How a corporate venture comes to life

Fledgling ideas move quickly from the garage to the road under the relentless momentum of a corporate venture builder, where a good start is half the battle

Corporate venture building is a relatively new method of corporate reinvention. What it promises to do is deliver new business models like digital platforms and new strategic businesses for a large company that finds itself at a point of inflection. It may be a market leader in a traditional industry, but in the digital age, new competition can emerge from adjacent markets, often unexpectedly. By creating digital speedboats a corporate launches a preemptive attack, positioning small nimble startups in high-potential industries. Some end up as market intelligence machines, others go on to become independently viable and others radically alter the parent company’s core business.

The first step in the process involves setting the strategic framework and this acts as the blueprint for everything that follows.

Phase 1: Strategic preparation — take the stage

To ensure investment and measurement success at every stage we start at the top level: First, we define and integrate an Entrepreneurial Operating Model (EOM) where you can make the right decisions and use a clear structure to build a portfolio of digital growth (buy, build, partner). The EOM installs a governing model in the company that provides an effective and structured way of steering the new digital business to fast track the future.

The main idea here is to ensure alignment between different stakeholders and to promote an appropriate funding structure where multiple initiatives can be supported at the same time. Acting as a bridge between the parent and digital venture, the growth board ensures that learnings can be shared and conflict avoided between the radical innovation side of the business and the core business side, which usually focuses on optimisation. Once both sides of the business can talk, there is less ambiguity about what the general overarching mission is: secure the future competitiveness of the business and reach a set of clearly defined strategic goals.

Phase 2: Tactical validations — where the magic happens

All great ideas at FoundersLane start in the garage: the White Space Garage that is. It’s an intensive process that results in the development of two to three high potential business cases. What happens in the garage stays in the garage as a team of determined entrepreneurs lock themselves away in a hideout reserved for deep concentration. Inside, all there is is a flip board, some markers, food delivery service on speed dial and a motivational poster on the wall that says: Quality is not an act, it is a habit, I think Aristotle said that, but I am sure it’s just to cover up a hole in the wall or something.

Jokes aside, the process which involves, for example, ecosystem and competitor analysis, customer journey mapping leading to organisational readiness and execution strategy, is high-tempo and requires a lot of interaction and validation interviews. These are conducted with subject-matter experts and our corporate partners, potential customers and stakeholders from the industry value chain.

The first step is to uncover problems and solutions spaces that are currently not served well. Next, we narrow these down to those most strategically relevant to our corporate partner. And, we move the most promising cases in terms of business viability and market size, towards a solution concept; with a potentially strong USP compared to existing products or platforms on the market.

At this point, we often experience what psychologists call “being in the flow”. Once ideas come into play and we receive positive, even excited, feedback from potential customers, it feels almost frenzied and the adrenaline keeps you going. The flow state, also known colloquially as being in the zone, is the mental state in which a person performing an activity is fully immersed in a feeling of energised focus, full involvement, and enjoyment in the process of the activity. The flow state shares many characteristics with hyperfocus. Time passes by without you noticing and ideas and connections are made that you didn’t think were possible.

Phase 3: Execution — the magic is not over

Once we have laid the foundations of strategy and tactics, the venture can speed into the rapid execution of one selected case. The first order of business is to create a Minimum Viable Business (MVB) which involves further rigorous validation of the value propositions on the customer side and building up a funnel of potential sales leads. On the technical side, we assess the technological feasibility and start building a pilot product, making our solutions tangible to customers. Finally, we also crunch the numbers to evaluate revenue models and investment needs.

Once all stakeholders are satisfied a green light allows the venture to pass to validation stage 2: Minimum Sellable Business. Here rapid tech and commercial execution take place in-house to get a working product ready for market. Tight deadlines keep the momentum moving with the illustrious goal of having a product that is ready for sale/use in a short timeframe and having customers sign the first letters of intent. These are our proof of their willingness to pay and to use our product once the legal entity is set up and the product is launched.

Only the top tier ventures are allowed to proceed to launch where the new digital business entity prepares for investment and market traction. At this point, we reach out to our network of potential high profile co-founders to get their feedback and interest in taking over once launched. They have all successfully scaled digital business models and know what it takes, so we nurture our venture from this point forward.

Phase 4: Scale/Exit — the rabbit is out of the hat

With the help of proven tech entrepreneurs and the support of a large corporate, the new venture, marketplace or platform business is primed for fast growth as it is tailor-made to do just that. Each step in the process ensures the highest chance of success at phase four. The three previous phases are strict stop/go gates, if a venture fails to meet the requirements at each phase it is immediately stopped, and the focus moves on to another venture.

At FoundersLane we pride ourselves on launching digital ventures that go the distance, beyond initial launch to becoming viable standalone growth machines. Given that most ventures are built for strategic reasons as opposed to financial, the venture is under less pressure to be profitable in the short term. The return on investment is market insight, the chance of a new strategic direction for the core business, and the high potential payout if the venture reaches market leadership and/or exit in the future.

For us, as early-phase venture builders and entrepreneurs, the return is seeing the successful birth of a company, that is, building a solution which helps customers to solve their most pressing issues.