Venture builder business model is growing, and what is more, it seems to be better than venture capital. Whilst both has its merits, venture builders are more enabling and beneficial for a promising startup especially one which lack expertise of a certain area.
It is no news that the chances of getting a venture capital is getting tougher and tougher. Actual hard results are often than not, required before a VC would commit. Today where digital technology has lowered startup cost, entrepreneur finds it difficult to justify raising fund solely based on business expense and hiring.
Venture Builder as a bridge to Venture Capital
Whilst entrepreneurs may struggle to get venture capital, venture builder companies stand a higher chance to secure one. Simply because VB fills up the gaps between an entrepreneur and VC.
An entrepreneur may have a brilliant idea but may not have the resources and know-how to develop a Minimum Viable Product or even a prototype. Hence, we hear many still fail to secure funding. Some might even lack tenacy.
However, a VB has in place, built frameworks and infrastructures to manufacture products, funds, marketing strategies, human resources, company culture, and the expertise to accelerate growth. Naturally, VC will rather invest in a VB simply out of lower risk.
If a VB finds an workable idea and a team of trusted and capable co-founders to run the business operations, it may seal a new venture, and another great business can spring out of it.
VCs may not want to dwell into the hard sweat work of a VB, and like a typical investor, only provide X amount of funds and expects Y in return. But a VB, as the word “builder” speaks for itself, is often a child product of a manufacturer or developer itself, of all digital and technology kinds. They build stuff. They have the builder DNA in them.
Let’s see if you should look for a VB.
- You are keen to be an entrepreneur, but do not want to go through the process of hiring and managing people.
- You are motivated to start as a CEO, CTO or CMO. Venture builders do not want to be involved in the day to day operations, marketing and management of the business eventually. Hence, you have to be equally hands-on the venture from day 1 alongside VB.
- Accelerate your growth, marketing efforts and appreciate mentorship.
- You do not want to commit to renting an office or workplace. VB provides you.
- Expect to be pushed to the limit and equipped to run the business on your own after 6 months.
- Willingness to reduce your equity share more than VC model. VB takes bigger stake in your company compared to VC, and that is the price you pay for the resources and that much less of risk you take.
- Willing to commit to training programmes hosted by VB, if any, and to implement steps and advice by VB.
- VC model might end you up without a fund before even getting to launch your first product. VB route is less risky, plus you might draw a salary too whilst building your own company.
| Area | Route to fundraising | |
| Venture Capital Firm | Venture Builder Company | |
| Funding | Direct methods (cash injection, etc) | Indirect funding (salary, product development, marketing expenses) |
| Product development | A prototype, if not, a MVP is required beforehand | Can be jointly or entirely done by VB core development team |
| Workspace & Hiring | VC can recruit executive and advise. No workspace | Co-working space and talents available in place. |
| Marketing | Solely entrepreneur’s initiative | Early marketing strategy and setup will be done by VB. |
| Trainings & mentorship | Usually mentorship. | Trainings and mentorship |
| Administration and Legal | Solely entrepreneur’s initiative | Plugged into VB infrastructure |
| Company culture | Defined by Entrepreneur | VB culture, until the business stands and run on its own with its own staff. |
| Proven track record or user size | Required. Traction should have been kick-started | Not pre-requisite. Strategic partnership, commitment, and experience are more important |
| Equity | VC takes less equity of your company | VB takes more than VC |
| Risk sharing | VC takes less risk, thus a harder selection process | VB takes on much more risk. |
| Industry preference | Portfolio of VC can be diverse | VB likely to be very selective. |
| Expectation on entrepreneur | Return on investment | Execution. Speed to scale is important |
Whilst it seems VB has more advantages, there are very few able to work with VB. As execution speed is the cornerstone to its success, often the lack in sense of ownership by entrepreneur might account for its pressure mounting from VB side.
Despite the pros and cons, which side will you choose?
This post is inspired by Ant Internet, a fast growing venture builder.