Corporations should be "venture building" - 5 reasons why and how to engage a Venture Studio to get it done!
With business landscapes changing, corporations are increasingly turning to venture building and venture studios as strategic avenues for innovation and growth. If you’re running a large company (as a CEO, Corp Dev, Product Leader, Corp Strategy, or Innovation team), worried about techtonic shifts in technology and markets, these ideas should resonate. Below are a few reasons you should consider "venture building"-creating brand-new, stand-alone companies inspired by your strategy, category, or customers.
1. Enter new categories.
Corporations often engage in venture building to explore and enter new market categories. By leveraging the agility of a venture studio, companies can quickly (weeks, not months or years) develop and launch new products or services that align with emerging trends, that might be totally new or adjacent to the core business. This approach allows them to diversify their portfolios, reduce reliance on traditional revenue streams, and stay competitive in a dynamic marketplace. Could Schwab have created Coinbase (market cap of 94B) to enter the crypto markets?
2. Deal with competitive threats
As competition intensifies, established companies face pressure from both direct competitors and disruptive startups. Venture studios provide a framework for corporations to address these competitive threats proactively. Companies can co-create new ventures that respond swiftly to market changes, helping to safeguard their market share and position themselves advantageously against rivals. This is also a low-risk way to put a chip on the table or thwart a quickly growing startup. What would have happened if Visa had created Stripe (approx value of >90B) and maintained direct payment relationships with 1000s of emerging technology companies?
4. Solving internal, usually operational, challenges or problems
Many corporations utilize venture studios to tackle internal challenges effectively. By acting as the “first and best customer” for their own innovations, these organizations can refine solutions that directly address their operational issues. This not only enhances efficiency but also ensures that the solutions developed are tailored to meet the specific needs of the organization. But, as these are created as "stand-alone" startups, the corporate benefits from learnings from other companies, limited burden to maintain the project internally, and should share in the upside if the startup is successful. This is especially true now as AI and new “AI first” companies come online to solve enterprise problems.
It's very difficult to find AI talent, and especially AI talent that could work at the pace of innovation happening in the category. It's difficult to bring those resources internal to a large corporation, not to mention the AI safety concerns at this point in time, which further slow down big companies. Venture studios enable companies to conduct AI experiments in a controlled environment, allowing them to innovate without the risks associated with traditional hiring processes and the legacy of internal corporate systems.
One recent example from PSL is Certivo, solving the compliance problems for Fortive and Fluke. This was a huge operational cost internal to the company and slowed them down in bringing new products to market. We created Certivo in about six months, with Fortive as our “first customer.” Not only does Fortive solve a problem, but they also have meaningful equity and an incentive to help Certivo grow and flourish. And, with the network effects of OEM/suppliers and managing regulatory certifications, the more customers Certivo has, the better it gets for Fortive and all the other customers. This would be very hard, slow and expensive to do internal to Fortive and would likely limit the network effects that will be so powerful for this business.
5. And finally, culture and pace.
When large corporations observe how quickly a startup studio can build new companies (PSL did our first company, Teamsense, with Fortive in ~6 weeks), using best practices, quick decision making, limiting internal alignment...they can encourage their teams to move at a faster and faster pace, when they see how it can happen. This cultural shift not only boosts morale but also enhances overall organizational agility, encouraging teams to embrace innovation more readily.
For example, at PSL, we run “Sprint Weeks” with our corporate partners. In a 5-day period, we go from rough concept (CVFB) to a full venture pitch, usually with a working prototype and strong customer interest and in a few cases, even an LOI or two. This process forces quick decision making, radical ownership, and exercises new skills across a team, including customer development, pricing and packaging, product management, design, and pitching to investors. Attend one sprint week and your team's approach could be changed forever!
Conclusion
As corporations navigate an increasingly complex landscape, venture building and venture studios offer a viable path toward innovation and growth. By embracing this model, companies can effectively address immediate challenges while positioning themselves for long-term success in a rapidly evolving marketplace. The combination of entering new categories, addressing competitive threats, solving internal problems, facilitating AI experiments, and fostering a culture of rapid innovation makes venture studios an attractive option for forward-thinking corporations.
At Pioneer Square Labs, we’ve been doing Corporate Venture building for almost 5 years and have learned a lot. We’ve launched 8 brand new companies with large corporate partners and have some very concrete examples of success (and failure), but we can say firsthand that this process works. We’ve worked extensively with Fortive, Capital One, Kroger, and others to conceive of, evaluate, and launch new, venture-scale startups!