More than ever, the people backing startups have a responsibility to the organisation and its people. But while traditional investors are generally trying to push entrepreneurs to show a clear path to profitability, they may not have the resources or bandwidth to help steer them through the choppy waters.
Venture builders (or startup studios), however, are emerging as a much needed life line for startups. These investors are businesses that use their own internal resources and networks to nurture startups’ growth. They were popular before the downturn too — playing an important role in the innovation of names like Medium and Venmo.
Now, venture builders aren’t just a welcome alternative funding route, they have the potential to carve more resilient startups permanently. Here’s how.
Deep expertise keeps ventures afloat
Specific industry and tech knowledge is a valuable currency for founders in the current downturn — and venture builders have a wealth of it.
So many innovative digital initiatives or tech projects fail not because the idea was flawed, but because the tech build was fallible
For example, venture builder IMS Digital Ventures’ team specialises in deeptech, particularly AI, blockchain, and SaaS in the B2B space. IMS engineers can help startups to ensure that the infrastructure they architect now is scalable in the future.
“So many innovative digital initiatives or tech projects fail not because the idea was flawed, but because the tech build was fallible,” says IMS founder and CEO, Anastasios Papadopoulos. “We mitigate that risk for tech startups, allowing us to create incredible products that are truly game-changing, whatever the market conditions.”
The scope of venture builders’ knowledge means they’re familiar with product ideas, business models and optimised go-to-market strategies — and can finetune these processes for startups. Traditional investors, on the other hand, may be more siloed in their experience, knowing only one business area particularly well.
For Murray Holdgate, CEO of WhiskyGenius, an NFT marketplace and company in IMS Digital Ventures’ portfolio, working with a venture builder means “partnering with someone who has expertise that you can leverage across multiple competencies without having to hire a full time team”.
A strategic alliance shapes a longer trajectory
Whereas traditional VCs can contribute their dollars and dash off (if they want to), venture builders have a vested interest in startups and their community.
Papadopoulos says VCs often maximise their odds of success by investing in as many businesses as possible, while venture builders prefer selective strategic alliances. “By having skin in the game we can actively influence the future success of the company,” he says.
For Holdgate, this alliance approach is one of the reasons he chose to work with a venture builder. “I knew that IMS maintained high standards around tech and marketing, and that they were emotionally invested in WhiskyGenius,” he says.
It’s difficult for startups to convince top talent to join their teams — especially before a capital raise
Ralph Chammah, CEO of Owl Gaze, a cybersecurity startup and another venture from IMS, agrees.
“I knew that we could accelerate our path to success if we could find the right partner,” he says, adding how the strategic alliance opened doors when hiring. “It’s difficult for startups to convince top talent to join their teams — especially before a capital raise.”
Startups that form strategic alliances with venture builders can also attract further funding down the line, as investors can be reassured by venture builders’ track records and intimate mentoring.
Access to venture builders’ resources drives ROI
Startup decisions are extra critical in a downturn — the usual challenges are all amplified, as are the mistakes. Fortunately, venture builders have a unique ability to use their array of in-house resources to avoid costly mistakes and extra fees.
For example, few startups can afford top-level chief technical officers or attract in-demand talent for technical roles — even less so in a downturn. A venture builder, though, can offer this expertise directly to founders.
Because we think like owners, we venture builders are able to deliver projects in a lean manner
In Owl Gaze’s case, IMS Digital Ventures guided the company in developing a product and establishing product-market fit with some landmark clients. The venture builder is now supporting Owl Gaze in penetrating new markets while growing the startup team.
“IMS Digital Ventures doesn’t just offer tech services, they also have a growth marketing team that has worked on creative projects for some of the world’s most recognised household names, and so assist our recruitment, accounting and sales processes,” says Chammah.
Papadopoulos explains that IMS isn’t trying to reinvent the wheel, but is leveraging existing technology where necessary and building atop of it to get startups to market faster.
“Because we think like owners, we venture builders are able to deliver projects in a lean manner,” he says.
But of course, it’s not all about costs. The downturn is a scary time for startups, and founders will inevitably look to their investors for as much help as possible.
“Cash is great,” says Chammah. “But cash combined with mentorship, networks and resources is even better.”