Lifeboat Ventures follows the theory of “Compounding of Marginal Gains”, to reduce the risk of the startups through the entire process of startup creation and scaling. We are putting together a set of processes that depend on empirical data and external validation to improve the success ratio of the startups. To facilitate this idea, we will execute the startup process in a Startup Studio (aka Venture Studio/Venture Builder) model. The Startup Studio is one of the more unusual version of the venture funding models, and one of the leading exponents is Rocket Internet.
This model is also known as Venture Studio, Venture Builder or Company Builder model. This model decides on a few ideas to fund, recruits the best entrepreneurs for that idea, provides all background services, acts as a co-founder by participating in both strategic and operational processes. The data shows that the companies are much lower risk for a slightly lower reward – this model does not focus on unicorns. More of the startups are successful as ratio of entrants – and the fund return is not based on a highly risky proposition of a single startup having to return the entire fund. The Lifeboat Ventures studio would create startups by vetting ideas that address clear needs fitting the investment thesis, recruiting the initial team, providing strategic direction, back office support and capital. The comprehensive back office function will be designed to reduce the time commitments on founders’ time by 50% and commensurate costs. This service package will keep founders’ focus on product, customers, and funding, maximally. The back office will include co-working space, UX Design, programming, marketing, tele-sales, accounting services, legal services, recruiting services, human resource management, and counseling. By reducing the risk of startups failing by a substantial percentage, we give a chance for more startups to provide a better overall ROI. The second part of our model is to deeply analyze all risks associated with each phase of the startup process, identify the risks, and reduce them all substantially. In the ideation phase, we would collect a large pool of ideas (100+) based on our understanding of the market that can fit the thesis. We would convene expert panels in these areas and filter the best ideas. We may add more ideas from the experts in that process. A shortlist of ideas (24) would be filtered for consideration. We then recruit entrepreneurs with the right qualities, entrepreneurial interest and suitable domain expertise. We have access to a deep and extensive network of entrepreneurs from the world’s largest pre-seed accelerator – Founder Institute. Existing VC models largely subjectively decide that certain entrepreneurs have what it takes. This assumption is not proven out in the results since 75% of startups fail. We look for some objective data to select entrepreneurs, instead. Founder Institute tests and selects entrepreneurs based on psychometric data. After that they go through an extremely rigorous process as part of the accelerator program.
Once a smaller pool of ideas have been selected, we go through a methodical process of validation of the ideas.
In the Build phase, low code, Platform-as-a-Service (PaaS) technology will reduce software development effort by 60%, and reduce costs of development commensurately. The solution will increase velocity and decrease time-to-market. It will provide competitive advantages by including enterprise-grade globally comprehensive functionality. This will include security & compliance, multi-tenant architecture, parallel processing, internationalization, language translation, data integration/API, workflow, business intelligence document management, electronic signature, etc. As part of the build-out phase, we will validate the entire startup to make sure it is a completely viable firm for execution success, and exit. We will be relying on Pepperdine University’s “Most Fundable Companies” algorithm to validate that our startups are well qualified for the journey ahead. The person who designed the entire algorithm, Jim Casparie, is now an advisor for the fund.In the scaling phase, we will assist the startups on a daily basis as a co-founder to grow the startup. Each startup will be assisted by a customer council made up of C-level executives, corporate development and purchasing management. During this phase, we also assess the progress of the startups by means of comparative KPIs to see that they are scaling as expected. We will also compare them against an external growth index to make sure there is independent verification of their performance and their suitability for M&A. The growth Index is called “Predictive Growth Index” and was designed by Broad Reach Growth to help manage a company to a successful exit. The founding partner of Broad Reach Growth, Andrew Green, is also an advisor to our fund. In addition, they will also have continuous assistance from an M&A advisor giving them guidance towards a successful exit.