what is venture building?

Posted by in Investing

Our website proudly proclaims ‘We are Venture Builders’ – but what does that mean?

First let’s start with what it isn’t.

It isn’t ‘incubation’ as incubation is generally short-term. Our Venture Building is a commitment of 5+ years.

It isn’t ‘acceleration’ as again acceleration is equally short-term.

It isn’t ‘investing’ [replace with venture capital or private equity as appropriate] as we do not manage a fund – though we do make it our business to know where the investors are and what they are interested in. We have no conflict of interest with investors, our advice is based on our belief on what is best for the business and not the needs of a fund/investors. We have no economic link with the investors (i.e. we are not remunerated or rewarded by them).

We are not the ‘entrepreneur or CEO’ – we back management teams in their vision, not ours. We help polish jagged edges, add value to and finesse strategies, we do not define them. We are also not wholly dedicated to one company.

It isn’t ‘light-touch’ as, whilst we have no desire to run businesses – that is what entrepreneurs are for per above – we in-fill knowledge and skill set gaps in businesses by rolling-up our sleeves and it involves being part of the team.

It isn’t ‘mentoring’ as, given the above, it is more hands-on than that and the risks are more evenly shared.

It isn’t ‘paid for consultancy’ as bluntly most early stage businesses could not/should not be outlaying the cash cost for our arms-length day rates on a sustained basis.

It isn’t ‘services for equity’, we do not employ a team that you must use in your business (though some Venture Builders do) as we do not want the conflict of needing to sweat an internal resource. We also think that services for equity is an expensive way to build a company in the medium-term. Instead we help our businesses to source, employ and manage their teams directly.

So what is it?

Well our definition of Venture Building is that it’s a partnership. We partner with the executive team in their endeavours and build the business alongside them, completely mirroring the risks they are taking themselves.

Over-simplifying it to a single founder with a blank sheet of paper and a great idea. When you are being paid nothing, we are paid nothing. If you have 100% and want us to dedicate 10% of our time to the business for the foreseeable, we will agree a 91%:9% equity split with you. When you are diluted, we are diluted. When you are doing well, we are doing well. And vice-versa. When you earn £91k, we will earn £9k.

Everyone is on the same side of the table. 100% aligned.

Our prime skills are; milestone planning with a view to fundraising, internally managing fundraising processes (we never do it in an advisory capacity before you ask), recruiting and managing development teams and building scalable technology architecture.

We also do other stuff too if we are best placed (I am currently designing business cards and setting-up adwords for one team). We will do whatever is required to forward the cause of the business.

When do we step-off/reduce involvement? When the company has grown sufficiently and/or is well enough capitalised to afford to employ directly the various skills we have brought to the table and when some (never all) of the early stage risk has been diminished through execution and commercial success. At that point the company is independent – we are not doing this to have jobs.

The downside to the model is that there isn’t immediate capital on call to finance the business. The upside is that that capital is earned and it is the process of preparing yourself to get that capital that makes you a good business and challenges thinking. Every business we have worked with has had to work hard for every penny of investment received – and we have worked with them to get it. We think they are the better for it.

Now to be fair, this doesn’t work for everyone. And that’s cool. Why should everyone want our product, we don’t want to get involved in every business! But when it works it works.

It is small scale and exclusive. Six years and only seven companies. The effort required for each company inhibits high growth as the journeys are intense. We Venture Build on average one business a year.