Introducing the Elastic Company Builder
Almost twenty-two years ago, while being an undergrad student of Computer Science at the University of Crete (famously and rightfully known, back then, as the “Harvard of the Mediterranean”), I took the crazy decision to “start a company”, simply because it just was “the obvious thing to do”.
Thankfully, I was not alone in this quest: Four of our community’s best programmers joined me: Perikles Akritidis, Charalampos “Harry” Gikas, Nikos Ventouras and Miltiades “Miltos” Vassilakis. We were also lucky enough to partner with another new Greek firm of that era, which had way more senior founders than us, who trusted our startup (yes, the first student startup in Greece!) and secured our survival in the first few years.
In September 2004 we held one of our first, (relatively) large open events. We claimed that “rather than becoming a company of 500 persons, we prefer creating a strong network of 10 companies with 50 persons each”. The venture building seeds were already planted and, very naturally, the ‘entrepreneurial ecosystem’ idea came to the surface few years later, in November 2009, defined as following:
“An Entrepreneurial Ecosystem is a group of non-competing companies, including both start-ups, established companies and one or more coordination entities, which share the same vision, values, culture, strategy and business processes and decide to form an organization in order to explore economies of scale in business functions such as business development, financing, market analysis, marketing communications, IT / MIS infrastructure, human capital management, legal support, financial & accounting management.”
It is worth mentioning that with founding Epignosis in November 2003 and founding a series of companies in 2006, 2007 and 2008 (including mVision, the ancestor of AbZorba Games), we were already walking the talk; walking it, in fact, very seriously.
Our original idea was all about a community of purpose, culture and knowledge, as well as, of course, about economies of scale. We identified very early that certain functions could not and should not be replicated at every new organization within such an ecosystem. Business administration, accounting and finance, HR, IT support, legal and marketing communication, as well as some aspects of strategy, financing and business development could obviously be offered by a ‘central entity’ — what we today call a venture builder (well, some others prefer calling it a venture studio; we do not).
Time did pass, successes came after failures and Starttech Ventures was formalized in January 2012 with the mandate to do formally and officially, what our community was already doing casually for almost nine years.
We initially envisioned the creation of economies of scale on four different levels:
1 — Shared infrastructure and facilities
2 — Shared administration resources
3 — Shared marketing resources
4 — Alignment of interest and entrepreneurial drive
From the very beginning we realized two different, yet quite complementary truths:
a — The capital required for launching and scaling a business is much less than what is widely believed;
b — The number-one reason for startups’ failure is that their founders, instead of focusing all their attention and capacity on customers and on product, they were running after investors and were desperate with their ‘runway’.
The key idea is that if an organization creates an environment where founders won’t have to worry about financing, they will actually develop their products better, faster and at way lower costs than their competitors.
We can now claim that this argument has been been proven beyond any doubt by the successful cases of AbZorba Games, Epignosis and Yodeck.
After naturally focusing on the narrow segment of B2B SaaS companies, with a high-velocity & inbound business model and a commercial focus on the North American market (as reality did teach us), we identified an interesting patter on the needs of new companies of this kind: They all needed a designer, very early on. Then they needed someone to help them with Google Adwords and very soon someone other to help with SEO and content writing. It became, then, an obvious choice to search for and hire three experienced professionals in these domains and have them as Starttech Ventures full-time employees covering the corresponding needs of our portfolio companies. More importantly, covering them for free, or, better put, having the pertinent cost calculated in the Starttech Ventures share of the new business.
The next step was, again, obvious: We incentivised this team following a fund management approach, offering them a generous share on the carried interest of the investments they were working on.
In parallel, as early as since 2015, we made the strategic decision to invest significant time and money in acquiring knowledge on Lean Startup and all relevant domains (such as Agile, Customer Development and Design Thinking) which constitute a solid theoretical foundation on how a new product (and, in essence, a new company) should be conceived, built and launched. All this process led to the compilation of the “Starttech Curriculum”
The decision to turn our resident team of domain experts (designer and marketers) also to lean startup experts has been one of our highest bets. We introduced the “Shadow CEO” concept, where each of our senior team members ‘adopts’ one or more of our portfolio companies, playing the role of a ‘daily mentor and coach’. This is of utmost importance as oftentimes a mentor is one who you meet rarely and is not very approachable. In our case, the mentor not only works at the next desk to yours, but also works on the them project as you — your project — and she/he has significant vested interest in your success. This is a mentor and coach who really cares for you.
This model has been put into practice at full scale since the end of 2016. As our portfolio companies grow, the same happens with this ‘shared team’. In order, then, to deal with scalability issues and complexities, we decided to follow the cloud computing principle of elasticity.
It was not too long ago, when companies (in practice, their system administrators) were having quite a tough time with their hardware resources. More servers were needed and even the new servers were soon running out or RAM and disc capacity. The “elastic cloud” was an elegant solution to this challenging problem: Virtual resources, let them be RAM or Disc or almost-anything, were becoming available to your application service on demand. A kind of the Holy Grail for each and every system administrator and software developer.
We decided to follow the same approach in our venture building team: Our companies will no more be supported by individuals or teams. Elastic personas will be the corresponding team members:
1 — A designer, taking care of branding, UI/UX design and web design/development
2 — A performance marketer, taking care of all things digital advertising and analytics
3 — An organic growth marketer, taking care of content authoring, copywriting, SEO and generally all things content
4 — Last, but not least, the ‘administrator’, the persona taking care of all things operations
In practice, each of these personas is actually a team. The same stands true also in cloud computing: There’s a lot of sophistication behind an abstract ‘memory’ or ‘disc’ which can scale on demand. The beauty, however, is that, similarly to the software engineer in the cloud computing scenario, a founder in the Starttech Ventures building company does not have to deal with this complexity! They just have to assign certain tasks to these personas and the corresponding groups will deliver timely and at high quality.
One very important side-effect of this approach is that when the graduation time comes and the portfolio company is ready to leave the venture building program, the required transition is going to be as easy as replacing the elastic persona with the professional who will be employed for undertaking this role.
For reasons of completeness, it has to be mentioned that the model described above concerns the actual delivery of work, what we could call as the “muscle system”. On a higher plane, there’s a different type of work done, where the company needs to decide what to do, what one could call as the “nervous system”. For this function, the Shadow CEO works as a ‘dynamic-duo’ with the respective team leader and together they hold the roles of head of product as well as head of marketing — in other words, they jointly undertake the responsibility of successfully and effectively applying the lean startup methodology in practice.
Much as it sounds like weird metaphor, we do believe that the “Elastic Company” is a very useful analogy and it constitutes a concept of utmost importance in the world of entrepreneurship. Similarly to the cloud computing analogy, where the true value can only be found in the application itself — not in the supporting infrastructure necessary for the application to run, the true value of an enterprise can be found in the essence of the value proposition (basically, understanding the market need and delivering a product that addresses it in an efficient and sustainable way) and not in all the peripheral activities, being them of administrative or accounting nature.
Similarly, however, to the huge opportunity it has been for providers like Amazon to provide this elastic environment, it is an opportunity of equal size for entrepreneurs and investors to embrace the venture building concept and tune it towards facilitating for an elastic company building.
This is what recognize as our mission at Starttech Ventures: To offer the right level of abstraction and the right type of interfaces, which will really serve the needs of the entrepreneurs while hiding all unnecessary complexity, allowing them to realize their creativity without having to worry for issues that others, their predecessors, have already efficiently addressed.Pretty much like a developer in our era does not have to worry a lot about memory volumes, disk sizes and load balancers.
Let the era of The Elastic Company begin!