Take a Portfolio Approach to Launching New Ventures

OUR THINKING

January 25, 2017

Successful startups usually don’t win with their first idea or first product. There are many examples of startups that pivoted (in some cases multiple times), or completely reinvented themselves, in order to win. Starbucks started selling espresso machines and beans door-to-door before pivoting to coffee shops on every corner. Avon started as door-to-door book sales, only to discover that the cosmetic samples they gave away for free to try and sell books were the real winners. Pinterest originally focused on mobile shopping, and then pivoted into focusing on online item collection and sharing.

And of course, many startups ultimately do not achieve the scale they’re looking for. For startup founders that means closing up shop and trying again.

For big companies, this isn’t an issue — they can leverage a portfolio approach to new venture creation to greatly increase their chances of success.

Venture capitalists and other investors always take a portfolio approach to investing. The common adage for a VC is that 1 investment out of every 10 will be a big winner. A few others will return some money, a couple others return their investment, and a few of them fail outright. If a VC firm only invested in 1 company, the odds of success would be incredibly small. Similarly, the most successful startup accelerator programs, play the volume game, investing in tens, if not hundreds, of startups per year.

Big companies need to take a portfolio approach to launching new ventures. This means finding relatively inexpensive and very fast ways of creating, investing in and co-creating new startups on a consistent basis. It means leveraging external resources to help guide the process (since the concept of starting a bunch of new ideas/projects simultaneously with uncertain outcomes is rarely in a big company’s DNA) and identifying the right external partners (e.g. founders, startups, investors.) The only point in time when a big company should be focused on a single new venture is when that new venture is already beyond product-market fit and scaling. Before that, it’s a volume game.

A portfolio approach not only increases the likelihood that some of the new ventures instigated are successful.

It also builds a foundation for ongoing and long-term success.

Every failed attempt at a new venture feeds learning and insight back into the organization. Historically, a big company would make a decision to do something, put a big budget behind it and then push as hard as possible to make that successful. Sometimes that works, but it also leads to a lot of waste. Startups (particularly those taking a Lean approach) are meant to reduce waste. New ventures — done right — cost a fraction of what a big company is typically going to spend on something, which means even if a new venture fails it’s saving the company significant time and money.

A portfolio approach within a big company touches more people and has the opportunity to more quickly transform an organization. It means that more people will receive the necessary training (e.g. Design Thinking, Lean Startup, Lean Analytics, etc.) and be inspired to try new things and experiment. More employees will feel empowered and culturally that can have a big impact.

Portfolios should start small. Even 1 or 2 new ventures per year to get started is a significant shift from what most enterprises are doing. If you’re just beginning your journey towards transformative and disruptive innovation through new ventures, you don’t want to invest in 100 companies overnight. You can’t. But you can have the right mindset towards building the foundation and framework for long term success. You can start small, with an eye towards scaling new venture investing and co-creation, in order to demonstrate bigger and bigger impact to your organization.

Subscribe to the Highline BETA Newsletter


News
May 07, 2019
Report: Female Funders releases “Women in Venture,” report on women in VC, angel, and corporate investing in Canada and the United States...
News
November 05, 2018
CNW: Minister Ng announces federal venture capital investments focused on gender and diversity Today in Montréal, the Honourable Mary Ng,...
News
August 02, 2018
Highline BETA Helps Design and Launch AB InBev’s Global 100+ Sustainability Accelerator Program Author: Ben Yoskovitz We’ve worked for a ...