There are plenty of incredible startups out there, founded by innovative entrepreneurs and teams with game-changing ideas. However, you need much more than that to build a successful business. You need funding to bring your ideas to life, the right connections to help build awareness and attract investment in your project, and even a little luck to launch with the right kinds of market conditions to succeed.
That’s where venture builders come into play. Venture-building firms find the best startups with the most potential and the highest ceilings, and they work with ruthless efficiency to make successes out of them. To do this, they leverage their access to capital funds, high-end technologies, and networks of trusted, experienced, and expert partners.
These builders nurture startups from tiny shoots into blossoming trees. At least, that’s the idea. Not every investment pans out, but some, every now and then, develop even better than expected, with small startups turning into prosperous “unicorn” companies. This guide looks at how that happens, with proven real-world examples.
What Is a Unicorn?
The idea of a unicorn business is still relatively new, so it’s worth taking a moment to highlight what unicorns are, for those who may not be entirely familiar with the concept.
In a nutshell, a unicorn is a private startup company with a valuation of $1 billion, minimum. There are also additional terms, like decacorn, which refers to a private startup of $10 billion or more, and hectocorns, which are worth $100 million or more. There are only a few hectocorns and not a lot of decacorns either, but the number of unicorns has risen greatly from the mid-2010s into the 2020s.
The term itself was created in 2013 by Aileen Lee, a venture capitalist. She came up with the name as the mythical unicorn is said to be a very rare and special creature in the world of fantasy and fiction, and in the real world, unicorn companies are also exceptionally rare. It takes a specific mix of factors for a company like this to emerge.
All unicorns are different and have charted their own unique successes, but many of them share certain characteristics:
- They’re founded on an innovative, groundbreaking idea with high-profit potential.
- They have committed, expert teams behind them.
- They have clear business plans with a focus on long-term growth.
- They enter markets with a lot of potential and proven demand.
- They often disrupt or subvert the market in some way.
The majority of unicorns are in software and technology, though there are some in other fields, like financial services, healthcare, and even manufacturing. More are likely to emerge in the AI sphere, too, as this tech continues to take off, and plenty of venture builders are eagerly working on new methodologies and tactics to spot prospective unicorns and invest in them.
Affirm: A Startup Becomes a Unicorn
Without further ado, let’s look at a story of how a startup was transformed into a unicorn, with the aid of a venture builder.
Note that not all unicorns are formed this way. Indeed, there are many that simply reach the $1 billion valuation mark purely through their own efforts and private investment, without calling on the services of venture builders to assist them. However, as this example shows, having a building firm on your side can be a big boon for small startups striving for success.
The example in question is Affirm. It’s a point-of-sale loan provider based in the U.S., and its journey began in 2012 with co-founders Max Levchin, Jeffrey Kaditz, Alex Rampel, and Nathan Gettings. Levchin is the biggest name on that list, as he had previously been part of the founding team behind the company that later became PayPal.
Also prior to founding Affirm, Levchin created a venture-building firm called HVF, which stands for “Hard, Valuable, and Fun.” HVF began in 2011, and a year later, Levchin strategically leveraged his venture builder to help get Affirm off the ground, and it swiftly proved popular as a pioneer of the “buy now, pay later” model that would later be copied by other big businesses, such as Klarna.
HVF’s Strategic Approach to Venture Building
Every venture builder has their own strategy, its own approach to nurturing startups and bringing out the best in him. HVF’s approach has proven successful not just with Affirm, but with several other businesses that came from humble beginnings but are now well-known names across the globe, like Yelp and Glow.
Here are the core elements of HVF’s strategy that helped it with Affirm and other clients:
Bringing Big Business Ideas to Small Startups
Many venture builders like to start small with the startups they work with, building up gradually over time in the hopes of seeing returns perhaps a year or two after investment. HVF tends to act more rapidly, bringing big business philosophies to small startup teams. It focuses on getting prototypes rolled out as quickly as possible and pursues every available avenue of growth.
Prioritizing Passionate Founders and Teams
One of the key factors that building firms like HVF look for in their investments is passion. They want to see startup owners, teams, and entrepreneurs who really care about the work they’re doing. With Affirm, this was obvious to see, as Levchin himself had a rich history in the fintech sector. Understandably, it typically pays off for venture investors if they can work alongside passionate, committed business owners, rather than those who may abandon a project at the first signs of struggle.
Laser Focus on Each Project Undertaken
HVF has historically taken a quality-over-quantity approach to projects and investments. By the company’s own admission, its venture investors only focus on a maximum of two projects at a time. That means that each project is afforded the attention and focus it deserves, with tailored strategies and meaningful contributions, rather than cut-and-paste or one-size-fits-all nurturing.
Close-Knit Collaboration and Long-Term Commitment
HVF’s team of venture builders actually works in-residence with the companies they support for a period of up to two years. They wholeheartedly collaborate with the startup founders and teams, leveraging their own resources – like access to leading technologies and unparalleled experience in fields like fintech and business – while demonstrating remarkable commitment to their investments.
Affirm and HVF Now
Nowadays, Affirm is no longer a unicorn, as it’s a public company. It’s also one of the biggest point-of-sale lenders in the world. It boasts close to 20 million users and processes tens of billions of payments each year. It has also expanded into international markets, like the United Kingdom and Canada while continuing to provide its services within the U.S.
As for HVF, it has amassed an exceptionally impressive portfolio of successful ventures, including the aforementioned Yelp and Glow, as well as Pathpoint, Resolve, and Divvy. It stands out in the venture-building sector as a proven success story, an example to many other firms wishing to maximize their returns and develop valuable long-term bonds with the startups they support.
Other Examples of Unicorns Formed by Venture Builders
Affirm is but one of many examples of unicorn companies that were nurtured and supported in their growth by venture builders. Other examples include:
- Zalando – One of the biggest names in retail fashion, Zalando has over 50 million customers across Europe. Startup studio and venture builder Rocket Internet helped it on its way, providing an all-important $50,000 of early-stage funding.
- Instacart – A major player in the grocery delivery and collection sphere, Instacart began as an idea in the mind of Apoorva Mehta. He teamed up with venture-building specialists at the startup accelerator Y Combinator to secure more than $2 million of funding.
Lessons Investors Can Learn
Despite these success stories, the truth is that a lot of venture-building projects will simply not attain unicorn status. Indeed, stats suggest that just 2.5% of venture-backed startups become unicorns, and while having committed venture builders on your side certainly helps, it’s not a surefire sign of success.
Still, examples like Affirm prove that it is possible, and there are lessons that investors and aspiring venture builders can learn from this:
- Commitment Is Key – If you want to nurture a startup from its early stages through to potential unicorn levels, you have to be fully committed to it, ready to use all of the resources at your disposal to help it succeed. That doesn’t just include your financial resources, but also the benefits of your experience, your network, the technologies you have access to, etc.
- Less Is More – The example of HVF shows that sometimes, a “less is more” approach is the way to go when nurturing startups, as it allows you to focus more of your efforts and energies on each project and help it be the best it can be. That’s something you won’t be able to do if you take on too many investments and spread your team too thin.
- Share Their Passion – A lot of entrepreneurs come to venture builders with ideas that they’re passionate about and excited to bring to life. Sharing that passion will help to foster strong relationships between builders and startups, leading to long-term commitments and a better chance of positive outcomes.
A Remarkable Success Story, With Many More to Come
All in all, the story of Affirm’s rise from a simple startup idea to one of the world’s biggest fintech companies, all triggered by the nurturing support of venture builders, is an inspiring one. It shows that venture builders are not merely responsible for reducing a startup’s risk of failure but can also guide it down the path to remarkable success.
Entrepreneurs seeking the best starts for their young companies should, therefore, consider partnering with trusted venture builders to support them. Aspiring builders, meanwhile, seeking to emulate HVF’s success should adopt a committed and considered approach, picking their projects with care, monitoring market conditions, considering risk, and putting the requisite time and resources into each one.
