Why Venture Capitalists Will Be Replaced by Venture Builders

For every entrepreneur starting up may seem like the hardest part, how do you grow an idea from the ground up with little resources, reputation, or staff?

Why Venture Capitalists Will Be Replaced by Venture Builders

For every entrepreneur starting up may seem like the hardest part, how do you grow an idea from the ground up with little resources, reputation, or staff? You’ve had this amazing idea, you know it has potential, you’ve identified your target market and know how to sell to this demographic. But there’s work to be done in getting a company off the ground and growing a customer base. Once this is achieved however, many entrepreneurs may be lulled into a false sense of security that their business is stable. But growth needs to be maintained and future forecasts achieved.  

There will come a point in most businesses when expansion is needed to maintain momentum and many entrepreneurs will find that upscaling the business model is really the hard part. How do you take your initial idea and expand it whilst ensuring the heart of the business; the core idea you started with maintains its integrity, quality, and values? To upscale any business, investment is usually needed and this investment and the type of role the investor plays can really be key in driving how the business grows and the successful roll out of the initial idea. 

There are three key players involved in every successful business: 

  1. The Founders, who start the business with a great idea; 
  2. The Funders, who resource the business; 
  3. And the Farmers, who have the job of growing the business.

As a start-up you might be doing all three, but as the business grows there comes a point when you’re going to need either outside funders, farmers or both. If you follow the well-trodden venture capital path, the funder funds the founder and expects them to grow the business. This works great until there comes the point when the company outgrows the founders’ ability to manage the growth. This is why only 1 in 10 start-ups succeed.

This is what happened in the UK last year when celebrity chef Jamie Oliver’s £100 million restaurant chain collapsed, all 22 of the restaurants went into receivership and 1,000 members of staff lost their jobs. 

The venture capital model is characterised by society 4.0, the information age, but the venture builder model is leading society 5.0, the impact age. Society 5.0 is Japan’s vision for the next decade, where we’re going to see where the results of the 4th industrial revolution takes us. Where AI, AR and the digital layer that we now have is going to change the ways in which we live and work and we are right on the cusp of this now. 

With the Venture Builder model, the founder finds a funder who both invests and helps grow the business. Google, Apple and Amazon know how to buy companies and help the founders to scale. In the venture builder model, the Funder also has the skills to be the Farmer. 

With competition in the UK restaurant industry coming from venture builders like Jeff Bezos investing $575 million in Deliveroo, and Uber founder Travis Kalanick investing $150 million in FoodStars, the market shifted while Jamie Oliver was stuck in the venture capital model. He used his own money to prop up a loss-making enterprise with sky-high running costs ‘ pumping in millions of his own cash before the company collapsed. As for the farming, he put his brother-in-law, Paul Hunt, in charge of running his empire and because neither knew how to grow the business well ‘ even with an amazing brand and money behind it ‘ it still failed, sadly.

The lessons to be learned from this when growing a business and seeking investment is to look at securing resources from farmers as well as funders. Don’t be too proud to ask for help, we are all continually growing and learning. As Benjamin Franklin famously put it: The only thing more expensive than an education is ignorance.  

So, for any business owner out there looking to expand their empire, keep this idea in mind and look for a funder who can not only offer capital but also has a wealth of experience in your field. Someone who can add something far more valuable than just investment. Experience is everything and an investor who keeps one eye on the current market and the other on changing trends will help keep your business growth on the right path.

Roger James Hamilton
Roger James Hamilton

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