A new challenge for VC: the competition with Venture-builders
This new year has just began and the premises are not bad. However, there is a great need for change in the world of Venture Capital. In the last year, the VC ecosystem had to deal with the competition of crowdfunding. In particular, it wasn’t clear if crowdfunding could be an ally or rather a dangerous competitor.
Anyway, this war seems to belong to the past. What matters today is that Venture Capital cannot continue to work in the same manner. Innovation, change and revolution are three steps which nowadays cannot be ignored. And what about this new year? What can we say about 2015? This new year started with a new great challenge for the VC ecosystem: new powers are starting to dominate the landscape of startups. I’m talking about venture builders. Yes it’s all true. They are not fiction. Venture builders are different from incubators and accelerators because they don’t take any applications, nor do they run any sort of competitive program that culminates in a Demo Day.
Instead, they pull business ideas from within their own network of resources and assign internal teams to develop them. Venture builders’ main strategy is to develop many systems, models, or projects at once and then build separate companies around the most promising ones by assigning operational resources and capital to those portfolio companies. We could imagine a venture-building company like a holding company that owns equity in the various corporate entities it helped created. The most successful venture builders are, however, much more efficient than holding companies. They are multitasking organizations since they work in different manners.
They raise capital, staff resources, host internal coding sessions, design business models, work with legal teams, build MVPs (minimum viable products), hire business development managers, and run very effective marketing campaigns during their ventures’ pre- and post-launch phases. However, actually, the main distinguishing mark of venture builders is the presence of a strong sharing network which can use a wide range of resources in the most effective way.
Venture builders rely on the quality and the dynamics of their networks and thus need to discover the best combination of resources in order to gain excellent results. Therefore all the available resources are under the control of a unique body which can build ventures oriented to specific purpose. In an article published on Venture Beat it is highlighted the strong link between the startup ecosystem and the venture-building universe. It’s explained that "The venture-building company is similar to a high-paced tech startup, where the product is the venture, the prototype is the business model, and ’shipping code’ means perfect and timely execution. In this regard, the venture builder is essentially a startup that builds startups."
The article on Venture Beat continued showing the similarities between the venture builder model and that of the venture capital firm: venture builders behave like venture capital. They "fund ventures, build a portfolio, and look for successful exits. However, a venture builder is also much more involved in the operational aspect of its ventures than a traditional VC. In some cases, it goes as far as pulling all the necessary resources from its vast connection network to crush its competition and scale extremely fast. "We can’t deny the incredible growth which the venture-building movement is living right now starting to become more popular also outside of the United States: The Netherlands made StarterSquad, the self-proclaimed "European version of Betaworks"; and the South African team at Springlab created an innovative joint-venture business model.
But, are we sure that venture builders could be a positive factor in the world of venture capital? Although venture builders could trace a new efficient financing system, completely self-sufficient, we cannot deny that there can be a risk of an excessive contamination which is not healthy on a global ground. The truth is that it’s necessary to keep a certain balance in every situation. If the venture capitalist and the startupper could merge in only one person, it would lead to a paradoxical situation in which the same person would be the judge and the defendant.
But it is also true - as Nassim Taleb wrote in one of his masterpieces- that What fools call "wasting time" is most often the best investment. Only with the passage of time, we’ll have an answer about the effective role of venture builders in the ecosystem of startups. For now we can say that they represent a new reality, a new power, which cannot be underestimated.
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