by John Scott, Founder, Chief Strategy Officer — Innventure
Why Innventure creates its own companies versus other approaches
Innventure is an origination platform company that founds, funds and manages new companies based on a systematic approach designed to reduce many of the risks inherent in building and scaling new, high-growth ventures – thereby aiming for a high success rate than typical startup ventures.
Why do we create these new Innventure Companies rather than invest in companies already started by an entrepreneur? There are many reasons related to our approach to risk reduction, which is centered on starting these new companies in collaboration with Multinational Companies (MNCs). These reasons include the MNC's already-developed technologies, their vast trove of market data around market needs, their willingness to be first adopters of the technology, and (in the best case) to further sell the commercialized product through their existing channels.
One additional notable point is that by founding the new Innventure Companies ourselves, Innventure obtains founders shares at zero premarket value, and this leads to a greater potential of obtaining relatively high multiples upon liquidation.
There is, however, an additional subtle point that augurs for funding companies ourselves. Simply put, we don’t have to deal with founders!
Founders are often the inventors of the technologies that companies are built around. Technologists often invent something they are interested in with market need as an afterthought. Then those founders try to jam their technologies into spaces the market doesn’t care about.
In prior instantiations of the model we use at Innventure today, we discovered in the early 90’s that no amount of argument could convince some founders to change in any way the beauty (in their minds) of their creation, especially when it technically worked. We often observed founders telling prospective customers how wrong they, the customers, were about what they needed. We call this oft-seen syndrome “The Founder's Deadly Embrace”.
In those settings, the act of inventing a new (particularly elegant) solution to a problem is praised and rewarded. When investing in such founders, one is running the risk of investing in ego rather than commercial success.
As that founder’s ego is fed, he or she becomes ever the more convinced the technology is inviolate and not subject to the market's wishes. Indeed, a founder often feels contempt for the market if it does not “get” the brilliance of the invention. This makes some founders difficult to steer to success.
By independently reviewing technologies via our DownSelect® process, it allows us a fresh and independent view of the unmet market need the technology is intended to solve, the uniqueness of the technology, and importantly, how it is uniquely solving the specific unmet market need. Within that, we also look to evaluate who is receiving value from the technology to best understand who the customers should be, what pricing should look like, and what is the best go-to-market strategy. Our process is geared towards commercial success and obviates the emotional connection many founders struggle with in growing an idea they created.
At Innventure, betting on ourselves and our process is one of the core principles that our business model rests upon.
