Five Ways to Start your Corporate Venture on a Budget

"Sure, we can do that. For 100 million." What?!

The notion that growth is only possible if you throw money at it - A LOT of money - is an opinion only held by folks who have never founded a startup.

If you're fed up with big consulting firms stretching your budget, we'd love to introduce you to serial entrepreneur Henrik Rydberg . Because he has a wholly different approach to building new ventures.

The time to start is now. Enjoy.

By Elke Boogert , Mach49 Managing Editor

Five Ways to Start your Corporate Venture on a Budget

By Henrik Rydberg , Principal Venture Builder North America at Mach49

If you and I founded a startup tomorrow, we'd be scrappy and move as fast as we could. Why should corporate venturing be any different?

Our client asked, “Could you find a cheaper way?”

A large consultancy had researched a new line of business for them. The dollar figure attached to this plan to launch the new business: $100 million. ??

Another client of ours had a venture team that was stuck.

Sadly, you hear stories like these every day in big corporations. When large organizations finally overcome the inertia of starting a new growth effort, they tend to balloon the new budget and snowball the team size - leading to over-extended expectations. The team is set to do too much, too soon, and produce results that are frankly unrealistic, given what they know of the new market and customer need.?

Too much funding kills corporate ventures and startups alike. Over and over , we find stories of struggling startups that raised too much funding, too quickly. They got way over their skis in product development without first validating the market need: does their solution provide real desired value or solve a meaningful customer pain?

We help Fortune 500 and Global 1000 companies operate their new ventures like startups would, and govern them like Venture Capitalists do. Mach49 Founder and CEO Linda Yates lays out our methodology in her The Unicorn Within book.

Below, I’ve gathered five themes that enable you to get started with a fraction of the budget:

1. Small founding teams

Small teams require less overhead and can move quickly – there’s no time lost on communication or decision making. For new ventures, small founding teams are effective in the earliest stages

2. Startup speed

To maximize the team’s focus on execution and minimize time spent on reporting, documentation, and internal bureaucracy, the venture team should be enabled to operate (slightly or fully) outside the normal corporate structure. The team must have tight – if not even a little scary – timelines.

3. Venture governance

Form a board (of executives) to support and guide the small founding team, and gradually give more funding/resources when goals are reached. Similar to how venture capitalists guide their portfolio companies. In monthly meetings with the founders, review the venture’s progress against their goals, update or set new goals, connect the team to the appropriate assets from the larger company and discuss guidelines to right-size risks. The Board should unlock new funding and enable the team to grow, when they're making the right kind of progress. Or kill the initiative if it looks like a dead-end and refocus the team to a new area, where they can be productive.

4. Continuous de-risking

The team must continuously accumulate market validation and do customer development. Avoid pure tech-build sprints that take months and block the team from gaining new learnings from the market. Instead, insist on creativity and finding lean ways that continuously deliver learnings, remove risk, and validate the venture. Build demos, form pilots and conduct in-market experiments that gradually build towards the dreamed solution. This way, the venture continuously removes investment risk and delivers the best ROI.

5. A razor sharp starting point

Focus creates speed. When the team is hyper focused on a few key questions and risks (max three at a time), they’re able to execute quicker and remove risks faster than if they would when building the full product/service everyone is dreaming about.

Before scaling and adding features, the team needs to find a value proposition that does just that. Once the Wedge is found, the team starts to form pilot and customer relationships that they can then continue to expand and build a full, rounded offering.

Back to our client, who was looking for a cheaper way to build a new line of business (at least cheaper than $100 million!). Following the five approaches above, we formed a venture team that searched and found the Wedge for the business line, mapped risks, and formed an operating plan that gradually removed them and built the new business. The cost: $3.5 million over 18 months – a 96.5% cost reduction!

And more importantly, the venture had clear go/no-go decision points that enabled the client to pivot or kill the initiative in case of an unfavorable market response.

When the pressures and expectations for any single initiative are lower, you’re able to get more initiatives off the ground, make faster progress, and ultimately extend your lead over others in the industry.

So, next time you’re thinking of starting a new initiative that comes with a lot of unknowns, cut the budget first. Then form a structure that makes quick progress a necessity for the team.

Principal Venture Builder HENRIK RYDBERG is passionate about meeting the customer on Day 1 and believes customer pain belongs at the heart of every business model. Growing up in Finland with Apple’s first Macintosh computers, Henrik fell in love with digital design and creating software, and boldly proclaimed that he would one day create cutting-edge technology alongside Silicon Valley’s top minds.?That dream was a guiding light, leading him to his first job as a web developer at just 16. By 20, he had founded Aisti Medialab, which became the most awarded Finnish UX consulting firm of its time. Henrik’s entrepreneurial spirit only grew as he forayed into the 3D technology market, helping found and scale a 3D design application that now has 40 million users worldwide, and growing a 3D printing service from a startup to a public listing. Along with their 10-year-old son - who is following in his father’s footsteps with Tinkercad and coding lessons - Henrik and his wife love to travel, visiting relatives scattered across Europe and the US while exploring new cuisines and hunting for obscure local specialties. Henrik holds a bachelor’s degree in digital design from the Lahti Institute of Design and acts as Design Coach for the Andreessen Horowitz network.