Venture development: a new era in supporting tech startups
In the world of tech startups, traditional support models like venture capital (VC) have long played a key role in funding innovation. However, rapid changes in the economy, emerging technologies, and the growing needs of early-stage startups have led to the rise of a new approach known as venture development (VD). This model goes beyond mere financing, offering startups comprehensive operational involvement, access to resources, expertise, and networks. In this article, we will explore what venture development is, how it transforms the way startups are supported, its benefits, challenges, and the trends shaping its future.
1. What is venture development?
Venture development is a hybrid model of startup support that combines funding with active participation in building the business. Unlike traditional venture capital, venture developers engage at earlier stages (pre-seed and seed), providing not only capital but also operational support, infrastructure, expert teams, and access to clients and partners. The core principle of VD is deep collaboration with founders to increase the startup’s chances of success.
Key differences compared to traditional venture capital
- Operational involvement: Venture developers actively participate in management, product development, and strategy, while VC typically limits itself to strategic advice.
- Longer investment horizon: VD assumes a longer support period, allowing for the creation of solid business foundations.
- Lower financial expectations, greater control: Venture developers may have lower expectations for quick returns, but in return, they require more influence over decisions.
- Resource sharing: Startups gain access to the venture developer’s internal teams, technological infrastructure, and networks.
2. Evolution of startup support models – from classic VC to Venture Development
The history of startup support has evolved significantly, adapting to the changing needs of entrepreneurs and the market:
- Classic VC (1970s to 1990s): Focused solely on providing capital with limited strategic advice.
- Smart money (1990s to 2000s): Funding enriched with networks and strategic guidance.
- Incubators and accelerators (2000 to 2010): Support programs offering mentoring, office space, and short-term assistance, such as those run by Y Combinator.
- Venture builders (2010 to 2020): Creating startups from scratch based on their own vision, often with ready-made teams and resources.
- Venture development (today): A hybrid model combining funding, operational involvement, and long-term support.
Venture development is a natural step in this evolution, addressing the need for a more holistic approach to building startups in a dynamic and competitive tech environment.
3. Key elements of venture development
Venture developers use modern methodologies to enhance efficiency, reduce risk, and foster innovation:
- Lean startup: The lean startup methodology, developed by Eric Ries and described in his book The Lean Startup, has been adapted to meet the needs of corporations working with venture developers. It focuses on rapidly testing ideas by building minimum viable products (MVPs), gathering user feedback, and adopting an iterative approach to development. This allows startups to quickly validate whether their product meets real market needs, minimizing costs and risks associated with misguided ideas. In the context of VD, corporations can provide data and resources to accelerate this process.
- Design thinking: Design thinking is a user-centered approach used in innovation processes to better understand customer needs. Popularized by Stanford d.school, it consists of five stages: empathy (understanding the user), problem definition, ideation, prototyping, and testing. In venture development, design thinking enables startups to create products and services deeply rooted in actual user needs, increasing their chances of market success.
- Agile: The agile methodology, originating from the Agile Manifesto, accelerates product development through short, iterative cycles called sprints, enabling flexible responses to changing requirements or customer feedback. In venture development, agile allows startups to bring products to market faster, adapt to shifting conditions, and manage teams efficiently, especially in dynamic tech environments.
- Evidence-based entrepreneurship: The approach of evidence-based entrepreneurship involves making decisions based on data and evidence rather than intuition. Promoted by sources like Harvard Business Review, it enhances the effectiveness of business decisions. In venture development, this means venture developers use market data, trend analyses, and test results to guide a startup’s growth, reducing risk and boosting success rates.
Scope of support
Venture development provides startups with comprehensive support, including:
- Complementary teams: Access to experts such as a CTO (chief technology officer, responsible for technological product development), CMO (chief marketing officer, handling marketing strategy and brand building), CPO (chief product officer, overseeing product design and development), or CFO (chief financial officer, assisting with financial management and fundraising). These experts provide “as a service” support, helping startups in critical areas without the need to build full teams early on.
- Technological infrastructure: Provision of computational resources, research labs, or software, enabling startups to prototype and test products more quickly.
- Testing with corporate clients: Opportunities for pilot implementations with large partners, providing startups with valuable feedback and accelerating development.
- Support in compliance and regulatory processes: Assistance in meeting legal and regulatory requirements, particularly in sectors like fintech or healthcare where regulations are critical.
4. Examples of venture development worldwide
Leading venture development firms
Several firms globally have successfully adopted the venture development model:
- High-Tech Gründerfonds (Germany): One of Europe’s largest funds supporting tech startups, offering financial and operational support.
- Entrepreneur First (UK): Focuses on building startups from scratch by connecting founders with ideas and providing early-stage support.
- eFounders (France): Creates and grows SaaS startups, offering comprehensive operational and strategic support.
- Antler (global presence): Supports entrepreneurs at a very early stage, helping build teams and products, with offices worldwide.
- Science Inc. (USA): Known for creating companies like Dollar Shave Club, combining investments with operational support.
Case studies
- Betaworks (USA): A studio-plus-fund model that combines investments with operational support, creating projects like Giphy. Learn more on Betaworks’ website.
- Rocket Internet (Germany): A hybrid venture-building model that created companies like Zalando, though criticized for its aggressive control approach. Details of their strategy are available on Rocket Internet’s website.
- Bosch Startup Harbour (Germany): A corporate venture development program supporting startups in IoT and mobility, providing access to Bosch’s resources. More information can be found on Bosch Startup Harbour’s page.
5. Data and statistics
Effectiveness of the venture development model
The VD model proves more effective than traditional VC in several areas:
- Survival rates: Startups supported by venture developers have a 20 to 30% higher survival rate, according to reports from CB Insights.
- Time to break-even: Startups reach profitability faster thanks to operational support and resource access.
- Success in raising further rounds: Startups under VD are more likely to secure subsequent funding rounds due to strong business foundations.
Investment trends
- Growing VD share: Venture development is gaining a larger share of the startup funding market, as noted in a report by Dealroom.
- Average investment size: Investments in the VD model are typically smaller than in classic VC, but this is offset by operational support.
6. Challenges of venture development
For startups
- Loss of control: Startups often have to give up a larger share of ownership and control to the venture developer.
- Conflicts over direction: Differences in vision between founders and VD can lead to tensions.
- Dependency on the ecosystem: Startups may become reliant on a single partner, limiting their autonomy.
For venture developers
- High operational costs: Operational involvement requires significant financial and human resources.
- Portfolio management: Handling diverse technologies and startups is complex.
- Balancing control and autonomy: Too much control can demotivate founders, while too little can lead to chaos.
7. The future of venture development
Trends for 2025 and beyond
- Sector specialization: Venture developers will increasingly focus on specific industries like healthtech or greentech.
- Integration with corporate venture capital (CVC): Collaboration with CVC will provide startups with access to larger resources.
- Hybrid models: Partial operational involvement will become more common, blending VD and VC benefits.
- AI in support processes: Artificial intelligence will play a key role in startup evaluation and process automation.
Technologies transforming the field
- AI in potential assessment: AI-based tools, such as those developed by CB Insights, assist in analyzing startup data.
- Remote collaboration: Platforms like Slack and Notion streamline remote support.
- Automation of due diligence: AI technologies speed up risk assessment and due diligence processes.
8. Perspectives for startup founders
Criteria for choosing venture development
- When to choose VD over VC? If a startup needs operational support and resources at an early stage, VD is a better choice. Check our article about differences between specialist and generalist venture capitals funds.
- How to evaluate non-financial support? Look at access to experts, clients, and infrastructure.
- What to watch for in agreements? Key aspects include clauses on control, intellectual property, and exit strategy.
Recommendations for founders
- Due diligence on venture developers: Check their track record and portfolio.
- Talk to portfolio companies: Reach out to other startups supported by the VD to learn about their experiences.
9. Conclusion: is venture development the future of startups?
Venture development is transforming the way tech startups are supported, offering not just capital but also comprehensive operational support, resources, and networks. This model enables startups to achieve profitability faster, increases their chances of survival, and improves their scaling prospects. However, VD comes with challenges for both startups and venture developers. Success depends on choosing the right partner, setting clear collaboration terms, and staying adaptable to emerging trends like the growing role of AI and sector specialization. Venture development may well be the future of the startup ecosystem, especially for entrepreneurs seeking not just funding but a true partner in building their business.
InnoGlobal is one of few venture develepment fund who stands out with a unique approach, combining funding with comprehensive operational support and access to global networks.
Sources:
- PFR Ventures Annual Reports, an analysis of the Polish startup ecosystem.
- Dealroom: European Venture Builder Landscape, a report on venture development in Europe.
- CB Insights: The Venture Building Model, data and statistics on VD.
