Topic 1: Introduction To Venture Building

Ortus AdvocatesVenture Building SeriesTopic 1: Introduction to Venture Building

TABLE OF CONTENTSWhat is Venture BuildingDefining a Venture BuilderCore ActivitiesPage 3Page 4Page 6Venture Building ApproachPage 7Difference with other modelPage 9Benefits of Venture BuildingPage 11Types of Venture BuildersPage 12

Introduction to Venture BuildingWhat is Venture BuildingVenture building is a business and productdevelopment approach that enables an organizationto create new products, services and processes fromscratch.One of the key aspects of venture building is that it isable to do so, without interfering with the existingcompany infrastructure at an early stage of thedevelopment process.

Introduction to Venture BuildingDefining a Venture BuilderA Venture builder, also called a startup studio, startupfactory, or venture studio - an organization dedicated tosystematically producing new companies using their ownideas and resources, which they help grow and succeed.“A startup that builds startups”A Venture Builder is similar to a fast-paced tech startup,where its product is the venture, the prototype is thebusiness model, and deliverables mean perfect andtimely deployment.A VB Leverages extensive network and ecosystemreaching out seasoned entrepreneurs for sharedresources (capital, skills, and market expertise).

Introduction to Venture BuildingDefining a Venture BuilderCharacteristics of Venture BuildersInitiation of ventures isdone in-houseIndependent andstandalone decision makingon investmentsRetain a majority stake intheir venturesFocus on portfoliosynergies and recycling ofresourcesProvision of funding (preseed, seed, series A, etc.)to the participatingventures, coming partiallyfrom investors in the fund.

Introduction to Venture BuildingDefining a Venture Builder

Introduction to Venture BuildingCore ActivitiesCreating TeamsIdentifying Business IdeasThis can be done in different ways. Some clone existingmodels. Others choose an opportunity space where theydevelop research projects, explore different ideas andprototype concepts. Regardless of the specific approach used,the goal is to come up with a viable business ideaFacilitatingaccess tocapitalHelping to leadventuresCreating teamsVenture builders create teams from the ground up. This isundertaken once the business idea is clearly identified.Facilitate access to capitalVenture builders facilitate access to capital for the startupsthey develop. They do this either through a fund they own, orby connecting the different ventures to their network ofinvestorsHelping to lead venturesVenture builders help lead the ventures. They can have agovernance role, they can participate in the management ofthe companies, or bothCore ActivitiesProviding shared servicesVenture builders provide shared services to their ventures,such as legal, design or accounting. This is also a form ofTechnical Assistance and Business Development Support.

Introduction to Venture BuildingVenture Building ApproachPortfolioFunding Whoinvests intheVentureBuilder? Whoinvests intheparticipatingventures?Pipeline/IdeaSourcing Where dothe ideascomefrom? Who isowning thePipeline? How to gofrom ideato product.Early-stageshaping How is theactualventureshaped inthebootstrapphase? How is themanagement team puttogether?SupportingGrowth How do wesupportgrowth oftheventures? How do weinteractwith theventure'smanagement?ExitingVentures Who aretheventurestypicallyexiting to? What is theexpectedsuccessrate andreturn?

Introduction to Venture BuildingVenture Building ApproachExiting theBusiness.Supporting andGrowing PortfolioBusinessEarly StageShapingPipeline/IdeaSourcingPortfolio FundingFunding is usuallysought from differentcategories of investorsthat include; HNWIs,Corporate Institutionsand DFIs, Externalpartners on a deal-bydeal basis, otherventure investorsamong others.VBs source for ideas inthree (3) ways; i)innovationdriven/externally – theIP is created fromelsewhere, ii) teamdriven/internally and iii)problem driven –combines innovationand team driven.VBs hire external talent(e.g. consultancies)and let them work within-house experts onseveral projects at thesame time.The alternative is tohire a managementteam specifically for agiven venture.Venture Builders tend totake a majority share intheir ventures and aretherefore moreinvolved than aVenture Capitalist inthe first 3-5 years of aventure. Apart fromspace and sharedback-office resources,the venture buildersoffer industry-tailoredservices that can beleveraged across allportfolio companies.Venture Builders usuallyadopt a more industryfocused and riskaverse business modelthat will enable themhave good traction withmost of their venturesultimately enablingthem to raise newrounds of externalcapital.

Introduction to Venture BuildingDifference with other modelsVC FundsAre not operationalorganizations. Theyinvest in promising teamsand business ideas thatmeet their criteriaVenture BuildersVsAre very involved withdaily management ofthe operation.Accelerators orIncubatorsProvide mentoring andsome shared services.They do this for a limitedperiod of time, and theybring in outside teamswith mature ideas.VentureBuildersVsAll ideas are developedin-house, and teams arebuilt from the ground up

Introduction to Venture BuildingVenture Builders Compared with other types of OrganizationsIdentifyingBusinessIdeas LeadingVenturesProvidingsharedservices Accelerators orIncubators VC Funds VentureBuilders Creating teams FindingCapital

Introduction to Venture BuildingBenefits of a Venture Builder ModelHighoperationalinvolvementLarger supportand investmenthorizon Venture Builders aremuch more proactiveand operationallyinvolved in theirventures than a typicalVC or angel investor. Venture Builders caninvest for a longer timeand in multiple rounds(often alongsidepartner investors ornon-related VCs). They typically invest inless risky ventures, ofwhich the majority(e.g. 6 out of 10) endup as healthy andstable mid-sizedcompanies. Moreover,accelerators andincubators are oftenset up to offerpartnering ventureswell-structured shortterm programs (e.g. a6 months program)instead of a long-termpartnership of 5-10years.Shaping thefounding team Venture Builders oftenhave a long list ofpotential CEOs orexecutives that theywork with in multiplecompanies, who eitherhelp the VBs puttogether managementteams or join theseteams themselves.Creating crossventuresynergiesInvestingheavily in earlystage ideation Sharing back officeservices is the norm,but some VentureBuilders go muchfurther depending ontheir level ofspecialization. For most VBs theseresources are spenton screening patents,brainstorming withinvestors, shaping thebusiness model andseeking partnerswithin the industry.

Introduction to Venture BuildingTypes of Venture Builders and their Business ModelsIn-house Venture BuildersThe corporation owns the venturebuilder and all the startups thatresult from its effortsCharge feesWorking forcorporationsthe venture builder sellsits services tocorporations in exchangefor some fees.Hold an equity StakeWorking for investorsthe corporation holdsequity in the differentventures and charges feesfor the services it provides.Hold equity andcharge fees

Introduction to Venture BuildingTypes of Venture Building Models1. Working for Investors: IndustrializationEntrepreneurship Business angels and VCs invest in the startups that spring fromventure builders as they would in any other startup. Investors can either put money in a pool of ventures, or in the venturebuilder itself. In this scenario the business model for the venture builder is based onthe equity it retains — along with investors and founders — from everyventure it produces. Its efforts are rewarded when the startup is sold, so the goal is to bringthe startup to an exit. Meanwhile, the venture builder charges the ventures for the services itprovides.

Introduction to Venture BuildingTypes of Venture Building Models2. Working for Corporations: Venture Building As a Service In this consulting model (venture-building-as-a-service) corporations are simultaneously the investor and the client. Because the corporation owns the business or businesses that emerge from the engagement, the venture builder and its talent can’tretain equity from the ventures. Corporations are charged fees per hour. Venture builders that work for corporations divide these projects in stages that are sold independently. The most common stages are:123InnovationIncubationCommercializationThe venture builder goes through a 4month process where multidisciplinaryteams explore an industry or an area oropportunity. Human-centered design,lean startup and other tools are used toexplore the defined space and producebusiness concepts, financial models, goto-market strategies and prototypesThe founding team is built and theconcepts defined in the previousphase are tested with high resolutionMVPs. During this 6-month period,go-to-market strategy is executedand the product is evolved with thegoal of validating product-market fitThe venture is focused on scale-upefforts, building managementsystems and middle managementlayers, as well as growth strategies

Introduction to Venture BuildingTypes of Venture Building Models3. In-house Venture Building: Empowering Innovation In this third model the corporation owns the venture builder, whichbecomes a vehicle for investing in new businesses. Interestingly the venture builder is also the context that facilitatesdeveloping competencies in innovation. Creating a venture builder under the corporate umbrella is an emergingmodel chosen by the firms which are most committed to the future.

Introduction to Venture BuildingConclusion The Venture Builder model is growing and is debatably a better model.Whilst all have their merits, venture building is more enabling and beneficialfor a promising early stage bootstrapping startup, especially one which yetto sustain with cash flow. It’s undeniable that venture building is industrializing and demystifying. Aprocess that used to be more art than science, and empoweringorganizations and individuals emphasizes the use of human capital to buildnew value from the ground up in a systematic way, increasing the chancesof producing and building successful startups. No longer a solo charismatic that drives the startup but rather the use ofproven methodologies based on success case studies, combined with theright team and deploy at the right timing that made stories told.

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Introduction to Venture Building Types of Venture Building Models 3. In-house Venture Building: Empowering Innovation In this third model the corporation owns the venture builder, which becomes a vehicle for investing in new businesses. Interestingly the venture builder is also the contex