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WHY VENTURE BUILDERS ARE A BETTER INVESTMENT

August 8, 2015

 

Explaining venture builders still raises eyebrows whenever I talk to tech investors. Venture builders—companies that build several startups in parallel—are usually confused with accelerators or incubators, but they’re almost completely different. Venture builders give internal startups a big boost of both human and financial capital through in-house teams and investments; accelerators and incubators usually only give startups access to human capital, and usually in just an advisory capacity.

 

Take our first startup, Pulse PlayPulse Play is a smartwatch for racket sport players. It’s a good-looking piece of hardware that keeps score, helps players find opponents, and gives them a worldwide ranking. If Pulse Play was a standalone startup, it’d struggle to find a team, it’d struggle to match market need, and it’d struggle to build a business model, all despite the big need for tech in racket sports. Those three things are the top reasons startups fail, with or without an accelerator or incubator.

As sFBI’s first venture, Pulse Play had a full team from the first day, including a designer with decades of experience, a Creative Director from top agencies, a COO with an entrepreneurial background, a Marketing Director with serious credentials, an extremely well-connected Head of Business Development, and a CTO with a few gray hairs and code worth gold. Not to mention me and the three-time Grand Slam tennis champion, Andy Ram, we were lucky enough to get on board thanks to our solid foundation.

 

Second, standalone startups struggle to match market need. At sFBI this risk is mitigated because of our unique approach. Unlike most startups that think product first and market second (if at all – “this will sell itself!”), we start with the problem we want to solve. We don’t ask the question of what will consumers buy; we ask the question of what problems do people have. This allows us to hone all of our efforts—from ideation to product development to marketing—on how best to meet real needs and ensures there’s a market for our startups.

 

Finally, many startups fail before they land on a working business model. We don’t even start product development until we’ve assessed the size of the market, conducted a competitive analysis, affirmed our unique value proposition, and tested the market for viable revenue streams. It’s only once we’ve established that there’s a large, approachable market that we proceed. We do that because our team of eight people has worked with over 100 startups and we know from experience that a startup is nothing without a working business model.

 

Despite the reduced risk, venture builders and their startups represent a different kind of investment vehicle that’s new to investors and it’s clear they’re still grappling with the funding model. Because venture builders typically give seed funding to their own startups and don’t even start searching for investors until they’ve reached a fairly advanced stage, the dynamics and implications of the funding differ. Given the quality of the team, the level of involvement, and the scope of resources, it’s time for investors of all stripes to take a closer look at venture builders and get on board.

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We are currently in the process of raising investment for Pulse Play. If you are interested in finding out more, do not hesitate to contact me directly.

 

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