Venture building — creating a new profitable business inside a corporation — is becoming increasingly popular with big companies. Siemens Energy is forming a new team called Siemens Energy Ventures, and one of its objectives is to build growth startups in energy transition and climate to help the company and its customers accelerate the journey to net zero.
There is a new realisation with corporations that in order to stay relevant and innovative, they need more than classical innovation programmes. Growing as a business doesn’t mean strengthening your core portfolio, but come out with a portfolio of businesses. Those businesses could end up as part of the mothership, or evolve into separate and independent businesses at scale.
There is a lot of debate about finding the right operating model or process for making this happen. However, the truth is that it’s more crucial to find the right people or entrepreneurs and the right mindsets.
Venture builders, business builders and entrepreneurs-in-residence must have the right habits and mindsets to be able to thrive and survive the ups and downs of building a new venture inside a corporate.
Who are the venture building success stories?
Two great examples of finding new markets and business models are from the top technology companies Amazon and Google. Amazon, for example, spun out Amazon Web Service from its retail business, and today its cloud business is leading the market.
AWS emerged from the scale problems the retail business encountered. It started as a solution to help build Merchant.com to help third-party merchants like Marks & Spencer to build online shopping sites on top of the ecommerce platform. It then served Amazon's entire developers' ecosystem and evolved to an independent business.
Another great example is Google, which created Alphabet and decided to build under that umbrella a portfolio of companies with the help of Google X, the Moonshot Factory. Google founders understood that they had to build a diverse portfolio that included companies like healthcare research company Verily and Nest in the energy sector. Google has the same mindset, with different businesses like YouTube and Android as separate brands.
You think startups are hard? Try innovating inside a large company
These examples have inspired other corporates to try the same thing. But be under no illusions: corporate ventures have even more challenges than building startups. Steve Blank, the Silicon Valley Guru, wrote: “You think startups are hard? Try innovating inside a large company where 99% of the company is executing the current business model, while you’re trying to figure out and build what comes next…”
In building and investing in both startups and corporate ventures, I have observed five key behaviours that are needed to make it work.
1/ Good venture builders focus on heartcount, not headcount
Usually, when I first engage with corporate venture founders and ask them about team building, they think in headcounts. They talk about the functions they need in order to build the product or service they envision. They would think of adding two developers, a project manager and a business development manager. The conversation also moves to discussing if work can be outsourced to a software development agency.
Look for people who are builders, curious, ready to fail, learn and grow
Instead, I encourage venture builders I work with to think in heartcounts. In the early stage, everyone on the founding team is doing everything. You don’t need a product manager or a business development manager because you do it yourself. If you haven’t done sales in the past, it’s time to do sales — you might be really bad at first but you’ll learn as you do it more and more. When you look for cofounders or founding teams, look for people who are builders, curious, ready to fail, learn and grow and go outside their comfort zone.
Two members of a founding team of one the climate tech startups I founded when I was an entrepreneur-in-residence at BP had this kind of mindset. They joined without any experience in working at a startup and found their passion and grew to become great leaders. Today one of them is senior product manager at a fintech startup and the other is a founder of another successful startup.
2/ They prioritise fiercely
If you are planning to become a venture builder, expect chaos — in a good way. The workload seems unreasonable, and you need to do so many things at the same time. You are the product owner, the business development manager, the head of finance and sometimes the developer. It is very common that entrepreneurs get lost in that ocean of tasks and stakeholders.
If you don’t prioritise, there is a risk you will lose focus on your customers and product
Good venture builders, however, constantly prioritise their tasks and goals. The speed in which their markets grow is so fast that prioritising is a leadership skill they have to excel in.
If you don’t prioritise, there is a risk you will lose focus on your customers and product and focus on other things like process management or procurement. Sometimes you have to address these areas, but you will have to prioritise constantly.
3/ They create teams of builders
At Siemens Energy Ventures, we focus on building teams of builders. Those founders who are building the next future energy and climate businesses, are there to build. The building work is not outsourced — the founding teams are capable of building a minimum viable product.
The founding teams are capable of building a minimum viable product
Having the teams able to build products themselves allows them to speed up innovation. A great founding team can independently run very quick feedback iterations in which they run experiments, talk with users and iterate and execute accordingly. If an agency or third party needs to do the execution for you the speed of innovation will significantly decrease and time to execute and test will be tripled.
4/ They are CEOs, and own their own business
One of the first questions I ask the cofounders I work with is: “Where do you see your venture in 5-10 years from now? Do you see it as a separate business? Or a part of your existing team?”
If the answer is that they want to stay as part of the existing team, they are not really there to build a venture, but an internal project. Our venture builders are encouraged to become the owners of their own businesses — the chief executives and chief technical officers of their ventures.
They plan to be on an 8-10 year ride to build and scale their venture and build their brand, their customer base and their team. They are ready for the ups and downs of the entrepreneurial journey and they are ready to take responsibility and be at the front of their own business. They do not hide under the corporate brand and network but know when to leverage it and when it is not the right stage to use it and focus on their own business.
5/ They build external networks
It doesn’t matter if you work for Facebook, Google or Tesla — companies create their own cultures, norms and reality. These can sometimes be very limiting and prevent companies from being sufficiently aware of what is going on outside.
I once had a conversation with a product manager at Google and I asked her if she knew which startups the product she owned competed with. She replied that it really doesn’t matter because her business set the tone and the market.
Being a venture builder requires a big amount of curiosity and humility
Being a venture builder, however, requires a big amount of curiosity and humility, and a big part of my growth as an entrepreneur was learning from other founders, sharing experiences, failures and learnings. If our venture builders don’t engage with the external ecosystem, investors and other founders they will lose perspective, speed, knowledge and most importantly their humility.
This is why we encourage venture builders to meet external venture capitalists, other founders and to engage in entrepreneurial communities. Our team also builds mechanisms to help our venture builders to do so effectively. If it’s a personal introduction we make or mentoring other founders and fellows in partner programmes such as our new partnership with Breakthrough Energy Fellows Program — our venture builders add value first and in doing so they are building their own external network and perspectives as entrepreneurs.