It was 30 January 2020 when the World Health Organization (WHO) declared COVID-19 a global pandemic. Then everything changed forever. Economic activities were severely disrupted, and it is the startups that are bearing the brunt.
But not all hope is lost even in the worst of times. Venture builders can be considered as a temporary vaccine that is fuelling ASEAN’s startup ecosystem through this pandemic, and possibly beyond.
The State of Startups During Covid-19
Experts predict that the economy will get better from the beginning of 2021. Unfortunately, not all startups have the luxury of waiting for a year or longer. According to a recent report, around 34% of Series A startups have less than six months’ worth of runway since April 2020.
It is a dangerous situation to be in, especially when the sector revenue has been reported to take a deep plunge. The same report also states that 40 percent of all startups experienced a 40 percent fall in revenue or more while only 12 percent recorded significant growth.
To rub salt in the wound, raising money during Covid-19 has also been adversely affected, resulting in a reduction in most areas of funding. It is worth noting that late-stage VC funding remains relatively stable, as investors are playing a safer bet, only pushing their monies into mature businesses that have a good track record.
Unfortunately, the same can’t be said for early-stage startups (Series A and below) as they have seen some struggle with only one-fifth of all funding coming out of this group, compared to around one-third in 2019. Meaning that founding a startup and running them is even harder during the pandemic.
As a result, we are likely to see a surplus of ambitious young entrepreneurs wanting to start a business but get chained down. That’s why venture builders have gained the recent spotlight thanks to their approach in creating, growing, and de-risking startups, which could very well be the solution to enrich our startup ecosystem during the darkest times.
How Venture Builder Help Enrich ASEAN’s Startup Ecosystem
Increasing the probability of success
Startups have always been considered risky, where any mistake can potentially cripple or outright kill the business.
However, Venture Builders are a safer bet, where they focus on business ideas that are already at a mature stage instead of pursuing unicorn ideas. In other words, the VBs try everything they can in order to reduce the operational risk and failure rate.
By embracing this concept, VBs can build up the startup foundation with in-house teams, funds, and resources around it to raise the success rate significantly. It’s like choosing to play a blackjack game instead of roulette as the first one has a higher chance of winning a smaller reward.
Most of the time, founders tend to spend more time seeking investment than working on their business, especially during the Covid-19. Moreover, they also have to cut down operations due to the lack of funding which negatively impacts their service/product quality. This can lead to potential customer backlash or even migration to competitors.
In contrast, startups from Venture Builder enjoy their funding privilege for the first couple of years, often backed by the VB themselves with a clear path of guidelines for funding, goals, and progress. When companies have grown strong and expand their capabilities enough, Venture Builder will assist them to connect with investment opportunities from other investor parties. Thus, minimize the risk of failing due to lacking capital.
Running a startup often requires many resources and services that are not related to core business such as accounting, HR, marketing, sale, etc… Hence, startups will be greatly benefited from the shared resource model of venture builders where they can access these needed in-house services without the heavy financial burden.
The same can be said with the existing customer base that startups can draw from thanks to the venture builder ecosystem. This will substantially cut down the marketing and sale costs while allowing startups to focus on their core business.
Consistent Access to Talent
Finding the right talent is difficult, getting them during the pandemic is even harder. Thus, most startups are underdeveloped when it comes to in-house staff. On the other hand, the venture builder will take care of the talent resources for the startup. They pump up in-house expert teams to help keep the performance always at the top level.
They also hire talents to support and join the startups for the founders, thus, reduces HR issues as people are carefully checked. It is also more economical as they can release or reuse the workforce for appropriate projects.
Venture Builders Are Here To Stay
It is undeniable that venture building is gaining popularity during the pandemic as the startup community tries to stabilize itself. Though it’s industrializing innovation processes, Venture Builders can nurture businesses and individuals to build a much stronger startup foundation and bring hope for a better future where it is easy for young entrepreneurs to join and run startups and advance their careers under the wing of Venture Builder.