Builders Recap #4 — Builders not Bankers
This year has been amazing. We raised our first external funding while building out our studio and the companies we co-founded. That said, I’d like to tell you how we got there, what we learned and how we will move forward. If this year were a static fire test, next year would be our moon landing.
Funding the dream
Before this year, we funded our studio operations through the profits of our previous ventures and by learning as we went. But this year, we took things to the next level by securing our first round of external funding. We talked to a variety of investors and quickly realised that we’re no match for the bigwigs in the industry. Studios are all about building things up, not playing the role of a banker. Sounds great in theory, right?
But the truth is, most studios have to turn to operator investors for their first round of capital. These are active entrepreneurs who have exited their own successful companies and want to reinvest in the next generation. They’re builders themselves, so they understand and appreciate the mindset of a studio. It’s a homecoming for them, whereas it’s a strange animal for institutional investors.
Building the foundation
And speaking of operator investors, it’s important to remember that when raising funds from other builders, you can’t just act as a banker. While a banker might be able to secure funding based on future investments, a builder has to show that they’ve got a solid business model in place before committing to anything major.
Don’t get me wrong, I think raising the first fund is one of the toughest things an emerging manager can do. But if you’re trying to raise funds for a studio, you need to be ready to show that you’ve got all the necessary pieces in place and the engine is running smoothly. That’s exactly what we did to secure the first part of the funds we needed to run the studio. And now, we’re on our way to securing the rest because, as builders, we understand the importance of a solid foundation.
Let’s dig into what we’ve learned that got us here.
The challenges of entrepreneurship
The title of one of our favourite books sums up the reality of being an entrepreneur perfectly: “The Hard Thing About Hard Things” by Ben Horowitz. Building a studio means making tough decisions and making them look easy by approaching them with data-driven solutions. Here are a few of the lessons we learned this year that will guide us in the future.
Technical co-founder or engineer
We usually aim to co-found companies with technical and business co-founders, with the belief that one person can build the product while the other focuses on sales and the overall business strategy. But what if, after a few tries, you haven’t found the right technical co-founder? Do you push forward with external engineers and try to grab a piece of the market? At the beginning of the year, I might have said to go for it.
But now, we’ve learned the hard way that it’s important to slow down and make sure you have the right match. Sure, you can build a product without a technical co-founder, but you can’t build everything else without one. Of course, it’s possible to bring on a technical co-founder later on, but in a studio environment, it’s crucial for the technical co-founder to be involved from the beginning, particularly during crucial customer solution interviews. These tough decisions shape the partnership and set the tone for the years to come. No external engineer can replace that. If you’re interested in hearing more from the technical cofounder we’ve been talking about, check out this great article on what it takes to thrive in a studio environment:
Founder opportunity match
One question that often comes up when discussing studios is whether or not ideas come from the founders themselves. When we explain that we start by working with founders to identify shared opportunities, some people are skeptical. They may think that ideas come about randomly or through personal experience, or that they’re not worth pursuing. But that’s not what we’ve found. Through research and experimentation, we’ve discovered that amazing solutions to important problems can be found. The one thing we’ve learned the hard way is the importance of making sure the problem we’re trying to solve is one that we truly care about and are passionate about, rather than just getting excited about a problem because the data seems to point in that direction.
We call this the “founder opportunity match” and it’s something that shouldn’t be taken lightly. Recently, we’ve spent a significant amount of time diving deep into the challenges of setting and achieving goals in white-collar organisations. We thought this would be a universal problem, but it turns out that it’s not. The bigger lesson we learned was that the entrepreneur and the opportunity weren’t a good fit, and the problem wasn’t something the entrepreneur truly cared about. This can’t be replaced by just finding a market opportunity. Now, we make sure to spend time learning about the background and story of every entrepreneur we partner with, not just to hear their accolades, but also to help empower them to make a lasting impact.
Launching ventures
Obeyo. Last year, we announced the launch of Obeyo with a group of launching customers. This year, we finally got the product into production. It was a long-awaited and highly anticipated moment, and we had to pivot our approach a few times until we found the right fit between problem and solution. Looking back, everything fell into place the moment we found our CTO and co-founder, Steven Aanen. Be sure to check out the refreshed Obeyo website and product.
Noon. Our next venture is Noon, a product focused on providing data-driven insights on well-being in the workplace. We developed an evidence-based model that allows companies to identify work-related stressors and make data-driven changes to improve well-being within the workplace. We then turned this model into a seamless platform that can easily integrate into a company’s existing workflow without causing disruptions.
We’re on a mission to launch more companies for the future of work and living.
Build with us
After two years of molding our independent studio model and creating companies with some seriously talented co-founders, we’re ready to take off on an even bigger journey in 2023. We’ve been exploring the future of work and living, and have compiled a list of exciting opportunities we’d love to tackle with fellow co-founders. Have a look and see if anything piques your interest. We’re also open to opportunities in similar fields, so don’t be shy and get in touch! We’ve also written a few articles about the discovery process we go through before establishing a new company.
Builders not bankers
We take the lesson “builders, not bankers” to heart. In our conversations with potential founders, we’ve learned that if we don’t clearly communicate that we are builders first and foremost, they might see us as investors before anything else.
That’s why we’re increasingly presenting ourselves as institutional co-founders, while still proudly calling ourselves builders. As the term suggests, an institutional co-founder is an organisation that plays a key role in the creation and growth of a company, rather than just an individual. This way, it’s clear how a studio like ours can be a co-founder to multiple companies, while still dedicating significant time and energy to helping them thrive.
Revamping our process
We’re continuously improving our process to streamline the path to incorporation. Previously, the entire core team was involved in validating solutions that could potentially become companies. However, we’ve realized that it’s more efficient to have just a few team members handle this step. Once we’ve validated a solution and identified a problem worth solving, we move on to the Shape phase. This is where the majority of the core team comes in to create prototypes, build proof of concepts, and develop a go-to-market strategy. We also work to secure the first 10 launching customers during this phase.
By separating validation from shaping, we’re able to more easily pivot or shelve an idea if necessary, without wasting resources. It’s all part of our effort to create a more efficient process that helps our studio and co-founders succeed.
Onward and upward!
It’s been quite a ride, and we’re so fortunate to have a truly amazing core team that constantly adapts and evolves as we navigate challenges. Our goal is to create a self-sustaining studio that will fund itself through the success of our projects, enabling us to make a bigger impact in Europe and beyond. Over the next few years, we plan to launch at least 8 companies and we may even venture into new verticals and cities.
If you’re interested in discussing investment, institutional co-founding, or the studio model with us, don’t hesitate to reach out. We’re always looking for opportunities to collaborate and grow.
Cheers.
Michael van Lier
Managing Director at Builders
—
About Builders
Builders is a startup studio that empowers entrepreneurs to build impactful software companies at scale within Europe by combining our experience in early-stage validation, operational excellence and pre-seed funding. To learn more, visit our website or talk to us at hello@builders.studio.
Continue following our journey on LinkedIn, Instagram, or here on Medium.
