October 16, 2000

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Relationships Fuel Fast Venturing

Executives and entrepreneurs must collaborate to speed businesses to market

By Ajit Kambil

hings move quickly in the Internet economy. Yet is it really possible for a startup to go from initial concept to full-blown dot-com launch in less than three months?

Not only is it possible, but in today's hypercompetitive Internet marketplace, it's essential. A number of companies are accomplishing this by using a new entrepreneurial model known as fast venturing.

Fast venturing is a strategy for bringing a company to market with the requisite scale and quality in record time. Innovators and outsiders--from equity investors and consulting firms to Web portals--collaborate to provide vital resources: capital, innovation, channels to customers, and execution capabilities. Partners share the considerable operational and financial risks of a compressed time line for taking the new venture from idea to initial public offering or acquisition. The result is increased speed to value.

Consider Dan's Chocolates, a startup that needed to be running full-bore in 11 weeks to meet the demands of the upcoming holiday season. With seed funding in hand and a partnership with greeting-card maker Blue Mountain Arts to reach customers, the company hired two professional-services firms to ramp up a full-fledged enterprise resource planning system and Web site before the 1999 holiday shopping season, successfully implementing a business that met its Christmas and Valentine's Day demands.

It's a commonly held notion that company bureaucracies suffocate innovation and entrepreneurship. Historically, the return on internal initiatives has been less promising than on independent ventures. But don't tell that to those retailing giants that, in structuring separate legal entities for their E-commerce offspring, have embraced fast venturing. Take Kmart, the $35 billion retailer. Working with Softbank for venture capital and expertise, and Martha Stewart Living Omnimedia as a strategic investor, Kmart created BlueLight .com. Working with other strategic partners--Spinway for technology, Yahoo for promotion and distribution, and consulting firms to assist with execution--BlueLight.com was up and running in a fraction of the time it would have taken the parent company on its own. It launched in December 1999, and BlueLight.com gained more than 3 million registered users in its first seven months.

In fast venturing, each partner in the value network contributes different skills and specialized resources to all three stages: illumination, investigation, and implementation.

Illumination is where venture capitalists sift through ideas to identify likely successful business models. Operational partners, meanwhile, provide the management team with expertise about potential channels, customers, and markets.

Investigation involves piloting, testing, and refining the idea. Outsourcing prototype development for pilot testing frees management to develop the company and refine the product.

Implementation focuses on scaling fast. Poor execution will drive customers away and destroy the brand's image.

Fast venturing can also occur through completely integrated offerings, in the form of business incubators such as Idealab. These hothouses for nurturing young companies hold a portfolio of ventures at one location, providing office space, hands-on management assistance, financing, and support services such as legal, accounting, and others, all in exchange for an equity stake.

There is, therefore, no single, clear path to a fast-venture relationship, or an established protocol in selecting a network of partners. Choosing a lead partner depends on existing informal relationships or reputations, as well as on the innovator's stage of business development. In addition to speed to market, innovators should typically seek six benefits: refinement of strategic intent, access to specialty skills, access to markets and contacts, access to talent, focused managerial attention, and the ability to build scaled, operational capabilities.

Obviously, fast venturing involves trade-offs. Managers and entrepreneurs must realize they have to share ownership and control of a new E-business. However, companies that have embraced fast venturing have determined that as speed is so important, relationships that can cut months off a launch cycle and reduce key business risks are well worth the cost.

Ajit Kambil is a senior research fellow with the Andersen Consulting Institute for Strategic Change. He also is a visiting professor at New York University's Stern School of Business. He can be reached at ajit.kambil@ac.com

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