Why venture building is the best way to turn innovation into profit
I’m a true entrepreneur at heart. I love taking the seeds of a new idea and turning it in a successful business. The more times I’ve been through the process, the more it has become a repeatable business model, and I’ve become better and better at it.
At my company Icarus Media Digital, we describe ourselves as venture builders. We systematically develop new companies that are changing the face of how we live and work.
We have big ideas for the future and the problems that tomorrow’s technology will need to solve. By mixing our ideas with powerful data analytics, we design these technologies and develop them into functioning, profitable businesses that we’re proud to promote.
The history of venture building
This venture building model is not new, but it has shifted significantly over time. The industry began with entrepreneurs in private businesses, reinvesting the profits of successful start-ups that they sold, into the next big thing.
In the current times, venture builders operate as investment vehicles, securing funding to run their operations and develop an ongoing stream of start-ups. Many specialise in a specific niche to build expertise that brings value to all the ventures they touch.
Why the world needs venture building
In the global economy, it’s essential to have both established corporates and more innovative start-ups.
Corporations help to provide stability, optimised processes and efficiency. However, their size and the type of talent they attract can make it challenging to develop truly market-disrupting technological innovations.
Corporations have attempted to create start-up environments at an arms-length to the central business’s processes. These arrangements have typically generated less disruptive innovations than ones that have developed outside of the corporate world, with no distractions. Corporates may also be resistant to developing innovations that significantly disrupt parts of their operations that are working smoothly today.
In contrast, start-ups are agile and more open to taking risks. They may also see more success in attracting creative talent.
How venture building works in practice
From an external perspective, venture building can seem a bit of a dark art, but essentially, it’s a systematic model.
The model begins with ideation. We establish a team of thinkers and dreamers who, inspired by data, invent a way to cause disruption. They may design a way to disrupt an existing industry by meeting a need in a better way or take a current solution to a new market with improved user experience. Alternatively, they may create something entirely new. The main risk at this stage is developing an idea that turns out not to be successful. We mitigate this by using a data-driven approach to idea generation, development and prioritisation.
We then assemble a team of the top talent to build the technology solution, taking it from an idea to a living and breathing prototype that we can test and refine. We also start building the team that will run the ongoing business, with Icarus Media Digital’s support.
Where necessary, we facilitate access to funding for each idea, that’s sufficient to take the concept through to a functioning, profitable business.
Our marketing experts then develop an innovative plan to launch and market the technology on an ongoing basis. Every successful business needs a healthy flow of revenue.
This venture building process from start to launch typically takes anywhere between three to 18 months, depending upon the build phase’s complexity.
We provide ongoing services to the business for efficiency, rather than have the new venture hire a specific resource; for example, legal guidance, finance and people processes. In that way, we share the lessons we have learned on other ventures and ensure we offer the highest quality service at an affordable price to the new venture. Over time, as the business grows, it will hire more internal resources, and the role of the shared services typically reduces to ad hoc problem solving, or scaling advice.
When you step back and consider all the support that these ventures benefit from, you can see why they have a considerable advantage over the traditional start-up business that tries to do everything with limited support and resources. No wonder failure rates amongst start-ups are so high; studies show that 90% of all start-ups fail over time.
Venture building business structures
There are some distinct business structures within the venture building industry, depending upon who the venture builder is working for.
Firstly, the venture builder can be its own corporation. As it develops new start-ups, it owns them outright and will typically benefit from the business’ profits and the potential to sell it to another company in the future. This corporation model is how we work at Icarus Media Digital.
The second option entails the venture builder working on behalf of a corporate in return for a fee for the work it does with the start-ups.
Thirdly, a venture builder may work on behalf of investors. In this case, it will typically hold equity in the start-ups and be paid a fee for its services.
A unique business model that nurtures innovation through to profit
Venture building has a distinctly different business model to other structures around innovation. The premise of the venture building business model is to continually develop new ideas and turn them into businesses.
In comparison, a start-up is a new business with one single focus.
Venture building should also not be confused with venture capital (VC). VCs focus on investing in new businesses and ideas, where they believe they have a good chance of making a profit on their investment. A VC’s support is typically limited to financial input, whereas venture builders go deep into developing, launching and staffing the new businesses, to ensure success. In that way, venture building is more time-intensive and involved, but we reduce our risks by ensuring the success of our investments of time and capital. VCs may employ a venture builder’s services to mitigate the risks of their investment in return for a fee.
Corporates may set up an incubator or accelerator, in which they encourage start-ups to work in-house with them, but at a distance to the company’s primary operations so as not to stifle the innovation. The corporate will typically supply a working space, that often allows the start-up to network with other entrepreneurs. They may also invest in the start-up in return for an equity stake or provision of services such as developing a new product or a technology solution.
Alternatively, an incubator may be established by an independent organisation, to provide short term support to help start-ups get off the ground, supporting jobs and innovation in the local economy. In comparison, venture building typically has a longer-term horizon through which it supports the startup up until it’s sold.
The biggest challenges for venture builders
I find venture building to be one of the most exciting and engaging business models to work within. But, it’s not without risks and challenges. The biggest challenges I face include:
· Finding the right talent to meet the needs of each venture. We have no shortage of ideas, but finding world-class people with the right talent, skills and culture fit isn’t easy. Working in a venture builder offers a career experience like nothing else for the individuals who meet the criteria. The sheer variety of what you can work on, while disrupting industries and improving lives, is addictive.
· Balancing our ambition with the realities of how much time each venture needs from our core team to be successful. I try to remain laser-focused on one or two ventures until they reach the stage that the in-house teams can carry on the mission successfully with less intense input from my central team. When you’re surrounded by a team of innovators, it requires constant discipline not to get carried away by new ideas and opportunities.
· Balancing capital raising, with maximising the available resources. New start-ups have an ongoing need for capital, but we must balance this against their ability to generate revenue. We have to make tough decisions on what is critical to have in place for launch, versus what we can develop and invest in overtime as the business generates sales.
Despite the challenges, no amount of money would take me away from venture building. It’s in my blood, and I’m proud of the track record of success our team at Icarus Media Digital has established.