Why reinvent the venture studio?
Hello!
I wanted to briefly introduce you to a new series we’re running: Adventures in Ventureland.
We want to open up a ‘behind the scenes’ on what it really means to build ventures with corporates. To do this, we’ll be bringing a range of voices together to share different experiences and dig into venture building from all sides. From founders, to corporate leaders, to industry experts, this series will explore everything from best practice, to deep industry insights, to inspirational startups, as we search for new spaces to build ventures in.
If you’d like to get involved in the series to share your own experiences, lessons learned and tips for the community, we’d love to hear from you.
But most of all, we hope you enjoy and get inspired too!
To start the series off, we’re opening up about our own Venture Building Model: the mistakes we made, how the model has evolved, and what we now believe the critical success factors to be.
So What is the Venture Studio?
Simply put, we build new, high growth ventures.
Like some other studios, we do this with different corporate partners.
Unlike other studios, we don’t take fees, and we put our own money in.
We bet on the new ventures together, so we’re equally incentivised to make them work or kill them quickly if they don’t.
What problem are you trying to solve?
It’s actually two problems, one we face ourselves as investors and company builders, and then another our partners face.
Our problem: building new businesses is really really risky.
We are entrepreneurs who all share a passion for building tech-enabled startups. But given that 90% of startups die, it’s a lifestyle that becomes a lot harder to justify as you grow older, start a family, and can’t go home to live with Mum and Dad if your latest idea doesn’t work.
So how did you solve it?
Venture building is inherently risky. If we can find anything to help lower that risk, it’s a huge advantage. For us, partnering with corporates is the key to lowering the risk, because any startups we build together get a huge leg up. It even allows us to tap into industries and business models that no startup in the wild can get into, because of huge barriers to entry.
But there was a lot that needed to be fixed for us to do this with corporates…
Our partner’s problem: building new, transformative businesses in a corporate is like pushing water uphill.
Corporates know they need to innovate. 80% of corporates say their business model is at risk. 84% see innovation as a key growth strategy.
But the ability to repeatably reinvent yourself when you’re so finely tuned for optimisation and execution… that’s still to be solved. Less than 8% of ventures launched internally reach scale. And the average corporate venture capital program (CVC) lasts just 4 years.
So the challenge for corporates is how to create new business models that are strategically close enough to the core that they could become the future of the business… without crushing them.
Outsourcing this is a huge challenge for corporates, and why so many are intent on keeping it in house. After all, ultimately they need to own the venture. If they invest in other startups, for instance, through a CVC function, they’re rarely even given a board seat, let alone guaranteed the chance to acquire it.
But when they build it in house, they’re battling the learning curve of corporate employees who are trying to build a business for the first time. They’re also fighting incentives. Corporate Innovators are often on a comfortable salary, doing a more fun day job, and that doesn’t incentivise rapid testing or killing of ideas that don’t work.
So corporates spend too much, take too long, and miss opportunities to own the business models which then end up cannibalising them.
This is what we set out to solve for: if we want to unlock the best of big, we need it to work as well for our corporate partners as for us.
That means a guaranteed path for the corporate to own strategically aligned ideas, while reducing the risk that corporate bureaucracy slows growth or kills great ideas.
So what’s the answer?
After a lot of mistakes, and three evolutions of the model, we think we’ve found the way to balance big and small. It’s part investment vehicle, part startup factory.
Want to learn more?