tl;dr: In the summer of 2018, the Momenta Lab project started with the objective of building a Venture Studio company. We underestimated the intensity of research required to test our hypotheses. We were successful in coming up with a business model (organizational, operating, financial) which we and the market had confidence in. Our team did not have the requisite finances, technical skills, and ecosystem clout to make the model succeed. We did not succeed insofar as we did not launch the business, but are pleased with the outcome of lessons learned and model developed. This is something I intend to pursue at a more suitable future time.
Note: this post will read with a fairly academic tone because it was very much a research project, and this is sort of a ‘report out’ of the experience.
This is the name of one of my recent projects which sought to establish a Venture Studio. The objective was to create and operate profitable, right-sized technology products.
We sought to do this with the ‘Builder’ model. In one sentence, this is the definition we settled on for what this means: a company with the infrastructure to enable an efficient venture building process, where meaningful financial and human capital is aggregated, to launch and scale global tech ventures following a repeatable process.
In essence, it’s a conglomerate for technology. The sum being greater than the whole. Its success is not determined by the outsize success of any one venture, but in the repeatable process of creating successful outcomes.
There have been multiple models and attempts to configure venture studios, including these. In our opinion, the majority have not succeeded as venture studios, but many have indeed succeeded financially in the way venture capital companies would seek to. We sought to figure out why.
Why pursue this?
The problems we aimed to address are many-fold:
Capital - While the technology sector has strong public interest and is well capitalized, it has been under-delivering in the production of globally competitive businesses. Many investments are made irrationally and based on erroneous assumptions. This has not reliably created proportional economic/social value as an asset class relative to its investment, and is unlikely to be sustainable.
Commercialization of Innovation - Many high-potential entrepreneurs were seeded by identifying a solution to a problem, and they are driven to create impact. They are often reluctant business owners and leaders. On the other hand, there are many domain specialists who have reliably produced business outcomes over longer time horizons in other sectors. Entrepreneurs are happy to receive guidance and structure from these specialists in building the business. Entrepreneurs insist on ownership around understanding the core problem and structuring their solution.
Talent - There is a significant pool of talent and ambition which is untapped or underutilized by traditional employment, including above-mentioned specialists. Redirecting this human capital toward an entrepreneurial environment would produce higher yield for the economy and society. A structured and measured pursuit of entrepreneurship with lower economic risk and higher fulfillment is desirable to this segment.
What did we do?
Between the months of May 2018 to September 2018, our team thoroughly researched the problem, existing market alternatives, and crafting our solution. It was intense and fascinating.
We spoke with hundreds of incredible professionals across global innovations ecosystems to discuss their experiences and perspective. These people include studio founders/operators, veteran/rookie entrepreneurs, hired-gun execs, policymakers, educators, VC/PE/IB/Angel investors, lawyers, accelerators, incubators, and government/non-profit operators.
Throughout this time, we hungrily documented everything we learned. We uncovered new questions and formulated new hypotheses along the way. We kept iterating on our organizational model, operating model, and financial model as we learned more. We tested out the incubator, builder, investor, and agency models to predict requirements and probability of success. We played back our learning to the community for external review. And on and on we continued.
At the end of this process, we formulated a three-year roadmap for the Venture Studio from start up to self-sustaining with a high degree of confidence. This roadmap was essentially the strategic rationale, competitive positioning, organizational model (legal, financial, management), and operating model (engineering, marketing, feedback).
However, we did not launch the Venture Studio.
The reason was that our team did not have the requisite bench strength, depth of ecosystem relationships. and financial means to maximize chances of a successful outcome. Pursuing this with our then configuration would have been irresponsible.
Some Lessons Learned
There is a balance between planning and doing. Both are critical. We did both in parallel, and this was a mistake that cost us a great deal of time and emotional strain. If we had given adequate weight to planning in advance of doing, we would have known the futility of doing without having to expend the effort and resources.
Between the three months, our team invested well over 1,000 hours in this project before making the no go decision. With better starting context and SME guidance, we could have been more effective with our time. While it sucks to kill a project, it was the best decision at the time.
The business of a Venture Studio, no matter which model, is difficult to operate successfully. It is more dependent on financial and human capital than singular technology businesses, which already have low success rates as a category. Many of the currently notable Venture Studios have been created as spin offs from already successful businesses.
While it is possible to succeed in building a global tech company as a young person (i.e. under 35), it is not likely when viewed from a statistical lens. When the data is sliced, the most successful class of entrepreneurs, investors, and ecosystems are those with several rodeos under their belt. It is not simply a matter of age - it is the amount of intentional practice that counts (and the passage of time is positively correlated with this).
Many well-built and well-operated technology companies implode because of the economic pressures placed on them from financial investors. Wise entrepreneurs are exceedingly intentional in their fundraising and maintain control over their cap table.
The top global technology ecosystems do not do a good job of talking to each other. There is a lot of ‘recreating the wheel’ that happens. This goes counter to the ethos of efficacy, which is widely preached in every ecosystem. Conversely, emerging tech ecosystems have excellent processes in place to learn systematically from the experience of others.
Vancouver is home to so many incredibly experienced/connected people who have chosen this city to be their home. They are truly world class gurus. Many of them do not care for public attention and are not self-promotional. Our ecosystem is lucky that they are literally our neighbours. Be kind to people. Learn from everything that happens.
What Happens Now?
Out of everything I’ve learned of the global technology ecosystems, the Venture Studio model seems to be the most responsible and reliable one for creating and sustaining value from technology products.
The innovation ecosystem is one that offers outsize value creation for the economy and society. This is the area I will continue to invest in such that I can be an instrument that optimizes for achieving successful outcomes.
Now was not the time in my life to pursue this specific project. When future timing and circumstances align, I will pursue it again. For the time being, it is my responsibility to continue learning as much as I can and helping as many people as I can.