In today’s world, building and developing new businesses rely not only on creative ideas but also on the right approach and organizational model. One of the prominent trends is venture building, a comprehensive and effective method to create and develop startups. This article will introduce and analyze the four main types of venture building: internal venture building, joint venture building, corporate venture building, and late founder venture building. Each type has its own unique characteristics and advantages, contributing to the diversity and richness of the global startup ecosystem. But first, let’s explore the activities of a venture builder organization.
The Activities of a Venture Builder Organization
A venture builder organization can develop business ideas externally, internally, or both. They work with a team to build the business using diverse skills and knowledge. They also bring in capital and take the lead, offering shared services and implementing a methodology and business framework. Finally, they can bring in new talent after the initial building phase.
Developing Business Ideas Through Venture Building
There are at least three different ways to develop a business idea into a product and a real business.
Internal Resources
A team built by the venture builder, also known as intrapreneurs, develops their main idea and vision independently, without outside help. Once the founders can demonstrate the product-market fit, they can look to expand the team, including additional co-founders, thus driving growth through their validated business model.
External Resources
The venture builder brings in an industry expert or consultant to help make accurate business decisions. They may also seek new entrepreneurs to form partnerships, allowing them to develop the idea into a business.
Combined Resources
Depending on the type of investment, the venture builder may use a combination of internal and external resources. Although more complex, this approach can quickly identify the right resources to complete the project.
Regardless of the approach, a venture builder, by design, helps entrepreneurs tackle uncertainties in building their company. Additionally, the goal is not merely to build on ideas but on results.
Building the First Team
A functional, well-knit team is one of the most important factors in a successful business. A venture builder will invest in a team, which can be from their own HR, external sources, or both.
Any successful entrepreneur will admit that they want to monitor the market and update product progress. This is why a business founder needs a tech co-founder and vice versa. A software engineer who can design the product before starting to write code is also essential.
Business developers and sales managers can join later along with senior executives. All of these roles are necessary for the team to achieve the best product-market fit, which should ideally come from customers.
To minimize the risk of failure, the venture builder will retain most of the control in a venture from the beginning. This means they will make all the difficult decisions and guide the team’s efforts.
Bringing in Capital
After the initial capital injection, most product teams will turn to a venture builder for investment, human resources, knowledge, and risk mitigation. A venture builder typically provides the necessary seed capital for the team. If things go well, they usually provide the necessary growth capital as well. They may also leverage their network to introduce the team to external funds for their next steps.
Taking the Leader
A Venture Builder operates based on a business plan, much like any entrepreneurial endeavor. This partly explains why they decide which business ventures to embark upon and when. After all, there are only a few ventures undertaken per year. Moreover, it’s crucial for them to retain control over these ventures from the outset to safeguard their interests and protect the entire portfolio from potential harm.
However, assuming the lead isn’t the sole method to mitigate the risk of failure. A Venture Builder commonly provides expertise and experience in the form of human resources and knowledge.
Offering shared services — or resources
Funding isn’t the only resource a Venture Builder can offer to a newly formed startup. More often than not, many team members lack sufficient experience to manage all aspects of the business adequately. The Venture Builder steps in to handle various aspects of the business for them until they can access resources of their own. These services may include:
• Financial and payroll management
• Legal management
• IT administration and operations
• Digital marketing
• Perks and recreation
• Knowledge sharing
These resources are available through shared services, meaning that all portfolio companies may benefit from them to some extent. However, the individuals providing these services are knowledgeable and experienced enough to help propel the venture to the brink of expansion before each team can hire their own experts.
Bringing in new talent after the initial team has formed
Recruitment is by no means an easy task, especially when the business model of a newly formed startup is fraught with risks and uncertainties. However, when a startup begins to stabilize and requires team expansion, it’s a positive sign indicating business growth. A Venture Builder can provide support and ensure the success of the business in less time than it would typically take, thereby reducing the risk profile for all stakeholders. This risk reduction factor tends to attract more talent for the subsequent stages.
Types of Venture Building
Venture building can be categorized into various types based on the approach and resources utilized. Here are some common types of venture building:
1. Internal Venture Building
Internal Venture Building is a business development model where new ideas are conceived and tested within the organization itself. New projects are typically initiated by internal employees or teams, utilizing resources and support from within the organization. This process often involves market research and analysis, product or service development, and experimentation with new business models.
The Internal Venture Building model offers several benefits, including flexibility and cost savings. By leveraging existing resources and deep organizational knowledge, businesses can develop new products and services more quickly and efficiently. Additionally, maintaining control and management within the organization helps ensure the sustainable and reliable growth of new projects.
2. Joint Venture Building
Joint Venture Building is a form in which an organization or individual collaborates with another partner to establish and develop a new business. In this case, the venture builder teams up with an external co-founder or a third party to share risks and responsibilities in building and managing the new business.
There are various types of joint ventures, but they all share a commonality: the combination of partners, pooling their resources (financial or otherwise) to optimize performance and output while minimizing financial risks.
There are four main types of joint ventures:
1. Joint venture with business partners: Partners can be family members, friends, or colleagues, investing equally and holding equal voting rights. This helps diversify risks and increase investment capital for the project.
2. Joint venture with skillful partners: You collaborate with someone who can contribute technical skills or practical expertise to complement financial investment. For example, partnering with an architect for design purposes or a contractor for construction expertise.
3. Utilizing an experienced real estate development company: Providing capital to a company to carry out all tasks from design to handover. This method is less intrusive but may limit profits the most.
4. With a major investor: Collaborating with someone with larger financial capabilities to invest a larger sum of capital. They may allow you to operate the project and take a supporting role.
It’s important to match the complexity of the joint venture structure with the scale of the project. Smaller projects may not require complex agreements due to potential legal costs, while larger projects may benefit from a stronger joint venture structure.
3. Corporate Venture Building in Corporations
Building businesses within businesses (Corporate Venture Building) is an innovative strategy for established companies. This strategy fosters new developments and brings long-term benefits. Leveraging their available resources and networks, these newly established ventures have the potential to disrupt existing markets or create entirely new ones. Corporate Venture Building also helps cultivate a culture of innovation and entrepreneurship, while encouraging collaboration and innovation with external partners.
4. Late founder venture building
Late founder venture building is when an entrepreneur joins an existing team with a product to continue its development. Typically, in this scenario, the product has already been created but requires additional effort and resources to grow and expand in the market. These late founder venture builders often play a crucial role in enhancing skills, resources, and innovation for the current project.
Building businesses in these four forms: internal venture building, joint venture building, corporate venture building, and late founder venture building all offer unique opportunities and challenges. Each type has its specific advantages, from optimizing internal resources, leveraging external expertise, to developing projects with strong support from large corporations, or continuing to develop existing products. Understanding and correctly applying the appropriate type of venture building that aligns with one’s goals and resources will help startups not only survive but thrive in today’s competitive business environment. Ultimately, this contributes to creating breakthrough value and fostering sustainable economic development.
If you’re a business owner aiming for rapid growth, CMG is your partner in accelerating the expansion of your enterprise. Our specialty lies in linking you with reputable financial institutions and experienced investors eager to support and invest in promising ventures. Get in touch with CMG today to unlock the potential of your business journey.
