct frameworks and assistance, as well as high-quality code (Tkalich et al., 2021). Even with a collection of proprietary technology that can be used to cut development time even more.
Over the past decade, many corporate innovation laboratories have sprung up. Cross-functional cooperation involving intrapreneurs in these laboratories helps companies come up with fresh ideas and concepts. On the other hand, these concepts are usually executed as startup priorities and get greater attention from the venture builders. Consequently, rather than forging new ground, venture builders often focus on boosting this young business. Meanwhile, corporate initiatives are designed to achieve mid to long-term goals. This eliminates the need for complicated integration concerns. With abundant resources, the venture builders may settle on innovative decisions at startup without facing the constraints of the corporate hierarchy. This results in quicker returns on investment and a better competitive edge for the startups. The startups are, thus, charged with exploring radical ideas and business models that address new consumer requirements, allowing the venture builder to diversify its risks of disruption.
The Distinction Between Incubators and Accelerators
Although each business is similar, its methods and target markets differ. Accelerators are short-term programs that target a wide range of start-ups, from pre-seed through scale-ups. Incubators are a kind of start-up help firm that is broader (Cryptix, 2022). Venture builders concentrate on bringing together teams and forming a group of start-ups simultaneously as part of a lengthier program that connects them to their network. Unfortunately, the phrase “venture builder” has only recently gained popularity in the entrepreneurial sector. “Accelerator” is a more often used word, yet it is still understudied. The words venture builder, accelerator, and incubator tend to be used interchangeably to gather as much information as possible, with the distinctions noted previously taken into account.
Because venture capital companies are not operating businesses, they are unique. They put their money into potential teams and company concepts that match their requirements. Venture Builders, however, are heavily engaged in day-to-day operations management (Cryptix, 2022). When a Venture Builder has shares in a firm, it came up with the concept and put in a lot of work to build it, not because it contributed funds. It is also apparent that many Venture Builders are setting up funds to help with funding (Gerhardt et al., 2021). Contrary to the case of incubators and accelerators, Venture Builders find company ideas from within their networks and allocate internal teams to initiate the building from the bottom up. The link between a Venture Builder and its ventures is long-term; it is heavily engaged with the businesses it creates until they depart.
Process of creating a Venture Builder
Venture studios create businesses by developing new concepts and allocating teams to those with commercial potential (Doyle, 2021). Any dangerous assumptions that must be true for your idea to have any potential are addressed after the business concept has been fully understood. The first step is to determine whether or not your target clients have issues that need to be addressed and, if so, whether or not your concept offers the appropriate answers. After these concepts have been verified and proven, they are backed up by resources to create a minimum viable product (INSEAD, 2018). Building a team is a crucial aspect of the process for smart individuals who want to achieve big things. While some venture builders fund the design process first, others have created a strong reputation that allows them to seek funds before the ideas are specified. If the feasibility is confirmed at this time, the studio works on growing the new venture before attempting to depart. This business model cycle is repeated several times, each time resulting in creating a new venture (Garcia-Luengo, 2017). It is anticipated that if an idea fails, resources will be shifted, or the business case will be abandoned outright.
The Venture Builder approach is becoming more popular. It is arguable if venture capital is a superior model. While each has its benefits, venture building is more facilitating and advantageous for a potential early-stage start-up firm, particularly one that has yet to support itself with working capital. It is indisputable that venture building is modernizing and deconstructing a process that was once somewhat of an art than a science, and equipping organizations and people by stressing the systematic use of human capital to create unique opportunities from the bottom up, thus boosting the possibilities of developing and growing successful companies. It is no longer a single personality that drives the company; instead it is the use of established procedures based on successful case studies, paired with the appropriate team and deployment at the right time that has enabled tales to be told.
Cryptix. (2022). The difference between Incubator, Accelerator and Venture Builder. Retrieved from https://cryptix.ag/blog/the-difference-between-incubator-accelerator-and-venture-builder/
de Alvarenga, R., Junior, O. C., & Zeny, G. C. (2019). Venture Building & Startup Studios versus Acceleration Programs-Conceptual & Performance Differences. In . ISPIM Conference Proceedings (pp. 1-14). The International Society for Professional Innovation Management.
Doyle, M. (2021, March 15). The Venture Studio Business Model Explained. Retrieved from https://theworldwecreate.net/insights/the-venture-studio-business-model-explained
Garcia-Luengo, J. (2017, Aug 29). Venture Building, a new model for entrepreneurship and innovation. Retrieved from https://www.linkedin.com/pulse/venture-building-new-model-entrepreneurship-jorge-garc%C3%ADa-luengo/
Gerhardt, V., Santos, J. D., Rubin, E., Neuenfeldt, A., & Mairesse Siluk, J. C. (2021). Stakeholders´ Perception to Characterize the Start-ups Success. Journal of technology management & innovation, 16(1), 38-50.
INSEAD. (2018). The Emerging Role of Venture Builders in EarlyStage Venture Funding. Retrieved from chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.insead.edu/sites/default/files/assets/dept/centres/gpei/docs/insead-student-emerging-role-of-venture-builders-oct-2018.pdf
Massi, M., Shah, P., Eckel, J., & Loughridge, J. (2022, Jan 12). The Venture Builder Strategy for Principal Investors. Retrieved from https://www.bcg.com/publications/2022/the-venture-builders-strategy-for-principal-investors
Massiera, P. (2021). Teaching business models through student consulting projects. Journal of Business Models, 9(3), 25-38.
Thng, P. (2019, Oct). Successful venture building: What matters! An empirical Successful venture building: What matters! An empirical examination of effective incubation practices . Retrieved from Singapore Management University Singapore Management University : https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1253&context=etd_coll
Tkalich, A., Moe, N. B., & Ulfsnes, R. (2021). Making Internal Software Startups Work: How to Innovate Like a Venture Builder? International Conference on Software Business (pp. 152-167). Springer.