Most startups fail and we also have a good understanding of the main reasons, for that I like to refer to the famous TED talk from Bill Gross highlighting the top 5 success factors for startups:
At my former company Stryber we received many applications for founder positions in one of our portfolio companies. When we asked our applicants why they are not launching a startup on their own, those were the top 3 answers we got:
- “I have no great business idea”
- “I do not find complementary co-founders”
- “I do not have enough cash runway”
On top of that we observed that first-time founders often lack the experience, methodologies and network that can significantly help to build a successful startup.
As a result we see many smart and ambitious individuals out there who want to build their own startup, but they struggle to fulfill ANY of the top 5 success factors mentioned above already on day 1!
Actually 30% of startups fail or give up in their first 2 years.
How a company builder eliminates typical starting problems for many founders
A company builder can enable smart and ambitious individuals to overcome their starting hurdles:
They help finding an attractive unicorn idea (big market and right timing!), build a first product version and validate the idea in a structured way with real transactions, plus the idea becomes fundable.
SPEED / EXECUTION
A highly professional and experienced in-house team of Venture Architects, Product Owners, Growth Marketers, UX/UI Wizards and Engineers tests hypotheses, gets transactions and achieves fundability super-fast
(= time savings of 12+ months compared to independent founders with much smaller teams at that stage).
This also lays the foundations to not get left behind by main competitors early on and to be able to exploit the right timing of the business idea with more manpower from the beginning.
The company builder hires a kick-ass founders team based on learnings what skills and experience the exact topic needs and whose individuals complement each other well. Typically the dream team consists of a visionary CEO, an execution-focused COO, and an experienced CPO/CTO.
Founder-friendly company builders are convinced that an attractive equity package is needed to ensure long-term incentivisation and fundability.
On top of the equity stake provided, the company builder covers the starting costs (pre-seed + some cash runway towards seed funding) and enable a small base salary for founders (= huge cost savings and peace of mind compared to independent founders). Independent founders typically earn no or very little salary during the first 1 or 2 years.
Check this document to see latest salary benchmarks for founders of funded startups as well as a generic equity calculation.
Company builders help their startups to get in touch with the right seed investors (while being already one of them).
Experienced senior partners join the startup board and act as mentors to advice on things like strategy, team, fundraising and operational topics (OKRs, culture deck, hiring, performance management, etc.).