Venture builder

A venture builder is an investment company which uses a business model based on its portfolio companies sharing resources and talent. Alternatively referred to as "tech studios, startup factories, or venture production studios" in the press,[1] VentureBeat loosely defines venture builders (VBs) as "organizations that build companies using their own ideas and resources."[1] According to VentureBeat, Nova Spivack was "part of the early technologists who pioneered the venture production studio model. He wrote about the model in 2011 at a time when most of the elements that make it up were still in gestation."[1] The press describes Idealab, Betaworks and Rocket Internet as other examples of early venture builders,[2] and according to VentureBeat, the Samwer brothers at Rocket Internet were the "undisputed kings" in executing the venture builder model on a global level as of 2015.[1] Other examples include HVF, Monkey Inferno, Lightbank, AlleyCorp, SherpaVentures,[2] Expa,[3] Stacked Venture Builders and Rokk3r Labs, while Incubix Technologies was the first venture builder in the Philippines.[4] Tech In Asia reported in 2015 that Vietnam had become a "hotbed" for venture builders,[5] at which point worldwide venture builders had raised a total of USD $4 billion since 2008.[6]

Definition

Name

Defining venture builders loosely as "organizations that build companies using their own ideas and resources," VentureBeat wrote in 2015 that venture builders are also referred to as "tech studios, startup factories, or venture production studios."[1] Geektime stated in 2015 that the venture builder model is "new enough that it goes by several names (startup factory, venture builder, startup studio, venture lab), but old enough that a loose definition is emerging."[3][7] Writes Boulder Bits LLC in 2016, "occasionally Venture builders are also referred to as start-up foundries, start-up factories, start-up studios or a generalised collection of similar words."[6]

Characteristics

"The venture builder model is close to that of the venture capital firm (VC): It funds ventures, builds a portfolio, and looks for successful exits. However, it is also much more involved in the operational aspect of its ventures than a traditional VC."
— VentureBeat (January 18, 2015)[1]

According to Natalie Edwards of Geektime in 2015, the venture builder model "still resists strict categorization," despite similar qualities in each.[7] Edwards clarified that "a venture builder is a team of startup veterans who take multiple ideas from scratch or startups in their infancy and simultaneously turn them into independent companies using shared expertise and resources."[3][7] Writes TechInAsia, "for those who are unfamiliar with the term, venture building is the development of a startup using an existing company’s own technical team and resources to do it in-house."[5] Unlike business incubators and accelerators, venture builders generally don't accept applications concerning their portfolio of companies, and the companies instead "pull business ideas from within their own network of resources and assign internal teams to develop them."[1]

According to VentureBeat, venture builders may focus on developing multiple projects simultaneously, and then assign resources to help build the most promising projects into separate companies,[1] with the goal of making those companies eventually self-sufficient.[3] During development, the different projects in the venture builder's portfolio will interact and share resources. According to VentureBeat, venture builders tend to all maintain a "strong sharing network capable of unifying a vast array of resources in the most effective way."[1]

Differences from other models

A number of publications have attempted to delineate the differences between venture builders and other business models, including Forbes,[8] Tech In Asia,[9] and VentureBeat.[1] Dileep Rao of Forbes opined that a "venture flipper" focuses on growing a business' short-term valuation to make a profit on its sale,[8] while "business builders" create and build startups from the ground up until the startups are operating efficiently. In contrast, Rao then defines venture builders as focusing on a market need, and then collecting the resources to build new scalable businesses to fit that market need specifically.[8]

"[Venture building (VB)] focuses more on experienced people who already have ideas and skills, as funding and sources are already in place... Normally, the likelihood of VB-backed companies to make return and to exit multiple is 60%, compared to 5-10% of those in startups with [venture capital models (VCs)]. No wonder, because they cut the time spent for fundraising (which sometime takes a VC-based companies struggling so long) for focusing more in building the company."[9]
— Tech In Asia (June 2015)[1]

John Borthwick of the venture builder Betaworks was quoted in February 2013 stating that "failure is part of the [venture studio] model. The traditional VC model is predicated on the fact that failure happens in the marketplace. But our model is a more flexible platform for innovation. If things don’t look like they will work out, we can easily pivot because there hasn’t been as much capital and investment put in. Death and breakage is part of the system.”[2] According to John Fearon of Sugar Ventures, the traditional business acceleration process tends to take three to six months, while venture building tends to last one to two years.[10]

History

Birth of model and term

According to VentureBeat, Nova Spivack was "part of the early technologists who pioneered the venture production studio model. He wrote about the model in 2011 at a time when most of the elements that make it up were still in gestation. Nova actually invented the Venture Production Studio term, calling it a 'new approach to building startups.'"[1] The article also opined that the Samwer brothers at Rocket Internet were the "undisputed kings" in executing the venture builder model on a global level as of 2015.[1] A 2013 article in TechCrunch described Betaworks as one of a new type of business called a "company builder," much like the Idealab startup founded by Bill Gross in the 1990s.[2]

According to TechCrunch, other notable examples of early venture builders by 2013 included Lightbank, Obvious Corp (launched by Ev Williams and Biz Stone), Betaworks, Science (launched by Mike Jones and Peter Pham), the R&D lab HVF (founded by Max Levchin), Cofounder.com (founded Raj Kapoor of Snapfish), Michael Birch's Monkey Inferno, Kevin Ryan's AlleyCorp, and Shervin Pishevar's SherpaVentures.[2] The large venture capital firm Andreessen Horowitz was also described as being in the process of "building an army of marketers, business development execs, recruiters and more to help aid in the creation of startups."[2]

International growth

According to Fintech Asia, Incubix Technologies was the first "venture builder" startup in the Philippines. Incubix had partnered with VMoney Inc for online payments in July 2014.[4] VentureBeat wrote in January 2015 that "the venture-building philosophy is a rising movement in the tech and startup industries." The article listed then notable examples of venture builders as Betaworks, Obvious Corp, Germany’s Rocket Internet, and Mark Levin’s HVF (Hard Valuable Fun).[1] VentureBeat also reported that StarterSquad had become a notable venture builder in the Netherlands, while SpringLab from South Africa had "made the entire African continent proud with their innovative joint-venture business model."[1]

A February 2015 article in Geektime listed 9 companies that it believed exemplified the venture builder business model: HitFox Group, Science Inc., eFounders, VentureLab Partners, Neverbland, Betaworks, Expa, The Monkey Inferno, Obvious Corp.,[3][7] and "early-stage venture builder"[11] Rocket Internet.[3][7] In April 2015, TechCrunch reported that Alibaba had recently acquired a controlling stake in Lazada Group, an e-commerce firm started by Rocket Internet.[11]

Recent developments

In June 2015, Tech In Asia reported that then notable venture builder examples included Rocket Internet, eFounders, and BrightBridge.[9] Tech In Asia reported two months later that Vietnam had become a "hotbed" for venture builders, writing that "a new hybrid breed of venture capital-backed developers have emerged into the local market."[5] The article named notable Vietnamese venture builders as Sixth Gear Studios, 8 Bit Rockstars (.NFQ Asia), and FPT Ventures.[5] Other recent venture builder examples include Stacked Venture Builders, Rokk3r Labs and Sutton Stone[12] in the United States.

According to The Big Startup Studio Study published in October 2015 by Attila Szigeti,[13] venture builders had raised USD $4 billion overall since 2008.[6] The article also claimed that on average, venture builders acquired fourteen portfolio companies within three years of their launch.[6] Also, since 2010, funding into those portfolio companies had increased by 48%.[6] In April 2016, VentureBeat reported that Rocket Internet "would be in the process of raising a second triple-digit round for its megafund," as well as a separate €75 million for its projects in Africa.[14]

See also

References

  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Diallo, Ali (January 18, 2015). "How 'venture builders' are changing the startup model". VentureBeat. Retrieved 2016-05-09.
  2. 1 2 3 4 5 6 Rao, Leena (February 16, 2013). "The Rise Of Company Builders". TechCrunch. Retrieved 2016-05-09.
  3. 1 2 3 4 5 6 Edwards, Natalie (February 9, 2015). "The trend that's shaking up the startup ecosystem: venture builders". Geektime. Retrieved 2016-05-09.
  4. 1 2 S. Noda III, Tomas (July 30, 2015). "PH venture builder Incubix Tech partners fintech startup VMoney". Fintech Asia. Retrieved 2016-05-09.
  5. 1 2 3 4 Rowan, Andrew (August 31, 2015). "Vietnam is now a hotbed for venture builders". TechInAsia. Retrieved 2016-05-09.
  6. 1 2 3 4 5 "The Startup Studio Model: What Are Venture Builders?". Medium. Boulder Bits LLC. February 18, 2016. Retrieved 2016-05-09.
  7. 1 2 3 4 5 Edwards, Natalie (February 9, 2015). "10 venture builders turning technologies and teams into awesome companies". Geektime. Retrieved 2016-05-09.
  8. 1 2 3 Rao, Dileep (October 14, 2014). "Are You a Business Builder, Venture Builder, or Venture Flipper". Forbes. Retrieved 2016-03-14.
  9. 1 2 3 2V, Vanya (June 29, 2015). "10 reasons why you should choose venture builder over venture capital model". Tech In Asia. Retrieved 2016-05-09.
  10. ↑ Tung, Colin (November 2, 2015). "Funding fuels success; it's not success: Venture builder John Fearon". Yahoo! News. Retrieved 2016-05-09.
  11. 1 2 Russell, Jon (April 14, 2015). "Spiralling losses show Lazada desperately needed Alibaba investment". TechCrunch. Retrieved 2016-05-09.
  12. ↑ Gouges, Guillaume (October 19, 2016). "James Duchenne (Venture Builder, Sutton Stone): "The Mauritian government is about to foster a 'Silicon Corridor'"". Business Magazine. Retrieved 2016-10-30.
  13. ↑ Szigeti, Attila (October 29, 2015). "Anatomy of Startup Studios: A behind the scenes look at how successful venture builders operate". Publishdrive. Retrieved 2016-05-09.
  14. ↑ Novoa, Jaime (April 8, 2016). "The 10 biggest European tech stories this week". VentureBeat. Retrieved 2016-05-09.
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