I think of myself as a founder. I have built several companies over the last 12 years, some more successful than others. But each company is always a huge learning experience. I joined Next Big Thing (NBT) - a company builder - because I was interested in learning more about the model. Specifically, my question was: how can an organisation remove the fragility, whilst retaining the agility of early-stage ventures?


Over the last 6 months as part of NBT’s Venture Development (VD) team, I have filtered thousands of ideas, read hundreds of decks, met scores of passionate founders and ultimately had a hand in building 6 ventures. As part of a company builder, I feel proud to be supporting this intelligent and driven cohort of people. As a founder, I know that these teams are only at the start of what will be a challenging, but valuable journey.


The learning throughout this process, for me and for the VD team, has been constant. This article documents the three biggest insights I’ve had, building 6 ventures in 6 months.


VDTeamThe venture development team at our headquarters inside NBT's offices at Factory Berlin.


1. Our Founders Become Part of our Model

As a founder, the venture you are building fills your entire view. It has to be your one primary focus. But from my more recent perspective within a company builder, I have the benefit of being less attached. Consequently, we have a ‘one to many’ relationship with ventures. This means I have to build up a more rigorous criteria than simply “passion” for an idea.


A key thing to understand is that when a founder joins an NBT Venture or accepts money from a VC, they become part of that organisation’s investment model. It may sound cold, but in the world of capital, there are some simple rules. As a founder, you must understand some basic calculations it takes to join a portfolio. Let’s say we build a company:


  • We own 50% (the rest is shared with others)
  • It costs €1m in investment and services to build to a Series A over 24 months
  • At this point, the venture raises €2.5m for 25% (our shares are now worth €6m)
  • We exit the business after another 36 months for €25m to a rival
  • Our €1m was locked up for 5 years, returning roughly €9.4m before tax (let’s call it 8X)


This is good, but to get to this one exit, we had to build 4 other similar businesses that failed. Now our return is much more like 2X. This is a lot less healthy. So my only real question to founders as a company builder is - how do you maximise our value and minimise our risk?


2. Founder Model Fit is Key

To take that thinking to the next level, I have started to look at founders differently. Inspiration and passion are great, but generally, I want to see people who can prove they have done something relevant before. The best evidence of this is a strong network and market insights.


NBT has a big pool of talent. We can build a product, launch a campaign or build a sales model. But it is not so big that we can understand every industry intimately, nor replicate 10 years of operational knowledge from a niche area. Take a look at my colleague Louise’s article about connecting to industry expertise. It demonstrates the value we place on industry experts and what we look for in founders.


Company builders provide a platform that is attractive for first-time founders with deep market experience or repeat founders burned by building alone previously. These people tend to arrive with the ability to accelerate and augment our process. They save us time and money and thus, are easier to build into our plans.


3. Document Your Financial Assumptions

No startup is strong in every area. Our job is to identify these risks and not cover them up. Some risks are explicit. But some are nuanced. In this case, stating assumptions allows others to help you mitigate them, especially in the finances.


So many proposals, decks and business plans I read assume the best or worst without making the assumption explicit. This creates work for the reader, as they have to reverse engineer the logic. Ultimately this makes it harder to assess and thus support the case.

For financial models, I like three kinds of assumptions:


  • Worst survivable - this is the minimum scenario which we need things to work, in order for us to survive - if this looks too hard to achieve the business becomes high risk
  • Best achievable - this is what the business will look like if everything works well - if the value is too low, it may not be worth pursuing
  • Target case - this is a case between the other two, where some things work and some things don’t - this should be the main plan, with options to pivot


In Summary

6 ventures in 6 months have been intense, but a valuable learning experience. As a senior member of our Venture Development team, I’ve learned a significant amount about how to build and evaluate potential projects. Together with the team, we engage founders, tackle risks and set up for growth. To recap, here’s what I would suggest to future founders:


  • Learn about the risk/reward that drives investors models
  • Develop value in your network and insights before considering founding
  • Be explicit in assumptions when you plan a project; don’t hide from the hard bits


If you’re a potential founder with insights into an industry, then please get in touch!