Venture builders: can they fix it?

funding
Technology the Internet business and network concept. Businessmen shake hands: Venture capital

How venture building is changing the face of Australian entrepreneurship.

The venture builder model is not a new concept, but one that is rising in popularity. Venture builders help burgeoning start-ups grow, particularly those that are lacking expertise in a certain area, for example technical experience.

The venture builder model slightly resembles venture capital (VC) firms and is often regarded as “the new breed of VCs”. Like a traditional VC, venture builders invest in a portfolio of promising businesses. However, a venture builder is more of a novel intersection between an agency or studio and a VC, revolutionising the start-up ecosystem and how entrepreneurs approach their business. Overseas and locally, this unique hybrid model has proven successful, having built some of Australia and New Zealand’s most innovative start-ups.

Between venture builders, VCs, incubators and accelerators, there is plenty of support and capital out there for start-ups. But choosing the right path for you and your business can be challenging. Understanding what each does best is the first step in making the right decision.

Foundations for building the right partnership

Venture builders take an active role in start-ups early on, providing as little or as much help as needed and agreed to by both parties. A venture builder’s role is to deliver sustainable solutions to a breadth of challenges and effectively operate as a start-up’s co-founder. Venture builders support founders in a variety of ways, from honing business ideas, building the start-up’s internal teams, providing or sourcing capital, helping govern or manage the ventures, and providing shared services.

VCs – such as Folklore Ventures, Blackbird Ventures and AirTree – invest in early-stage start-ups, where they provide private equity and financing to start-ups that they believe have long-term growth potential. VCs’ value, unlike venture builders, generally comes from investors, investment banks and other financial institutions.

“Partnering with a venture builder is a great way to successfully build a business.”

There are also start-up accelerators, which offer a range of support services – from funding opportunities, supply chain resources and mentorship. Accelerators also partner start-ups with incubators – such as Stone & Chalk – that offer start-up founders shared workspaces, allowing these entrepreneurs to enjoy a collaborative work environment with invaluable mentoring and networking opportunities, funding support and shared equipment.

Venture builders, VCs, incubators and accelerators, will all have different guidelines and criteria for working with start-ups, so before selecting a partner it’s important to consider the needs and stage of your start-up.

Venture builder business models

Venture builders can operate under different models. The most common three are:

  1. in-house venture building, where a large corporation owns the venture builder and all of the start-ups that result from its efforts
  2. working for investors, where the venture builder holds equity in the different ventures and charges a fee for its services
  3. working for corporations, where the venture builder consults to corporations in exchange for service fees.

Think like a venture builder

If you’re considering speaking to a venture builder, you’ll need to get your venture building cap on. While a bold idea is a great start, venture builders will want to know you’ve addressed their concerns and considerations. Before the first meeting, ensure you’ve established a well thought-out pitch deck, including evidence-based decisions to demonstrate the business plan and validation of the idea.

In many cases, most venture builders are created by experienced entrepreneurs, so they’ll know what to look for. It’s essential to consider and understand potential risks – particularly financial, environmental developments, regulatory scrutiny or marketing pitfalls – and implement upfront risk management strategies to counter these. Mastering the art of selling your start-up idea will also help with any other pitching you need to do, such as if you wish to engage with VCs or angel investors.

Venture building as a service

In recent years we’ve seen a boom in areas like fintech, healthtech and edtech. These traditional industries have substantially increased their technological footprint, creating more job opportunities than ever before.

For start-ups, hiring the right talent is key. Yet for early-stage start-ups, it can be expensive. That’s where venture builders can help. Not only do they provide the right skills and expertise across a range of key areas, but the outlay typically equates to or is less than the amount a founder would spend building out their own internal capabilities and team.

Partnering with a venture builder is a great way to successfully build a business by leveraging the right skills and talent. Domain expertise is crucial, especially when creating a start-up in an industry that traditionally has had little to no technology.

Start-up success story: Provider Choice

One such start-up with founders who had deep domain expertise but lacked technical expertise is Provider Choice. Co-founders Tom Blinksell and Jonathan Salgo both had personal and professional experience with the National Disability Insurance Scheme (NDIS) and intimately knew the hurdles recipients faced in easily accessing and managing their plans. That’s how they came up with the idea for Perth-based start-up Provider Choice, which helps people manage their NDIS in one simple-to-use platform.

Tom and Jonathan knew they had the domain knowledge, but needed a technical partner to design and build the actual platform. They turned to Dovetail due to our proven experience in building and scaling successful start-ups. In a collaborative partnership, Provider Choice worked closely with the team at Dovetail to navigate getting their start-up off the ground and building out their digital product. Tom and Jonathan also were attracted to the financial investment that we offered their business to help them get the ball rolling.

Since the inception of the partnership, Provider Choice has continued to see growth across all metrics month-on-month, acquiring hundreds of new customers per month. Having recently raised a round of $1.5 million late last year, Provider Choice appears to be going from strength to strength.

To create and maintain a successful business, start-ups need to call in the right talent for each stage of their development – from marketing and sales to operations, through to building the platforms for your product. The core idea of the venture builder model is that shared expertise in the business will significantly increase the chances of success. It’s a win–win.

This article first appeared in issue 33 of the Inside Small Business quarterly magazine