Venture Builders: the rise of synergetic entrepreneurship.

Venture builder: perhaps you’ve heard the term before, but don’t exactly know what it means. Also known as tech studios, startup factories or foundries (among other names), these companies are revolutionizing the startup model.

In partnership with entrepreneurs, VBs quickly and efficiently co-found and get new enterprises off the ground by leveraging knowledge and resources that are shared among their ventures. When you hear of venture builders, have in mind a few core activities that are common to most of them:

Conceiving business ideas — this is usually done either as the result of in-depth concept exploration and market research or by replicating existing models in creative ways. Regardless, the intent is to develop viable (and usually scalable) businesses. It’s also important to remember that the proactivity a VB has in the conception of its ventures is directly related to its degree of participation as a shareholder in the companies it builds.

Building teams — daring projects are only possible by means of talented execution. By concentrating highly skilled talents of diverse backgrounds in-house, VBs can quickly assemble multi-disciplinary teams with the expertise of seasoned professionals whenever a new venture is launched.

Raising capital — companies within a venture builder have the benefit of facilitated access to capital. VBs provide funding for their ventures either by means of a fund of their own or by enabling connections with investors (a combination of both alternatives is also quite common).

Business management — venture builders have a wide range of operational and strategic involvement in the companies they co-found, engaging in activities such as market research, team structuring, product development, financial and legal support, fundraising and various other affairs. Ultimately, they are involved in all aspects of their endeavors on a day-to-day basis.

Providing shared resources — venture builders leverage shared assets among their companies, including knowledge, methodologies and services such as Finance, HR and Legal. This results in reduced operational costs as the result of a collaborative ecosystem of “parallel entrepreneurship”, in which lessons learned are shared and the cost of growth and scalability is distributed among the VB’s many ventures.

We at MAR, for instance, have regular talks on subjects such as tech and design, in which we share knowledge and discuss new insights. At our last tech meetup, teams from all our ventures gathered to talk about technologies for mobile development (react native and kotlin), for example. We also have #knowledgesharing channels on slack, monthly meetings to talk about entrepreneurship and many other initiatives to foster learning and progress.


Are VBs venture capital firms?

Venture builders resemble venture capital firms in that they grow a portfolio and own shares of the various businesses they develop. The difference is that, unlike venture capital firms or traditional holdings, VBs not only provide access to capital, but are also extremely hands-on and engaged in the businesses they co-create. As we mentioned, the scope of their activities encompasses the entire process of designing, developing and strategically managing the enterprises in which they participate.

What about startup incubators and accelerators?

Venture builders are somewhat different than incubators or accelerators — they don’t tend to take any applications or have demo days (albeit they might). Instead, together with entrepreneurs, VBs usually search for hotspots for innovation and proactively conceive and develop new businesses from the start.

Another distinction to be made is that venture builders have a long term involvement in their enterprises that isn’t (necessarily) limited to a determined period of time, unlike incubators or accelerators that usually run programs that last 3 to 6 months.


Let’s talk about specifics

Although venture builders have common traits (such as the use of pools of shared resources and day-to-day involvement in their endeavors), they also differ widely in how they conduct their business model. Here are a few aspects in which VBs vary:

  • Proactivity in generating new business ideas.
  • Frequency of venture founding.
  • Target markets.
  • Shareholding policies.

Some VBs are more proactive than others in the ideation of new ventures. Those that are more “passive” could be compared to incubators or hands-on VCs, while the more active ones are truly full-stack venture builders — they assemble in-house founding teams to conceive, validate and grow business models from the start.

eFounders, for instance, could be considered one of the more active venture builders. As they put it on their site:

“We generate and test unique business ideas for SaaS products. After carefully validating the concept, we partner up with brilliant entrepreneurs to build a product used by millions”.

Front, one of their companies, is a good example. Together with co-founders Mathilde Collin and Laurent Perrin, eFounders developed the product and generated early traction. After having grown independent, Front was accepted into Y Combinator, gathered over $80M in total funding and built a talented team to make the company fully autonomous.

Venture builders vary widely in how often they launch new companies. Some might develop less than three new enterprises a year, while others might build up dozens of new ventures in a matter of months. There is no standard; some bet in large numbers of businesses while others focus on just a few projects at a time.

In 2017, 47 companies “graduated” from Entrepreneur First. eFounders, on the other hand, has decided to dedicate itself to launching batches of about 4 ventures per year.

VBs tend to focus on tech-oriented businesses, but their specialities cover a wide spectrum of industries and many are quite eclectic — endeavors venture builders engage in vary from Ecommerce and AdTech to healthcare and diverse SaaS.

Blenheim Chalcot and Rocket Internet are known for intensely participating in the development of the ventures they help build and, as a consequence, seek majority participation even in existing businesses. However, VBs more inclined toward an accelerator model (consulting and facilitation) tend to keep a lesser portion of shares.

Shareholding policies are perhaps the most controversial and criticized aspects of the venture builder model. Since VBs provide both financial and human capital, they have a strong sense of ownership and are very involved in decision making processes within their businesses — something that might not sit well with all venture founders. Many entrepreneurs disapprove the lack of absolute control over their companies that may come with their association with a venture builder.

Ultimately, venture founders and VBs should be on the same page in regards to the roles they play in a business. We at MAR believe that entrepreneurs should have significant autonomy over their enterprises, but other companies might prefer founders along the lines of CEOs for hire.


Venture builders around the world

The VB phenomenon is taking on the world, especially since the colossal successes of the german Rocket Internet and the New York based Betaworks.

For informative purposes, we made a list of more than 150 companies throughout the globe that could be associated with the venture builder model. Our intent is to offer you an open-source, living document, where anyone can learn about and help keep track of the rapidly evolving VB industry. You can find the spreadsheet here.

Please feel free to contribute to it and help us keep the information in it as accurate as possible.


Why VBs make sense in emerging markets

As a venture builder focused on the Brazilian market, we at MAR know: it isn’t easy being an entrepreneur in an emerging market in which problems like excessive bureaucracy and a shortage of skilled labor (particularly in the technology sector) are commonplace. Luckily, the VB model helps entrepreneurs in all these aspects, allowing business founders to spend more time on things like product development and growth.

Thibaud Elziere, founding partner at eFounders, says it best:

“In emerging markets — as in most places — venture builders make up for patchy ecosystems. Their ability to attract human capital, to retain knowledge, and to grow networks of potential investors compensates for ecosystems that are not as deep as the one in Silicon Valley, for instance”.

Companies within a venture builder all take advantage of the same processes, resources and talents in a collaborative ecosystem of synergetic entrepreneurship. The VB structure facilitates connections and alleviates costs among the group’s enterprises, providing enormous benefits in terms of efficiency.

Funding

According to KPMG, venture capital investments in Brazil only just reached the $233 million mark in the last quarter of 2017, while in that same period the US was blessed with nothing less than $23.75 billion in capital from VCs. Goes to show how access to capital is an issue around here when compared to more developed economies.

With the financial support provided by a VB things are a lot easier, though. Ventures at MAR not only count on our experts for financial management, but also have the benefit of our network of savvy investors. In addition, it isn’t uncommon for us to personally invest in our companies at their early stages, since our goal is to get them to a Series A within two years (BeeTech and F(x) are two companies that illustrate the success of our intent).

Talents

Nowadays code is gold, but finding qualified developers is hard. Software engineer positions are one of the hardest to fill in the US and in Brazil the issue is even more severe. It is so hard to find devs around here, in fact, that renowned companies like NuBank have opened offices in other countries in search of tech teams. Guia Bolso, a brazilian fintech company focused on smart loans, went so far as to offer R$5000,00 (about 1400,00 dollars as of April 2018) to anyone in their team who could bring in a senior developer.

Businesses created within the collaborative infrastructure of a venture builder, however, have the advantage of an in-house hub of talented developers right from the start. Professionals working in a VB may be allocated in one of the group’s companies or be temporarily designated to certain projects — either way, startups within the group can count on qualified people to do what needs to be done in order for enterprises to thrive.

Mosaico Digital Assets, one of our ventures here at MAR, is living proof. Since the very beginning the company has had access to the expertise of software engineers like our CTO Vinicius Gracia, who co-founded and helped develop the world-famous app Easy Taxi a few years back.

Another factor worth considering in regards to access to talents is that venture builders provide a reputational advantage that makes their companies very attractive to qualified professionals. Instead of working somewhere without a proven track record, many people find it interesting to work at a place with many successful endeavors under its belt.

Legal and Strategic Consulting

As if the lack of skilled labor and difficult access to capital weren’t hard enough, entrepreneurs in emerging markets like Brazil also face an extremely complex and archaic regulatory system. As a result, innovative businesses often must deal with legal impediments or operate under the uncertainty of gray areas in regulation.

The excessive bureaucracy for companies here is so great that, in a recent study conducted by the World Bank on the ease of doing business around the world, among the 190 countries considered, Brazil occupied position 125, having been ranked even lower than countries at war like Iran. Factors considered in this research include the number of procedures, amount of time and minimum capital necessary to get companies off the ground in each of the countries surveyed (you can find the full report here).

In this sense, the expertise of a venture builder’s teams can come in very handy, since it provides a faster, smarter way to bring companies into fruition by identifying and implementing the best solutions for each particular context.


The rise of scalable, synergetic entrepreneurship

A business model structured on building businesses. Seems a little far-fetched, but that’s exactly what venture builders are about. How is this possible, you ask? One word: leverage.

The VB model thrives on shared solutions, shared talents and shared growth, which in turn result in reduced, distributed costs and better applied efforts. Nowadays it isn’t enough to work hard; one must work smart in order to achieve exponential success — and venture builders emerged in this exact scenario.

As we write this, we hope to help people gain a deeper understanding of what venture builders are and how relevant this kind of company can be as a catalyst of growth within the ever-changing startup economy. Since we know there aren’t that many articles available on the subject, we’ve listed few we think can be useful and that we’d like to share below.

Also, feel free to contact us at bewater@mar.ventures and get to know us better at www.mar.ventures. We are always looking for amazing, ambitious people to work and co-found new business with us.

  1. http://www.startupstudioplaybook.com/blog/startup-studios-vs-accelerators
  2. https://medium.com/appnroll-publication/the-start-up-studio-model-what-are-venture-builders-33f8d4961d38
  3. https://blog.itnig.net/the-startup-accelerator-business-model-the-emergence-of-venture-builders-bd6831ae219e
  4. https://medium.com/@jorgegarcialuengo/venture-building-a-new-model-for-entrepreneurship-and-innovation-79001751d0c6
  5. https://tangelo.co/insights/blog/venture-studio-types-in-house-production-full-stack
  6. https://medium.com/we-are-builders/dont-read-this-if-you-know-what-startup-studios-are-30e2e86d9598
  7. https://www.entrepreneur.com/article/288819
  8. https://medium.bmannconsulting.com/what-is-a-startup-foundry-ed0821c8278b
  9. https://medium.com/frontier-vc/the-rise-of-venture-builders-and-the-evolution-of-the-startup-model-d2104d505c10