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Organizational best practices of company builders – a qualitative study



In this paper we qualitatively explore the phenomenon of company builders – a new form of venture incubation that has only recently been established. The paper distinguishes company builders from other incubation models, analyses their organizational structure and maps their new venture creation process. Based on a multiple case study of nine company builders located in three European start-up hubs, we find that organizational structures of company builders are dependent on organization size. Company builders with less than 50 employees tend to feature functional line organizations, while larger company builders feature project-matrix organizations. In terms of venture creation process, company builders follow a seven step process, which is mapped in terms of inputs, activities and outputs. We discuss the implications of this study for the extant literature and offer directions for future research.
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Rathgeber, Philipp; Gutmann, Tobias; Levasier, Maximilian
Organizational best practices of company
builders – a qualitative study
In this paper we qualitatively explore the phenomenon of company builders a new form of
venture incubation that has only recently been established. The paper distinguishes company
builders from other incubation models, analyses their organizational structure and maps their
new venture creation process. Based on a multiple case study of nine company builders located
in three European start-up hubs, we find that organizational structures of company builders are
dependent on organization size. Company builders with less than 50 employees tend to feature
functional line organizations, while larger company builders feature project-matrix
organizations. In terms of venture creation process, company builders follow a seven step
process, which is mapped in terms of inputs, activities and outputs. We discuss the implications
of this study for the extant literature and offer directions for future research.
1 Introduction
Successfully navigating the venture creation process is a difficult endeavour (Shepherd & Pat-
zelt, 2017). While there is no agreement in scientific literature regarding the chances of success
for start-ups (Yang & Aldrich, 2012), failure rates are typically reported to be in the 40 to 60
percent range within five years of founding (Löfsten, 2016; Eurostat, 2013). Therefore, entre-
preneurial activity is innately characterized by uncertainty and risk (Shane & Venkataraman,
2000). Over the past decades, research institutes, corporates and investors alike have devel-
oped different forms of incubation models to reduce this risk (Pauwels et al., 2016). Today, in-
cubators of all types are an integral part of the entrepeneurship ecosystem, with more than
1,250 incubators existent in the United States and about 300 in Germany (Mian, Lamine, &
Fayolle, 2016).
Among the newest generation of incubation models are so-called company builders (also re-
ferred to as start-up studios or venture builders), which try to reduce risk by following a rigorous
new venture creation process and inserting a stronger influence over the venture development
through substantial equity holdings (Köhler & Baumann, 2015). Recent headlines in popular
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entrepreneurship media provide evidence of the growing importance of the company builder
model. In 2013, the leading start-up news site TechCrunch reported on the “rise of company
builders” (Rao, 2013, p.1) and its counterpart VentureBeat predicted in 2015, that “we’re going
to see a lot more venture-building organizations emerging” (Diallo, 2015, p.1).
While the literature on incubators is quite established (Mian et al., 2016; Barbero et al., 2014)
and the research on accelerators is steadily increasing (Pauwels et al., 2016), so far only the
practice-oriented literature has started to comprehensively cover the topic of company build-
ers. To our best knowledge, the so far only scientific study on the topic is a single case study of
Köhler & Baumann (2016). At the same time, the continuously increasing economic success of
players like Rocket Internet, Team Europe and Allianz X calls for a more fundamental analysis
and a better understanding of this emergent form of organization, which seems to have a last-
ing imprint on the entrepreneurship landscape. Moreover, extant incubation research has re-
peatedly called for taking into account the heterogeneity of incubation models and understand-
ing its implications (cf. Barbero et al., 2014; Pauwels et al., 2016). Finally, Hausberg & Korreck
(2017) recently pointed out the lack of scientific understanding of the company builder model
and Köhler & Baumann (2016) noted that “fruitful avenues [...] exist for more fine-grained work
on single organizational dimensions and processes [of company builders]“ (p. 31).
In our study, we take up these recent calls for research and aim to explore the following re-
search questions to make a substantial contribution to this new field of research:
What are the defining elements of company builders and how can company builders be dis-
tinguished from other incubation models (in particular traditional incubators and accelera-
How can the organizational structures of company builders be defined?
Which new venture creation process do company builders follow?
Given that no comprehensive understanding of the company builder phenomenon exists so far,
field work and grounded theory “is more likely to generate novel and accurate insights into the
phenomenon under study than reliance on either past research or office-bound thought exper-
iments” (Brown & Eisenhardt, 1997, p. 2). Thus, our study follows a multiple-case study ap-
proach, drawing on nine semi-structured interviews with the managing directors and/or deci-
sion-makers of nine company builders located in the European start-up hubs Munich (Germa-
ny), Berlin (Germany) and Budapest (Hungary).
Our study yields several new insights. First, we contribute to the emergent field of research on
company builders (cf. Köhler & Baumann, 2016) by providing a definition of this incubation form
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and distinguishing it from other forms of incubation. Second, we contribute to the incubation
literature as we are the first to describe the organizational structures of company builders.
More specifically, we find that company builders with less than 50 employees feature functional
organizations, while larger company builders have matrix structures. This is important as organi-
zational characteristics materially shape the business undertaking and have a substantial impact
on performance (Gulati et al., 2012; Dalton et al., 1980). Third, we make a contribution to the
literature on the venture creation process (Bhave, 1994; Vogel, In Press). So far, research has
focused on understanding the process steps followed by entrepreneurs from opportunity
recognition to exploitation. However, the process flows in an incubation setting have not been
studied so far. We fill this gap by laying out the venture creation process followed by ventures in
different company builder settings and derive a generic venture creation process for this new
form of entrepreneurial incubation.
2 Theoretical context
2.1 Incubation models
An incubator is commonly defined as an institution that supports start-ups in manifold ways to
increase their chance of survival and accelerate their economic development (Pauwels et al.,
2016). The type of support that start-ups receive depends on the respective incubation model
(Barbero et al., 2014) and comprises access to capital (Aernoudt, 2004), networks (Bergek &
Norrman, 2008), know-how (Cohen & Hochberg, 2015), and office space (Vanderstraeten &
Matthyssens, 2012). Since the foundation of the first US-incubators in the 1950s (Mian et al.,
2016) the original incubation approach has substantially evolved and developed into distinctly
different operating models (Bruneel et al., 2012; Grimaldi & Grandi, 2005).
While a broad range of typologies can be found in the literature (cf. Barbero et al., 2014; Phan
et al., 2005), the predominant incubation models can be separated into three categories: (i)
traditional incubators, (ii) accelerators, and (iii) company builders (see also Exhibit 1). This dis-
tinction is necessary as “different [types of] incubators achieve different results“ (Barbero et al.,
2014, p. 152). We provide a short description of the different typologies and a short summary of
the respective state of the literature in the following sub-sections.
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Exhibit 1: Typologies of incubators
2.1.1 Traditional Incubators
According to the National Business Incubation Association (NBIA), a business incubator is a cata-
lyst tool for economic development which provides entrepreneurs with a range of business re-
sources and services (NBIA, 2007). Incubators have been in existence since the 1950s, when
Stanford University established its Stanford Research Park and laid the ground-work for a model
that has been replicated globally (Mian et al., 2016). As a result, a substantial body of research
has been published on incubators over the past decades.
Existing research has mainly revolved around classifying the various incubator models around
the globe (Von Zedwitz & Grimaldi, 2006; Etzkowitz, 2004; Grimaldi & Grandi, 2005) and as-
sessing their performance (Rothaermel & Thursby, 2005; Colombo & Delmastro, 2002; Mian,
1997). Only little attention has been given to incubators’ organizational structures and their
interaction with start-up firms during the venture creation process. The only studies that have
taken a procedural perspective on incubation have been conducted by Bergek & Normann
(2008), Rubin (2015), and Gassmann & Becker (2006). Bergek & Normann (2008) illustrated a
structural best-practice framework for incubators in terms of selecting incubatees, providing the
right services and engaging in an effective form of collaboration. Rubin (2015) reported on the
differences in information flows and knowledge sharing among incubators from Israel and incu-
bators from Australia. Gassmann & Becker (2006) qualitatively explored tangible and intangible
ressource flows in the corporate incubator setting.
Traditional incubators Accelerators Company builders
Existing since
A catalyst tool for
economic development
which provides
entrepreneurs with a
range of business
resources and services
(NBIA, 2007)
Stanford Research Park
WHU Incubator
Organization, which
aims to accelerate new
venture creation by
providing education
and mentoring to
cohorts of ventures
during a limited time
(Cohen & Hochberg,
Y Combinator
No scholarly definition
Rocket Internet
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2.1.2 Accelerators
Ever since the foundation of San Francisco-based Y Combinator in 2005, accelerators have been
proliferating (Cohen & Hochberg, 2014). Experts estimate that today more than 3,000 accelera-
tors exist globally (Cohen, 2013; Cohen & Hochberg, 2014). While there is no academic consen-
sus on a definition of accelerators (Isabelle, 2013), characterizations of accelerators commonly
encompass the following elements: a 3-6 months program for a cohort of early-stage start-ups
that includes mentoring and the opportunity to publicly present their ideas to investors in a
public pitch event or demo-day (Pauwels et al., 2016; Cohen & Hochberg, 2014; Hochberg,
2016; Wise & Valliere, 2014). Isabelle (2013) also points out that accelerators are typically for-
profit organizations, whereas traditional incubators tend to be non-profit.
In contrast to traditional incubators, accelerators explicitly focus on accelerating the growth of
firms (Isabelle, 2013). Moreover, they are not mainly designed to provide physical resources or
office support services over a long period of time, but they usually offer pre-seed investment in
exchange for small equity stakes and are well-connected with business angels and small-scale
individual investors (Pauwels, 2016; Radojevich-Kelly & Hoffmann, 2012; Miller & Bound, 2011).
2.1.3 Company builders
The company builder model has only been established a few years ago and has so far received
only limited scientific attention. In the practice-oriented literature, the term company builder is
not used consistently. Other terms which are typically used synonymously are start-up studio
(Bliemel et al., 2013), venture builder (Diallo, 2015), or start-up factory (Köhler & Baumann,
2016). This diversity is also reflected in the attempts to define this new form of organization
(Köhler & Baumann, 2016). Based on the lack of scientific definitions, we put forward a defini-
A company builder is a type of organization, that launches new ventures based on a sys-
tematic venture creation process. Company builders independently drive the process
from idea generation, the hiring of the co-founders to early fundraising. In return, com-
pany builders control a substantial part of the new venture’s equity, thereby exerting
significant influence over the new venture development way beyond the initiation
From prior academic research we have insights on the governance relationship between the
company builder organization and its associated start-ups. Köhler & Baumann (2016) studied
the renowned company builder Rocket Internet in a single case study to find that company
builders seem to remarkably differ from traditional incubators in terms of ownership, decision-
6 ISM RJ | Heft 1·2017 | Rathgeber/Gutmann/Levasier | S. 1-26
making, incentives and collaboration. The authors report that company builders hold substan-
tially higher equity stakes, therefore exerting more influence over decision-making, in some
cases even centrally orchestrating the entire development of the venture. Additionally, compa-
ny builders grant substantially less equity to founders but tend to pay them salaries. Lastly,
company builders collaborate with their start-ups open-endedly thus differing from the time-
restricted incubator model (Köhler & Baumann, 2016).
Furthermore, non-academic studies show that company builders are studio-like holding opera-
tions which develop multiple startups in parallel leveraging reusable infrastructure and cross-
disciplinary teams (Mocker & Murphy, 2014). Thus they are essentially organizations that build
new companies using in-house resources following a clearly defined blueprint process (Diallo,
2015; Szigeti 2015).
While initial groundwork has been laid with respect to company builders, no comprehensive
understanding of this phenomenon exists so far. In particular the understanding of the organiza-
tional structures employed by company builders is fairly limited to date. Given the importance
of organizational structure for essential corporate outcomes such as effectiveness and success
(e.g. Zheng et al., 2010), we intend to fill this gap with our research.
2.2 Venture creation process
The creation of new ventures is fundamental for economic growth, innovation and job creation
(Gartner, 1994). While entrepreneurship research has so far made substantial inroads towards
understanding entrepreneurial cognition (e.g., Gruber, Macmillan, & Thompson, 2013; Keh, Foo,
& Lim, 2002), as well as the antecedants (Krueger, 2007; McMullen & Shepherd, 2006) and out-
comes of entrepreneurial action (Foss et al., 2007), the understanding of venture creation from
a process perspective is still fairly limited (Shepherd & Patzelt, 2017).
This aforementioned lack of understanding is particularly surprising given the early works of
Churchill & Lewis (1983) and Bhave (1994) on the venture creation process and the profound
literature in the adjacent field of creativity and innovation management (Vogel, In Press). The
latter maps the evolution from idea generation via the stage-gate concept refinement process
to the market launch (Jolly, 1997).
What we know so far is that there are different triggers that can stimulate the identification of
the opportunity (Alvarez et al., 2013), as well as different paths to develop the concept and ex-
ploit the opportunity (Bhave, 1994; McMullen & Shepherd, 2006). Vogel (In Press) has recently
extended this field of research by providing a conceptual framework which clearly describes the
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phases of the new venture creation process: (i) trigger, (ii) idea-generation, (iii) concept incuba-
tion, (iv) concept evaluation and ultimately (v) exploitation.
Moreover, practice-oriented literature has also provided important concepts. Blank (2013) has
conceptualized a two-phase customer development process: (i) the search for a business model
which is based on a fundamental customer understanding and (ii) the execution of the business
model. In addition, Eric Ries (2011) has described an iterative 3-step venture creation process
along the phases (i) build, (ii) measure, and (iii) learn. This process is characterized by early pro-
totypes and systematic customer feedback followed by iterative product and business devel-
opment cycles that allow start-ups to generate a viable product and business model in a short
time frame.
At the same time, the current theorizing around the venture creation process is limited. Shep-
herd & Patzelt (2017) therefore call for a better understanding of the early stages of the entre-
preneurial process, urging scholars to “investigating the numerous activities that make up en-
trepreneurial action because it will provide the foundation for theorizing about and testing mi-
cro-foundation models of entrepreneurial action” (p. 29-30). In addition, to the best knowledge
of the authors, no research has been carried out so far analyzing the venture creation process in
the incubator or company builder-setting, which is a clear blind spot of current entrepreneur-
ship research.
3 Data and methods
3.1 Research design
Given the nascent state of research on company builders, we grounded our theorizing in data
and employed a multiple case study approach. Multiple case study research is most appropriate
if the phenomenon of study is more or less unknown, or if no comprehensive theory has been
established (Edmondson & McManus, 2007). Based on Eisenhardt & Graebner (2007), “a major
reason for the popularity and relevance of theory building from case studies is that it is one of
the best (if not the best) of the bridges from rich qualitative evidence to mainstream deductive
research” (p. 25).
For our research we used a theoretical sampling approach (Miles & Huberman, 1994). We start-
ed our sampling by only contacting company builders that met our strict definition. This ap-
proach is consistent with other incubator and accelerator studies (cf. Pauwels et al., 2016). We
defined company builders as organizations with the following characteristics: (1) The company
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builder independently drives the new venture creation process from idea generation to early
fundraising; (2) Co-founders are hired by the company builder’s management team; (3) The
company builder controls a substantial part of the new venture’s equity; (4) The company build-
er supports the venture without time-restrictions. Applying above criteria, we identified 34 Eu-
ropean company builders. Of the 34 company builders contacted, nine ultimately agreed to
3.2 Data collection
Information on organizational structures and organizational processes are typically not publicly
available and only rarely documented in the required depth for our analyses purposes. There-
fore, we used two main data sources. Our primary data source was semi-structured interviews
with the managing directors of the nine company builders. In one case (Rocket Internet) we
were only able to get access to the founder of a portfolio company and thus were only able to
get an outside-in perspective. We made use of an interview guide with 13 open-ended ques-
tions to explore topics such as the company builder’s history, organizational structure, venture
creation process, financing structure and success criteria (see Appendix 1). We initially asked
broadly framed questions related to the topic before following up with several deep-dive ques-
tions to capture all relevant aspects. Interviews which lasted between 35 and 95 minutes were
recorded and transcribed comprising in total 55 pages of written text. Our secondary data
source were publicly available articles on the company builders as well as organizational charts
and process descriptions that were obtained from the research subjects for analysis purposes.
We made use of the secondary data sources to triangulate our research findings and to com-
plement insights from the interviews with more granular process descriptions, which we re-
ceived from some research subjects. The use of secondary sources is recommended for qualita-
tive research undertakings to increase the validity and reliability of the research (Golafshani,
2003). Table 1 provides an overview of the analyzed company builders.
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Table 1: Overview of the sample
3.3 Data analysis
For our data analysis we followed the qualitative content analysis methodology devised by
Mayring (2015). We coded the interviews according to an inductive coding strategy (Corbin &
Strauss, 2008). An initial coding scheme based on constructs relevant to our research questions
was constantly revised throughout the iterative coding process (cf. Miles & Huberman, 1994).
Ultimately, our coding system comprised 6 categories and 23 sub-categories (see Appendix 2).
For our analysis purposes we worked with a comprehensive table that contained interview
quotes for each of the 23 sub-categories and for each of the cases analyzed. After analyzing the
cases one-by-one in a single case analysis (Yin, 2013), we proceeded with a cross-case compari-
son between the nine incubators (Eisenhardt, 1989).
For the mapping and comparison of the venture creation processes we followed a structured
analysis procedure, which contained six steps. Steps 1-3 provided the macro-analysis, while
steps 4-6 provided the micro-analysis of the venture creation process.
1. The individual venture-creation processes of the respective company builders were
mapped on a high aggregation level. The cases were presented horizontally for further
2. The process steps of the different cases which fit together thematically were ar-
ranged horizontally. We made sure that the logical arrangement and sequence of the
process steps remained intact.
of interview partner
Rocket Internet
of a portfolio company
of Company Building
Allianz X
Startup Studio
Venture Stars
Novel Businesses
10 ISM RJ | Heft 1·2017 | Rathgeber/Gutmann/Levasier | S. 1-26
3. We then developed the overarching process phases which comprehensively and logi-
cally described similar process steps.
4. To add more granularity to our analysis, all existing process-relevant data regarding
the process steps obtained from the interviews were compiled. This included mile-
stones, input, activities, tasks and output.
5. We then assigned this data to the relevant process steps.
6. Finally, an appropriate visualization method was chosen, with which the theoretical
system’s micro-level developed in steps 4 and 5 could be visualized in conjunction with
the macro-level developed in steps 1 to 3.
4 Findings
4.1 Organizational structure
In terms of organizational structure our data revealed that company builders feature either
functional or matrix organizations. More specifically, four out of the nine cases analyzed fea-
tured a matrix organization, combining a functional and a [venture] project organization. The
other five cases featured functional organizations (see also Table 2). In functional organizations,
departments are grouped by function (e.g. marketing, finance) and each employee reports to
his/her functional superior (Daft et al., 2014). Matrix organizations are “a mixed form in which
traditional hierarchy is overlaid by some form of lateral authority, influence, or communication”
(Kuprenas, 2003, p.51).
Table 2: Organizational structures
Rocket Internet
~ 300
Matrix Organization
~ 300
Matrix Organization
Allianz X
~ 60
Matrix Organization
~ 50
Functional Organization
Functional Organization
Venture Stars
Functional Organization
Functional Organization
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The differentiated structural approaches are not related to different organizational strategies
pursued but are a mere matter of organizational size. Company builders with less than 50 em-
ployees do not have the resources to provide a breadth of services, offer depth of specializa-
tions, and dedicated project team staffing. The larger company builders (with more than 50
employees) on the other hand, temporarily allocate dedicated resources with specialist back-
grounds to the venture projects.
Exhibits 2 and 3 show two exemplary organizational structures one of a company builder with
a functional organization (Drukka Startup Studio) and one with a matrix organization (Rocket
Exhibit 2: Organizational structure of Drukka Startup Studio (Functional organization)
Management Start-ups
Start-up 1
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Exhibit 3: Organizational structure of Rocket Internet (Matrix organization)
We also find that regardless of company size, company builders tend not to be hierarchical.
While hierarchies formally exist, they are interpreted rather loosely, as a Managing Director of
the company builder Venture Stars reports: “[...] our organizational structure is very flat. [...] We
don’t even have departments or teams, we only have functional areas”. Similarly, the CEO of
WATTx notes that “you will not find a lot of structure [in our company builder] […] Of course
you will find some structure, but structure does not mean hierarchy”.
All company builders in our sample provide office space, financing, mentoring and coaching
services and provide administrative and operational support. The extensiveness and breadth of
support provided by the company builder varies greatly, due to differences in size but also dif-
ferences in strategy. For example, company builder WATTx stresses the importance of not
providing too much support: “We generally support our teams, but for a start-up there is noth-
ing more important than standing on one’s own feet and operating in a self-sufficient manner.”
This stands in contrast to the approach by Rheingau Founders, who try to provide a comprehen-
sive support package for its ventures: “We support through our network, know-how and experi-
ence. We have a clear mentoring function. But we also offer co-working spaces and all start-ups
have access to central assistance services.
Startup 1
Startup 2
Startup X
Product Marketing BI CRM PaymentSecurity Logistics Finance &
Board of Directors
Regional Group
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4.2 Venture creation process
Based on the results of our empirical investigation, we mapped the venture creation processes
of the company builders. We then analyzed each empirically-collected process on a standalone
basis (within-case analysis), before we proceeded with a cross-case comparison of the cases and
a derivation of an aggregated venture creation process. Since the depths of the collected data
differed substantially, we were only able to analyze six of the nine cases in our within-case and
cross-case analyses.
Each analyzed company builder has established its own company building process, yet with var-
ying degrees of process orientation. While some company builders have developed a formal
process description (e.g., Mantro), others follow a rather informal process based on experience
and business acumen (e.g., Venture Stars). These two extreme cases one very formal, one very
informal will be presented in the following.
Company builder Mantro has developed a “digital innovation process” which consists of 5 phas-
es (see also Exhibit 4). Based on an initial business idea, prototypes are built in order to conduct
a first customer validation (Ideation phase). Prototypes are then iteratively tested and opti-
mized to obtain a validated product concept (Validation phase). During the incubation phase,
the team develops a first product version with key features and starts operating as an inde-
pendent entity. The product is then optimized for the mass market (Product Nurture phase)
before a fully operational company is set up (Scale phase).
In contrast, company builder Venture Stars follows a less formal process. As the Managing Di-
rector of Venture Stars puts it: “We are not standardized and process-oriented. This is why our
co-founders also have to think and act entrepreneurial.” At the same time, Venture Stars fol-
lows a sequential 6-step process initiated by conducting a market screening of different indus-
tries based on a data-driven scoring model (Market Research phase) (see also Exhibit 4). Promis-
ing industries are further analyzed in a deep-dive phase. Validating potential target markets is
done by building minimum viable products, collecting customer feedback and calculating busi-
ness cases (Validation phase). Thereafter, the founder team is recruited and the product is
launched (Going Live phase). Then the new company is established and external funding is se-
cured (Setup Phase). Finally, the business starts its operations and gains traction and scale (Trac-
tion phase).
We then extended our case-specific findings by aggregating the different venture creation pro-
cesses into one combined process that unitedly describes the procedural approach of the com-
pany builders analyzed. In the following, we will describe this process in detail.
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Optimization GrowthSolution
ScaleProduct NurtureIncubationValidationIdeation
Business Set-Up Based on Real Data
First Salable
Products (MVP)
Prototyping of
Understand Customer Needs
GrowthSolution ValidationProblem Validation
Allianz X
TractionSetupValidationDeep DiveMarket Research Going
Venture Stars
Focus and
MVP Market Start
User Exploration &
Market & Client
Setup & Kickoff Prototype Test &
Validation Roll Out
SNB Startup
Focal Topic
Generation Conception
Scouting /
Exhibit 4: Venture creation processes of the sample
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Exhibit 5: Aggregated venture creation process of the sample
Market ExplorationProblem Identification Solution ValidationProblem Validation
Focus and Framework
Kick Off
Business venture Goals and focal topic Hypotheses and pain points Business idea Problem description
Quality Gate Foundation
Set up company builder team
Generate focal topic and
strategic focus of company
Define goals
Identify pain points of
potential customers, suppliers
and partners
Draw user empathy map
Conduct interviews
Formulate hypotheses for
user-centric ideas and
business models
Analyze target group
Conduct user-centric
interviews and tests
Develop personas
Identify “jobs to be done”
Map the customer journey
Preliminarily test potential
solutions and select attractive
Conduct business modellng
Set up qualitative and
quantitative evaluations and
Develop value proposition
Define design and mock-ups
Build Minimum Viable Product
(MVP) with first key features
Conduct product-market fit
analysis based on customer
Test and validate MVP with
early adopters and partners in
a data-driven way
Improve MVP iteratively
Calculate Business case
Validate Business Model
Canvas iteratively
Define KPIs
Test sales channels with real
Acquire key partners
Initiate financing round
Goals defined
Focal topics and strategy
set up
Business model hypotheses
Pain points identified and
ideas collected
Problem description of
different problem areas
roughly drafted
Deep market understanding
Business ideas
Founding team recruited
Business idea validated
Detailed problem description
Validated product concept
and business model
First real users
Feedback from early
adopters and partners
Product-market fit
Signed LOI with key partners
Market-ready product
Market-ready product Product and company
Found new company
Compose teams
Optimize product for mass
Conceptualize go-to-market
Aspire fast and KPI-driven
market rollout
Sign binding contracts with
key partners
Set up and optimize sales
Start marketing activities
Advance continuous product
development and
Increase sales
Secure financing
Intensify marketing and sales
Establish organizational
Professionalize sales and
marketing processes
Build efficient infrastructure
and company processes
Scale business
Enlarge team
Achieve growth
Sales contracts with
Validated sales channels
Products on the market and
ready to scale
New, independent company
Financing secured
Product on sale
Professionalized marketing
and sales processes
Fully functional,
independent company
Call potential customers
Develop deep understanding
of target market
Understand supplier,
customers and competitors
Analyze analogous and
adjacent markets
Evaluate hypothethic al
business model ideas in a
data-driven way
Seek, evaluate, challenge and
select potential entrepreneurs
in residence
Recruit founding team
Entrepreneur in Residence
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The aggregated venture creation process of our sample can be divided into seven steps (see also
Exhibit 5):
1. First, the business project is aligned with the focus of the company builder and the
framework conditions are defined. Trends are analyzed and the objectives of the ven-
ture are defined.
2. After a kick-off event, potential customer problems are identified. Business model hy-
potheses are developed in a user-centered manner, various pain points of potential cus-
tomers are identified, and ideas which could be implemented as a new business idea are
collected. For all problem areas problem descriptions are documented.
Before the hypotheses and problem areas are analyzed more deeply, they are reviewed within a
quality gate, in which the following criteria must be answered positively:
Proximity: Is the business idea close enough to the company builder’s strategy?
Feasibility: Is the business idea feasible within the company builder context?
(technology, resources, know-how, market access)
Significance: Does the business idea address unresolved and significant customer
Potential: Is the addressable market large enough to start a new company?
3. After the hypotheses and problem areas have passed through the quality gate, the mar-
ket exploration phase follows. The team develops a deep understanding of the market
(i.e. customers, suppliers, competitors) as well as adjacent markets. Furthermore, the
first hypothetical business ideas are developed and evaluated in a data-driven way. In
addition, the founding team is recruited.
4. In the fourth step, the problem underlying the developed business idea is validated and
described in detail. This requires a detailed qualitative as well as quantitative analysis of
the target groups. This is supported by various design thinking methods.
5. Thereafter, a suitable solution is validated. Both the product concept and business
model hypotheses need to be validated in conjunction with convincing first users and
gathering feedback from early adopters. After this phase the product-market fit must be
achieved and a market-ready product should be available.
Problem- and solution-validation are worked out in an iterative process which is compiled step
by step with a data-driven lean startup cycle according to Ries (2011).
ISM RJ | Heft 1·2017 | Rathgeber/Gutmann/Levasier | S. 1-26 17
6. After the market-ready product is developed, it is being optimized and a new, inde-
pendent company is founded. In addition, financing is secured, contracts with custom-
ers are closed and sales channels validated, so that scaling can begin.
7. During the growth phase the aim is to build a fully functional and independent compa-
ny. To do so, structures and processes are put in place, the teams are enlarged and the
business is scaled.
Once the founder team has been recruited, its responsibility is increasing over time. The com-
pany builder itself gradually draws back from the decision-making and operations of the portfo-
lio company. Collaboration only happens when needed but still there is an ongoing mentoring
and coaching relationship. Additionally, financial controlling is conducted by the company build-
er. In most cases, the company builder is in the lead of the upcoming financing rounds as it typi-
cally has better access to investors.
5 Discussion and implications
5.1 Theoretical implications
We motivated this study by the limited theorizing and empirical work on the subject of compa-
ny builders. We discuss our theoretical contributions to the literature on company builders,
incubation models and the venture creation process.
Existing research on company builders primarily goes back to Köhler & Baumann (2016). In their
research they compare the governance structure of company builders and traditional incubators
and find that company builders operate a more centralized operating model. We extend the
research of Köhler & Baumann (2016) by providing a definition of this form of incubation and
distinguishing it from other forms of incubation. Based on our cases studied, company builders
feature the following characteristics: (i) they follow a defined venture creation process, (ii) in-
dependently drive the process from idea generation to early fundraising with no or limited in-
volvement of the founders, (iii) control a substantial equity stake, and thereby (iv) exert a sub-
stantial influence over the new venture’s development way beyond the initiation phase. Given
the confusion which exists in the scientific debate on incubation models (Hausberg & Korreck,
2017) we hope this will increase the clarity going forward.
We also contribute to the research on incubation. While the incubation literature is relatively
established, only few studies have so far focused on organizational topics. We extend the find-
ings of Bergek & Normann (2008), Rubin (2015) and Gassmann & Becker (2006), who have fo-
18 ISM RJ | Heft 1·2017 | Rathgeber/Gutmann/Levasier | S. 1-26
cused on incubatee selection, information sharing and ressource flows, by taking a structural
perspective. Our finding that company builders with less than 50 employees feature functional
organizations, while larger company builders follow a matrix structure is important as organiza-
tional characteristics materially shape the business undertaking and have a substantial impact
on performance (Gulati et al., 2012; Dalton et al., 1980). Therefore, we hope that our descrip-
tion of existing organizational structures in this incubation model will prove elementary for fu-
ture studies on the topic.
Finally, we contribute to the literature on the venture creation process (Bhave, 1994; Vogel, In
Press). So far, research has focused on understanding the process steps followed by entrepre-
neurs from opportunity recognition to exploitation. However, the process flows in an incubation
setting have not been studied so far. We fill this gap by laying out the venture creation process
followed by ventures in different company builder settings and derive a generic venture crea-
tion process for this new form of entrepreneurship. Given that institutional contexts matter
greatly in the unfolding of new venture creation (Auschra, Braun & Schmidt, 2016), our concep-
tualization may be helpful to both researchers and practicioners involved in company builder
5.2 Practical implications
Our study also has implications for practitioners. Foremost, our findings have implications for
the top management of company builders or top managers of corporates who want to increase
corporate innovation. Our study provides a 7-step venture creation process which can be used
as a blueprint for rigorously managing the new venture creation process. While some start-ups
in our study (e.g. Venture Stars) stressed the importance of flexibility regarding the adherence
to the venture creation process, all interviewees agreed upon the importance of an established
process, which serves as a guiding light in the often tumultuous days of early-stage start-ups.
Closely following this best-practice process should help company builders to increase the effec-
tiveness of their venture output and corporate managers to tap new sources of innovation.
In addition, our findings also provide guidance for top managers of company builders in terms of
organizational structure. Our study shows that below a company builder size of 50 employees a
functional line organization is sensible, while above this threshold a project-matrix setup be-
comes more effective. Given the lack of research on this topic and the difficulty to compare
organizational structures of company builders to other types of organization, this insight should
help leaders of company builders to make the right structural choices.
ISM RJ | Heft 1·2017 | Rathgeber/Gutmann/Levasier | S. 1-26 19
5.3 Limitations, future research, and conclusions
As all studies, this study is not without limitations. First, this paper is based on company builders
located in the European start-up hubs Munich, Berlin and Budapest. These regions might not be
representative of Europe. As geographic context might have an influence on the organizational
designs and venture creation processes pursued (Levie et al., 2014), future research should test
our findings in other parts of the world. Second, as for all case-based research, the generalizabil-
ity of our insights are limited by the small sample size. Future studies should pursue quantitative
approaches to test our findings.
This study also provides several avenues for future research in order to further deepen our un-
derstanding of company builders. For one, researchers could build on the emerging literature of
equity distribution (Breugst et al., 2015) to determine optimal equity splits between company
builder and founder team. Further, research can incorporate the literature on entrepreneurial
team composition (Knockaert et al., 2011; Ensley & Hmieleski, 2005) to find out if and how ven-
ture teams of company builders should be configured differently to set out for success. In addi-
tion, the vast literature on founder personality (De Jong et al., 2013) can be leveraged to study
psychological properties of co-founders in the company builder context, given the different
incentive schemes and diminished risk profile. Finally, established research on incubator success
(Rothaermel & Thursby, 2005; Colombo & Delmastro, 2002; Mian, 1997) can be extended to this
new incubation variant in order to understand similarities and differences of company builders.
To conclude, company builders are an increasingly important form of incubation. At the same
time, research has so far neglected this emerging field, and failed to provide insight into the
structure and workings of company builders. Against this backdrop, we generated important
insights with this study that have novel implications for the incubation literature at large and
the research on company builders in particular. We hope that our findings will provide the way
for future research that will further enhance our understanding on this important phenomenon.
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Appendix 1: Interview guide
1. Please describe your company as well as the history of your company.
2. What is your role/function in the company?
3. How do you define the term company builder“?
& general
4. Please describe the size and organizational structure of the company.
5. What different departments and teams exist in your company?
6. Where and how are decisions taken in your company?
7. Are resources shared between company builder and portfolio companies?
8. Please walk me through the process from the initial idea until the foundation of the portfolio company.
a. What are the different process steps?
b. What are the activities in the various steps?
c. Which persons are involved?
d. What is the timing/sequencing of the activities?
e. Are activities aligned with resources?
f. Which methods are used?
g. When and how are decisions taken?
h. Are there clearly defined processes, milestones and/or quality gates?
i. How is the team staffed and what are criteria for the team‘s composition?
9. What happens post-foundation?
a. How do you collaborate and allocate resources after the foundation of the company?
b. What are the initial process steps post-foundation?
10. How is your company builder financed?
11. How would your describe the business model?
12. Can you fill me in on your compensation and incentive model?
13. How does the equity distribution look like for a new venture?
Interview questions
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Appendix 2: Coding system
1. Year of foundation
2. Number of employees
3. Important milestones
4. Function of the interview partner
5. Definition of company builder
6. Organizational structure
7. Activities and teams
8. Decision-making (corporate)
9. Ressource allocation (corporate)
10. New venture creation process (from idea to foundation)
11. Process steps
12. Activities per process step
13. Spatial organization of process
14. Methods used
15. Decision-making (NVC process)
16. Milestones / quality gates
Staffing 17. Staffing / team composition
18. Resource allocation (post foundation)
19. Process steps post foundation
Financing &
20. Financing of company builder
21. Description of business model
22. Compensation and incentive system
23. Equity distribution
Categories Sub-categories
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Tobias Gutmann studied Electrical Engineering and Information Technology in a dual
Bachelor studies program at the Munich University of Applied Sciences in cooperation
with Siemens. Parallel to working as a business developer and management consultant
for the CEO of Siemens Mobility Germany, Tobias completed a Masters in International
Management at the International School of Management. Currently at next47 the
recently established venture arm of Siemens Tobias is responsible for the technology
transfer process that includes the identification of a technology, prototype development,
and subsequent successful integration into a Siemens business unit. Using several incu-
bation models and innovative technologies, Tobias is building new products, business
models, and partnerships for Siemens. Furthermore, he is the CEO and co-founder of the
company builder Salmano, where he builds digital ventures and helps both corporates
and SMEs tackling the digital transformation.
Prof. Dr. Maximilian Levasier studied Business Administration at Ludwig-Maximilians-
University Munich (LMU), and completed a Master of Law in Taxation (LL.M.) at Westfae-
lische Wilhelms-University in Muenster as well as a Master of Business Research (MBR)
at LMU Munich. Maximilian earned his doctor’s degree from LMU Munich in 2010 paral-
lel to his work assignments where he gained extensive practical experience in consultan-
cy, tax accountancy and family office, amongst others at Ernst & Young. Maximilian is co-
founder and managing partner of Bamboo Ventures GmbH, a venture capital boutiques
specialized in early stage investments in high technology companies. Since summer term
2013 he is a professor at ISM Munich and is Program Director of B.Sc Finance and Man-
Prof. Dr. Philipp Rathgeber studied International Business at the European School of
Business (ESB) Reutlingen and Northeastern University Boston. From 2008-2015 he
worked as a strategy consultant for McKinsey & Company’s Fashion and Luxury Practice.
Philipp received his PhD in Entrepreneurship from the Technical University Munich (su-
pervisor: Prof. Dr. Dr. Patzelt). Since the Fall semester 2015/16 he teaches at the Interna-
tional School of Management. In addition he is an external advisor for McKinsey & Com-
pany and an active business angel.
... As a result, the model attracts attention from founders, investors as well as established companies (Alhokail et al. 2019). Prior research addresses CBs from an incubation (Kreusel et al. 2018) or a corporate venturing perspective (Gutmann 2019) resulting in initial explanation attempts regarding their organizational designs (Rathgeber et al. 2017) and governance structures (Köhler and Baumann 2015). However, current literature does not exclusively address the phenomenon and its different types and unique characteristics. ...
... Thus, returning back to the value-adding intervention system of Schwartz (2013), we can differentiate between tangible (e.g., office space) and intangible (e.g., access to financing) services, which are referred to as fundamental baseline and growth-driving forces. These services comprise the essential elements of traditional business incubators that seek to catalyze economic development through the support of young entrepreneurs (Rathgeber et al. 2017). This is in contrast to accelerators, a new for-profit incubation model that focuses on accelerating the growth of already existing, and mainly ICT-related startups (Hausberg and Korreck 2020). ...
... After reviewing the respective literature streams and several definitions attempts of company building and synonymously used terms in both practice and science (e.g., Alhokail et al. 2019 andRathgeber et al. 2017), we derived a working definition. In order to offer a broad definition, we argue that company building depicts the umbrella term for all these related terms, i.e., start-up studio, start-up factory, corporate/independent CBs, and venture builder. ...
Conference Paper
New venture creation is at the core of entrepreneurship and regarded as the source of innovations and new employment. However, despite the potential that digitization bears for innovation and entrepreneurship, the failure rate of start-ups is still very high. In this context, digital company builders (DCBs) are becoming increasingly important as a new form of entrepreneurial support. Based on a multiple case study with ten DCBs we iteratively developed a taxonomy consisting of 13 dimensions, which describe how such organizations provide what kind of support to whom. Based on this taxonomy, we further grouped the cases into four main types of digital company building. These results may provide researchers a tool to systematically compare different entrepreneurial support systems, help both entrepreneurs and incumbents decide which support system is best suited to their individual needs, and furthermore be useful to the owners of DCBs themselves in their strategic positioning.
... Venture builder research, on the other hand, placing this phenomenon among incubators (Köhler and Baumann, 2016;Scheuplein and Kahl, 2017;Rathgeber et al., 2017;Schmidt et al., 2017;Baumann et al., 2018;Peter et al., 2018;Gutmann, 2019;Alvarenga et al., 2019), does therefore not fully align with the research on incubation and acceleration. Rathgeber et al. (2017) state that few signs of addressing the venture builder phenomenon in research is available. ...
... Venture builder research, on the other hand, placing this phenomenon among incubators (Köhler and Baumann, 2016;Scheuplein and Kahl, 2017;Rathgeber et al., 2017;Schmidt et al., 2017;Baumann et al., 2018;Peter et al., 2018;Gutmann, 2019;Alvarenga et al., 2019), does therefore not fully align with the research on incubation and acceleration. Rathgeber et al. (2017) state that few signs of addressing the venture builder phenomenon in research is available. Scholars present differences between venture builders, incubators, and accelerators in i) the ideation process, ii) team formation, iii) leadership commitment, iv) duration, v) ownership, vi) use of internal resources, and vii) the venture creation process itself (Köhler and Baumann, 2016;Sheuplein and Kahl, 2017;Rathgeber et al., 2017;Alvarenga et al., 2019). ...
... Rathgeber et al. (2017) state that few signs of addressing the venture builder phenomenon in research is available. Scholars present differences between venture builders, incubators, and accelerators in i) the ideation process, ii) team formation, iii) leadership commitment, iv) duration, v) ownership, vi) use of internal resources, and vii) the venture creation process itself (Köhler and Baumann, 2016;Sheuplein and Kahl, 2017;Rathgeber et al., 2017;Alvarenga et al., 2019). Despite the differences, companies referring to themselves as venture builders, also fit the earlier mentioned incubator definitions by Grimaldi and Grandi (2005) and Bergek and Norrman (2008). ...
The modern landscape of corporate venturing (CV) is emerging and has undergone increasingly rapid evolutions over the past two decades. A growing heterogeneity of CV modes can be observed such as corporate accelerators, corporate incubators, corporate venture capital, and strategic partnerships with startups. Selecting the appropriate mode is critical given that most corporations struggle to find the proverbial needle in the haystack. Furthermore, scholars’ examination of CV is fragmented and involves competing frameworks and typologies, which fails to provide practitioners with a better understanding of how to effectively choose between distinct CV activities. Building upon a systematic review of the literature, the research question addressed in this paper is: Which CV modes and dimensions can be identified in the literature and how can they be categorized comprehensively? To address this, I propose a reconciliation of various CV dimensions by constructing a framework enhanced with practical examples derived from expert interviews. Going beyond the highly dispersed work on CV I strive to (1) identify, organize, and integrate the relevant literature on corporate venturing activities; (2) analyze the dimensions that have been proposed by scholars to categorize and characterize distinct CV activities; and (3) harmonize competing approaches and introduce a coherent and reconciled framework that organizes CV modes along ‘inside-in’, ‘inside-out’, and ‘outside-in’ innovation flows, thus helping practitioners and scholars alike better understand and choose more appropriately between discrete CV modes in relation to specific objectives.
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Technology entrepreneurship rarely succeeds in isolation; increasingly, it occurs in interconnected networks of business partners and other organizations. For entrepreneurs lacking access to an established business ecosystem, incubators and accelerators provide a possible support mechanism for access to partners and resources. Yet, these relatively recent approaches to supporting entrepreneurship are still evolving. Therefore, it can be challenging for entrepreneurs to assess these mechanisms and to make insightful decisions on whether or not to join an incubator or accelerator, and which incubator or accelerator best meets their needs. In this article, five key factors that entrepreneurs should take into consideration about incubators and accelerators are offered. Insights are drawn from two surveys of managers and users of incubators and accelerators. An understanding of these five key success factors (stage of venture, fit with incubator’s mission, selection and graduation policies, services provided, and network of partners) and potential pitfalls will help entrepreneurs confidently enter into a relationship with an incubator or accelerator.
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Due to the highly uncertain nature of pursuing new business opportunities (Knight, 1992; McMullen & Shepherd, 2006), failure is a rather common outcome of entrepreneurial endeavors (Brüderl, Preisendörfer, & Ziegler, 1992; Shane, 2009; Wiklund, Baker, & Shepherd, 2010). Take family businesses as an example. They comprise a significant share of all businesses (up to 90% in the USA [Dumas, 1992; Heck & Trent, 1999; Kets de Vries, 1993]), but nearly 70% of family businesses fail to make it through the second generation, and roughly 90% fail to survive through the third generation (Kets de Vries, 1993). Similarly, established firms often undertake entrepreneurial projects as part of corporate entrepreneurship initiatives to create new products, enter new markets, explore new technologies, and/or build new businesses (Zahra, Jennings, & Kuratko, 1999). Like businesses, however, entrepreneurial projects are basically experiments with unknowable outcomes; there is an air of uncertainty (McGrath, 1999). Thus, sporadic or even repeated entrepreneurial project failure is an inevitability in firms practicing corporate entrepreneurship (Burgelman & Välikangas, 2005). In fact, Boulding and Morgan (1997) estimated that 35–45% of all new products fail (Boulding and Morgan, 1997). Further, investigating 95 venturing units in corporations with headquarters in eight countries worldwide, Campbell, Birkinshaw, Morrison, and van Basten Batenburg (2003) reported no successful examples among firms exploring “new leg” ventures or among internal corporate ventures started with the sole purpose of pursuing growth opportunities in novel (to the firm) product-market domains.
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We investigate the effects that the experience level of accelerator management teams has on the performance of the accelerators they manage. In particular, we examine how the collective business experience of the accelerator managers influences the survival and growth of tenant firms within the accelerator. The experience of accelerator managers is assessed from two perspectives: their own direct knowledge from operating entrepreneurial startups, and their ability to access the knowledge of others from their professional networks. The survival and growth of tenant firms is assessed as the hazard rates for successful exits (acquisitions) and unsuccessful exits (firm failures). We find evidence to suggest that increased knowledge of accelerator managers reduces the risk of firm failures and that this reduction can be attributed more to differences in the amount of direct experience the accelerator management team has as founders in startups, than to differences in connectedness to the ecosystem.
- This paper describes the process of inducting theory using case studies from specifying the research questions to reaching closure. Some features of the process, such as problem definition and construct validation, are similar to hypothesis-testing research. Others, such as within-case analysis and replication logic, are unique to the inductive, case-oriented process. Overall, the process described here is highly iterative and tightly linked to data. This research approach is especially appropriate in new topic areas. The resultant theory is often novel, testable, and empirically valid. Finally, framebreaking insights, the tests of good theory (e.g., parsimony, logical coherence), and convincing grounding in the evidence are the key criteria for evaluating this type of research.
This longitudinal study identifies two core business dimensions important for New Technology-Based Firm (NTBF) survival. These business dimensions are business networks, and entrepreneurial business behaviour and competition. Data was collected from 131 small high-technology firms located in incubators initially in 2005, when most were almost three years old, and again in 2014. A factor analysis was conducted using 17 variables, and a correlation analysis was then performed. Four control variables were also included in the analysis to separate the performance that was due to the firm and the performance that was due to the incubators. Further, three latent variables were developed from the two business dimensions. The findings from this study confirm the importance of business networks and explain how the behaviour and competition of NTBFs during their initial three years may impact firm survival. The latent variables of business and patent advice also had a significant relationship with firm survival.
Recent years have seen the emergence of a new institutional form in the entrepreneurial ecosystem: the seed accelerator. These fixed- term, cohort- based “boot camps” for start-ups offer educational and mentorship programs for start-up founders, exposing them to a wide variety of mentors, including former entrepreneurs, venture capitalists (VCs), angel investors, and corporate executives, and culminate in a public pitch event, or “demo day,” during which the graduating cohort of start-up companies pitch their businesses to a large group of potential investors. In practice, accelerator programs are a combination of previously distinct services or functions that were each individually costly for an entrepreneur to find and obtain. The accelerator approach has been widely adopted by private groups, public and government efforts, and by corporations. While proliferation of accelerators is clearly evident, with worldwide estimates of 3000+ programs in existence, research on the role and efficacy of these programs has been limited. In this article, I provide an introduction to the accelerator model and summarize recent evidence on its effects on the regional entrepreneurial environment. © 2016 by the National Bureau of Economic Research. All rights reserved.