The concept of company building – equal to venture building, venture studios or start-up factories – is becoming an increasingly prominent phenomenon in the start-up ecosystem. While the first venture studio originated from Bill Gross’s Idealab in 1996, independent and fast-growing company builders followed suit in Europe with – most prominently – Rocket Internet, BCG Digital Ventures or Project A. Since then, the German Mittelstand began to implement open innovation initiatives. The latest of which, namely corporate company builders, aim to build start-ups from the inside-out perspective, – and thus, bring new opportunities for founders to get their idea off the ground.
The basic concept of accelerating and incubating founders’ potential to leverage their ideas is well-established and nothing new. The positive effect of office space, mentoring and also initial access to funding on start-up success rates and going to market is empirically proven. However, corporate company builders are a new phenomenon within open innovation. They act as hybrids between incubation and acceleration, allowing founders both long-term operative assistance as well as access to resources, networks and markets.
The process of company building focuses on its key purpose: finding the most promising business model ideas and complementary founder teams to build and scale companies. The core activities in every step of the founding journey are built on the value of providing specific know how and shared infrastructure, building teams and enabling access to capital along the entire process.
Core activities of company builder and intersection with venture capital (Source: XPRESS Ventures).
Along this process, company building helps founding team to concentrate on what really matters in each step. Finding a cutting-edge idea and business model to solve a proven customer problem (ideation), iterate a business model with experts and existing customers to gain initial feedback (iteration), test a minimum viable product on the market to approach a product-market fit (MVP) and found and scale the company to an operating business as a team (Seed). At this point in the journey, company building further accompanies the startup to make a crucial step in its development: the acquisition of venture capital. The proof of concept, an ambitious founding team and an elaborated product-market-fit are, among others, key factors VCs look for, and which company building actively pushes as well. Besides, the legal and financial advisory of company builders are benefits to structure a VC-attractive cap table, find smart capital and scale from here (Series A / B / C).
Established company builders can provide these services at scale based on long-term experiences in digital business modeling, integration of tech expertise and founding experience. Corporate company builders help streamline during these early-stage steps. By providing user and market access to founders, critical in-depth information becomes accessible exactly at the right time. Thereby, iteration processes can be accelerated significantly.
The success factors of start-ups along each development phase are manifold and different from industry to industry – from an early validation of a business idea to accessing critical infrastructure for market tests. The fact that digitalisation and innovation increasingly become top priorities on a CEO’s agenda fosters the exchange between corporates and founders which ideally is mediated through company builders. Along with the core activities of company building, these two worlds of corporate innovation and entrepreneurship can result in a symbiosis that gives founders an advantage. The facilitation of this advantage can be seen as the key purpose of corporate company building.
Company builder at the intersection of corporate and founder (Source: XPRESS Ventures).
First, crucial and early challenges of the founding process lie within the validation of the idea. Often based on solving a customer’s problem, the trusted confirmation of the existence and importance of it can be hard to find. This is especially true for technology-specific topics focusing on industry verticals. Even more, early access to specific expertise and the willingness to jointly validate the idea in depth sharpens the idea from an early stage on and can be a crucial time-saver.
Second, on the way to a product-market fit not only time but especially customer feedback matters. As this iteration can be seen as an ongoing process from build, measure and learn, the effectiveness of its process relies on the quality of feedback. The earlier an MVP can be tested with a critical number of potential customers, the earlier it becomes clear whether to pivot or achieve a proof of concept. In this period, founders depend on access to relevant customers given limited resources of the founding team. As a consequence, company building can fill this gap through the introduction of its core business to existing customers or partners.
Third, starting the operations of a new venture requires the connection to critical infrastructure. Depending on the business model, this can be tech-focused and hence be solved through internal know-how or external providers. But especially start-ups at the intersection of tech and asset-heavy industries benefit from early adoption of existing partnerships, shared services and also office or warehouse spaces. In this way, company building can serve as a bridge to an infrastructure that the corporate has been building and optimising for years.
XPRESS Ventures, partner of FIEGE Logistics, is a German company builder to empower logtech ideas and build technology-oriented companies for the logistics sector of tomorrow. XPRESS Ventures follows both the inside-out track based on the innovation potential of FIEGE, a leading global full-service provider in logistics, as well as the outside-in track through cooperation with ambitious founders. XPRESS Ventures was founded in 2020 and is located at the Maschinenraum in Berlin.
