When the decision to start exploring venture building as a way of driving innovation and securing long-term growth has been made, the first thing to settle is how to get started. There are many questions to look into, but I will highlight one that is particularly important for the long term success of venture building initiative as part of the innovation agenda.
Do we try it out with just one venture, or do we get cracking with several straight away?
All eggs in one basket
Many companies decide to start with just one venture because when trying something new it makes sense to start small, right? It feels intuitive to start with one venture, to figure out how it should be done, and then replicate it. But starting with just one venture also means that you are starting out narrow. That you are putting all your eggs in one basket. If the idea you picked for your first venture happens not to be a winner it is not unlikely that the stakeholders come to the conclusion that venture building doesn’t work. Because the idea you picked didn’t. The success rate of new venture ideas is quite low, as is the case within most innovation work. It is unfortunate to tie the faith of venture building in your company to the success of one specific idea.
Many small bets
Even though it might feel counterintuitive, the more cautious way to start is to spread the risk. To make many small bets, by starting several ventures at the same time. This way there is a much larger chance that one of those ventures will go on to become a great success. That one success is often all that is needed for a company to dare to commit to using venture building as a long-term part of the innovation agenda. And with that one success, and a bunch of failures, you can hone your venture building skills and your approach, to become more effective along the way.
How to keep the bets small
A few key things will help you avoid investing too much in each venture while keeping them running at speed. These are teams, careful portfolio management and defined investment decision points.
- Teams: Validating early venture ideas doesn’t require big teams. A huge team of developers from day one does not increase a venture’s chances of success. Most early stage validation can be done with little or no development. The very first teams should consist of 2 or 3 people with roles that cover key perspectives like business, design and technology. The teams will need to grow over time, but make sure not to add extra team members before it is necessary.
- Defined investment decision points: By setting up clearly defined investment decision points for all ventures to go through you ensure that no resources are wasted on ventures without potential. We like to use the decision points Problem, solution, willingness to pay, business model and scalability, in that order. This means that only when you can prove that there is a problem worth solving, a venture recieves funding to go on and start proving that they have a solution that solves the problem. And so on. If a venture fails at an investment decision point it will either be closed down, or sent back to try another angle.
Keep a balanced portfolio
To make sure your venture building initiative lives on to deliver the innovation and growth you hope for, make sure not only to work on several ventures in parallel, but also make sure to always have a broad range of ventures, at different maturity levels, and different levels of risk in your portfolio. A company’s strategic direction changes over time. Hopefully not too drastically too often, but with a long-term perspective it is important not to be too sensitive to those small shifts. By doing continuous research to keep on top of areas that are adjacent to your company’s strategic direction and making sure to explore ventures across several of those areas your venture building work won’t risk becoming irrelevant just because one of those strategic areas is deemed irrelevant at a certain point.