With this market uncertainty, entrepreneurs are better off planning for long-term growth than the quick-scaling approach.
May 7, 2020 4 min read
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For startup entrepreneurs, participating in an accelerator program provides financial resources, an invaluable network and prestige, but the current public-health crisis has interrupted operations for many of them. For instance, Y Combinator’s next batch will be mentored remotely, and instead of investing in the entire batch, they will evaluate each startup individually to determine who receives funding. Meanwhile, 500 Startups is eliminating cohorts entirely and allowing rolling admissions, with two demo days and only one investment round per year. Other accelerators around the world are making adjustments to how they distribute funding in response to global economic uncertainty.
Entrepreneurs looking for guidance and funding for their ideas right now should consider other opportunities, and company builders provide an alternative for entrepreneurs in this uncertain time.
What is a company builder?
Company builders, also known as “venture builders,” provide comprehensive, long-term support for growing a company. Rather than accepting applications, company builders focus on cultivating potential ideas and leaders as part of a very hands-on process.
In general, the organizations and their networks develop and invest in multiple business ideas, bringing entrepreneurs under their firm’s wing. They develop many projects and ideas simultaneously, exploring different ideas that complement each other through structured, repeated processes for business incubation. They assign leadership teams to build out those ideas and establish the most successful ones as companies in their own right.
Advantages of company builders in uncertain times
Over the past few months, business activity across all industries has been drastically affected by travel restrictions, social distancing measures and economic instability. Experts predict the worst economic recession\ since the Great Depression, and most countries already show negative GDP growth compared to 2020 projections.
With this market uncertainty, entrepreneurs are better off planning for long-term growth than the quick-scaling approach that most accelerators promote. A company builder can help foster that growth by utilizing its extensive networks of resources and staff. A small startup on its own usually doesn’t have the funds to build out all the departments it needs right away, nor even to contract third parties to handle those tasks. Instead, founders have to make difficult choices and may need to pursue outside funding to aid that growth, which can be difficult to secure during an economic downturn.
Many company builders focus on specific industries, which could range from health or logistics to B2C or B2B service companies. This way, company builders can apply their domain expertise and handle legal, IT, HR, recruiting and other administrative tasks for all their companies. Along with expert staff, company builders can also provide continuous access to funding and help develop robust marketing strategies, raise funds and distribute them. In contrast, participation in an accelerator program is not always a guarantee of follow-on funding support.
Company builders are also in it for the long haul and invest heavily in their talent. If an idea doesn’t pan out, the team stays on board with the company builder and begins working on a new idea in order to learn from less successful experiences and apply those lessons the next time. By working on multiple ideas simultaneously, company builders foster synergy and collaboration. The sharing of resources, knowledge, and talent among the different businesses also provides a safety net during downturns.
In addition to long-term security and support, company builders are well-positioned to continue operations that comply with the travel restrictions and social distancing measures in place around the world. Many accelerators are scrambling to go remote, working through the challenges of adapting their models to the current situation. Company builders, on the other hand, are well-positioned to operate remotely or have been doing so for a long time, and are able to support entrepreneurs and continue building out companies. Company builders are generally more open to remote teams to better facilitate long-term collaboration, and many already have a remote infrastructure in place. Managing a distributed workforce allows them to find and organize the best contractors and entrepreneurs for each business without geographic limitations.
Being an entrepreneur always involves risk. In recent months, those challenges challenge have become heightened, but now more than ever, the world needs innovative solutions to pressing problems, and company builders can help address that need.