Many people don’t seem to know what is a venture builder. Well, firstly, a venture builder is not an accelerator. A venture builder is a place that uses shared resources to grow several startups together under one roof. The venture builder is run by a group of people with the expertise and network to incubate and grow their startups. Some of the notable examples in Malaysia are 1337 Ventures, True Happiness Capital, VLT Labs (recently acquired by Mckinsey), and recently LaunchPad which began last year.
Running a venture builder is a lot of hard work. Unlike a typical venture capital firm, you can’t run a venture builder with just a couple of guys. You need a dedicated team to operate and monitor your startups. You need to give all the support that a startup needs to grow (which pretty much can be anything depending on the problem that the startup is trying to solve). As a venture builder, you may have to deal with a lot of startups at the same time including maintaining a good technical team in your ecosystem like app developer, content writers, and other guys that you may need to support your startups.
Recently I went to the launch of PixelPlay Ventures in Bukit Bintang. PixelPlay Ventures aims to be a new venture builder to capitalize on growing Shariah businesses. The startups that they’re looking for are those seeking seed investments ( anywhere from RM10,000 to RM100,000). Compared to a normal venture capital firm, a venture builder will incubate the startup and monitor its investments in-house. The leadership looks pretty solid as it’s a combination of people who have worked with startups and even listed entities. I found out later that PixelPlay has been around for quite some time as well mainly for its entertainment business. The entertainment division is led by a well-renowned actor Bront Palarae (who happens to hail from Kedah like me!). I understand that their first cohort is starting sometime in July this year. You can find out more by going to PixelPlay Ventures website here.
It seems that venture builders are attractive targets for strategic acquisitions. One notable example is the entry of Mountain Partners, a Swiss-based incubator company in Malaysia through the acquisition of Qeerad. Another recent example is the acquisition of VLT Labs by McKinsey & Co. The acquisition is just timely and looks like a perfect fit for McKinsey as it allows the company to offer better digital solutions for their established clientele.
In my law practice, it is normal to find recurring issues affecting compliance issues as they are busy selling their products and growing traction. To run a good venture builder, it will be crucial to incorporate shared services solutions that will resolve all these compliance issues such as dealing with payroll, accounting, tax and secretarial stuff. If a venture builder can tackle these issues, the startup would definitely have a higher chance of getting funded as the due diligence process may be potentially smoother.
As an entrepreneur, you might be asking whether joining venture builder is a good idea for you? Well, it depends. As a startup, you need to find out whether the venture builder you’re planning to apply really understands your business and ultimately your vision. You don’t want to end up in a scenario where your business is ‘usurped’ by the venture builder which may cause a big problem for you in the future. Another important aspect is autonomy. Many entrepreneurs leave their high paying jobs to start a business so that they have more freedom to do stuff. Being part of a venture builder means that you will still be bound by a hierarchy of supervision. There will be certain milestones so that you need to comply to continue getting funded. In other words, you won’t get the full amount as the money will be disbursed based on certain conditions. Seasoned entrepreneurs who have exited their startups may have the resources and network of investors may do it themselves. So, joining a venture builder may not really be for everyone.