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Venture builders have become an increasingly popular model for creating and developing start-ups in recent years – and for good reason. This method of start-up development provides several advantages for the investor, the venture builder, and the entrepreneur themself.
Even though venture builders are a relatively new phenomenon, they have quickly become an important part of the start-up ecosystem – both for investors and start-ups.
One area where venture builders can be particularly impactful is in their ability to increase investor returns.
Venture builders provide the resources, and expertise that start-ups need to grow. By pooling resources and sharing risk, venture builders can help start-ups scale quickly and achieve success – proceeding through to scale up quickly.
Venture builders help entrepreneurs validate their ideas and business models. By working with a venture builder, entrepreneurs can get feedback and advice from experienced professionals daily and on an operational basis.
This helps entrepreneurs evade costly mistakes, which can easily be avoided.
So why are venture builders so important? Because they can help start-ups grow quickly and achieve success. If you’re reading this and thinking about starting a start-up, consider working with a venture builder.
As mentioned, venture builders have a unique approach to building start-ups. Unlike traditional VC firms, which invest in pre-existing companies, venture builders create companies from scratch. This allows them to have a guiding hand over the direction of the company, the product development process, as well as building a good start-up operational team.
Venture builders have expert teams working alongside an entrepreneur on a continual basis, which gives the entrepreneur a leg up when it comes to creating a successful start-up.
This is business model is vastly different from the traditional accelerator/incubator model.
Venture builders also have a wide network of resources and contacts that they can draw upon to help the entrepreneurs succeed.
So, what makes venture builders so unique? Their ability to build companies from the ground up, as well as leverage a deep understanding of specific industries through the knowledge that the entrepreneur brings. Together, this makes a powerful force.
While the traditional venture capital model focuses on investing in a small number of companies with high potential returns, venture builders take a different approach. Venture builders build and invest in a large portfolio of start-ups, with a more consistent RoI.
Of those start-ups [through venture builders] that make it to the seed round, 72% of those ventures make it to Series A. Compare this figure with traditional start-ups [through non-venture builder structures] where only 42% of ventures that get to seed make it to Series A.
So how do venture builders increase institutional investment returns? By investing smaller amounts in many start-ups, venture builders mitigate the risk associated with a more concentrated, high-value, investment strategy.
The venture builder industry is very operationally intensive, as each start-up needs a substantial amount of work. However, the model adds value to both the entrepreneur, the investor, and the ecosystem as a whole.
“According to Global Start-up Studio Network, start-ups that launch from studios [venture builders] experience 30% higher company success rates. “
The Venture Studio Business Model Explained
Venture builders add continual value by working with the entrepreneurs and providing mentoring and external content exposure – venture builders focus on building entrepreneurs’ skills. By doing this, venture builders avoid 3 issues (identified by Tapio) that face start-ups, outlined below:
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