The startup ecosystem is filled with nuance, populated by aspiring flora and fauna of every color and shape. More entrants join the fray each year, causing mutations, variations, and occasionally entirely new species of businesses. This article aims to demystify one of the relatively newer players in the startup sphere: the company builder.
So a Company Builder…Builds Companies?
If you’re unsure what a company builder is, that’s understandable. Put simply, a company builder is a business that creates new ventures by offering feasible ideas to qualified candidates and then guiding and supporting these candidates as they create a startup around this original idea.
The company builder goes by many names (if four is considered many). Startup studio, venture builder, and venture studio are all used interchangeably with company builder. Although there are differences between them, their basic function is largely similar, even if individual firms may choose different tactics to achieve their goals.
If you’ve started to hear the term come up more in casual conversation (the ones you have with your friends about startup ecosystems, naturally), it’s because startup builders have multiplied steadily across the years. In 2005, just 15 lonely studios operated in the space. In 2010, there were 42. In 2015, 137. 2020, 560. 2022, 724. And as of this writing, there are as many as 800 operating venture studios around the globe.
The Big Idea(s)
How do company builders get the ideas that become the core of a new, profitable startup (without reinventing the wheel or just marginally optimizing existing systems)? Depends entirely on the company builder. Some use market-based ideation, conducting large-scale research studies or surveys to figure out what the people need. Others rely on founders to enter with their own ideas. Many use problem-based ideation methods, like personal interviews, structured sticky note sessions, or good ol’ fashioned brainstorming. There are tons of methods for developing startup ideas.
We at Beam like to use our own personal cocktail of methods, including industry research, market signals, and expert interviews. This potent mix helps us identify non-obvious problems across the entire logistics industry, making sure we’re fully stocked on tasty problems for candidates to sink their teeth into.
Whatever the method, company builders pick their ideas with care. Any venture studio worth anything avoids the obvious – there’s no room for copycats or marginal optimizations here. Good ideas are hard to come by, so venture studios collect as many as they can to ensure a steady supply for new joiners to work on. These collections can get massive – one firm, IdeaLabs, has explored over 5,000 startup ideas over the life of their firm.
Putting a Team Together
Once we’ve got a few really solid candidates, we start putting together the teams that will form the core of future startups. These pairings, termed “validation teams,” are chosen based on the various entrepreneurs’ strengths, weaknesses, and interests. Generally, a validation team consists of two founders, though more may be added over time as needed.
For example, we may pair a strong sales-focused founder with someone more experienced in strategic operations. Later on, we may realize that they’re lacking the development skills to properly produce a minimum viable product, so we’ll incorporate a tech-focused founder into the mix.
What’s In It for Startups?
A common question asked of company builders is: why? Why would a future founder choose to work on someone else’s idea and give up a piece of their potential profit? Why not just DIY? The answer is that joining a company builder helps remove many barriers to entry that would typically halt a startup before it begins.
One of the biggest blockers to entrepreneurship is the introductory broad ideation step. By going to a company builder, you are, in essence, outsourcing the research, ideation, and falsification process to a team of experts. That’s not to say that there’s no problem-solving on the part of the founders – quite the opposite. The initial idea or problem to be solved is just a start, a jumping-off point in need of much more thought, research, and adjustments before it’s a 100% viable concept.
Once a validation team has their problem and set off to work, the company builder nurtures the fledgling operation with coaching, workspace, tool licenses, marketing support, network access, and more. Company builders tailor their offered support based on the teams’ needs, so the size and scale of assistance can vary wildly. At the end of the day, a company builder’s goal is to see their startups get funding, reach profitability, and eventually exit, so they’ll do all they can to keep the startup heading in the right direction.
An added bonus: there’s no need to bootstrap, and you receive a salary during the company builder program!
What happens next?
Every company builder operates a little differently, and many consider the exact process from ideation to exit a trade secret. However, they all follow a vaguely similar path, including steps like ideation, onboarding, rounds of validation, scaling, pitching, and exiting.
For example, below are the broad strokes of Beam’s process:
- Research & Ideation: our Head of Research identifies problems or market gaps that a new startup can tackle
- Candidate Selection: our HR manager works with the Head of Venture Development to select entrepreneurs to join the company builder
- Problem Selection & Pairing: our vetted entrepreneurs select the problem they’d like to focus on and form validation teams (by picking their cofounders, having Beam pair them existing entrepreneurs, or having Beam source new cofounders)
- Understanding & Insights: the validation team does their own research into the problem, gaining a deep understanding into the industry and new insights into the issues
- Falsification & Feasibility: the team focuses on feasibility, market-customer fit and gaining internal champion traction
- Business Plan & Pitch Prep: the team creates the business plan, execution road map and finalizes their pitch deck
- Pitch: the team pitches their finalized startup to investors in the hopes of gaining funding
- Launch: if the team successfully secures funding, Beam works with them to prep for product launch, including developing a business equation and relevant KPIs
- Post-launch: Beam continues to offer support for startups after they’ve entered the market, including marketing & design support, coaching, and continued network access
And just like that, a new logistics startup is born, raised, and ready to take on the world! For us, the validation process once a team has been created is intended to take around 20 weeks, though that can vary quite a bit.
If everything goes roughly to plan, the end result is a profitable, innovative startup, able to scale independently, explore new markets, and further develop their product without the need for emergency funding or significant intervention. While there’s no guarantee of success, the data shows promising trends for startups created by company builders, including higher rates of funding and faster exits than their natural-born counterparts.
To conclude, company builders are an increasingly popular way to create viable startups from scratch. Many firms operating in the space have a proven track record of success, giving credence to the idea that the concept works. With the systems in place, all that’s needed now are ambitious, open-minded professionals to take the reins and become founders!
Want to build a company with us? Apply now!
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