A new breed of more involved venture capital is developing to help support start-ups and growth companies in a more structured and elaborate manner. Some call it ‘operational venture capital’ proving at the very least that venture investors should stay away from new naming conventions.
Where venture capital typically plays an important role is the period in a company’s life when it begins to commercialise its innovation. The vast majority of the money invested by venture capitalists goes into building the infrastructure required to grow the business - in expense investments (manufacturing, marketing, and sales) and the balance sheet (providing fixed assets and working capital).
Venture capital’s niche exists because of the structure and rules of capital markets. Someone with an idea or a new technology often has few other institutions to turn to. Usury laws limit the interest banks can charge on loans, and the risks inherent in start-ups usually justify higher rates than allowed by law. So bankers will only finance a new business to the extent that there are hard assets against which to secure the debt. And in today’s information-based economy many start-ups have few hard assets, while at the same time, few young entrepreneurs can afford to buy a house for the bankers to wrap their somewhat grubby paws around in the glorious name of ‘collateral’.
Venture Capital therefore fills the void between sources of funds for innovation (chiefly corporations, government bodies, and the entrepreneur’s friends and family) and traditional, lower-cost sources of capital available to ongoing, proven businesses. Filling that void successfully requires the venture capital industry to provide a sufficient return to attract private equity funds, attractive returns for its partners, and sufficient upside potential to entrepreneurs to attract high-quality ideas that will generate high returns. The challenge is to earn a consistently superior return on investments in inherently risky business ventures. A challenge that you could argue is a little oxymoronic. But, then again, entrepreneurs do it every day of their life so who’s counting.
The original idea that the entrepreneur is the modern-day cowboy, roaming new industrial frontiers much the same way that earlier Americans explored the west is a vision that is starting to wilt on the vine. At the entrepreneurs side stands the venture capitalist, a trail-savvy, Tonto-style sidekick ready to help the hero through all the tight spots - in exchange, of course, for a not small slug of the pie.
Yet today’s entrepreneurs look more like Harvard MBA’s and venture investors look increasingly like Wall Street bankers. Some think this will lead to more empty suits and fraudsters and Sam Bankman-Fried’s than romances made in money-making heaven.
Others argue that it's more than ever going to lead to quickie divorces rather than investor bromances. After all, venture money is not long-term money. The idea is to invest in a company’s balance sheet and infrastructure until it reaches a sufficient size and credibility so that it can be sold to a larger business or so that the institutional public-equity markets can step in and provide liquidity. In essence, the venture capitalist buys a stake in an entrepreneur’s idea, nurtures it for a short period of time, and then exits with the help of an investment banker faster than you can say “show me the money”.
The problem is that a number of quality entrepreneurs want more than just money as they march tirelessly and lonesomely through the venture building process, so they might not want an empty suit with a hack load of promises and a half open wallet. They might, in this increasingly ESG universe, want something a little deeper, a little more dare I say, ‘meaningful’.
“Remember, investors will offer entrepreneurs all sorts of things and likely deliver none of them. They only have to deliver one thing - a cheque!” The famous words of venture capital legend Bill Draper III rang deep with our editor.
It seems Bill Draper, probably the first venture capitalist, summed up the essence of the venture capital industry by stating that these investors were not, in fact, partners to the entrepreneur but merely private company, early stage fund managers. And like public company fund managers from Fidelity, BlackRock or Schroders they’re more analyst than operator. They are there to make money out of the entrepreneur and not there to ‘buddy up’ Tonto-style or ‘make a goddamned difference’ to the universe aka Steve Jobs.
Unfortunately some of the great entrepreneurs like to make a difference. Call it the Napoleon syndrome or the youngest child syndrome or simply if-I’m-gonna-give-up-my-life-my-sanity-and-my-money-there-had-better-be-some-deeper-meaning-to-it!
Either way, apparently there are a decent number of entrepreneurs that want more than just a number crunching, cash accounting, financial analyst for their venture partner - they want something a little deeper than that. They’re looking for their very own Jerry Maguire. And who wouldn’t want a small piece of Tom Cruise.
As a result a new breed of ‘operational venture capital’ companies have emerged. Firms like Project A, EQT Ventures and others including a16z and GV (formerly known as Google Ventures) in the US. They have a combination of investing specialists and operational consultants that widen the entrepreneurs team in areas such as HR, talent, data, sales and marketing.
These operational VC’s on top of their investment, give you access to their people - often only if it is needed. It’s more like a menu. You know, that sales pitch “if you want to work with us, you can”. Except, an investor that has a large stake in your company and likely a board seat is not necessarily the most passive partner in real life. Pure play VC’s would suggest that if you utilise their ‘no operational strings attached’ money you can go and hire the best specialist advisers in the open market - not just shoe-in the ones that they employ.
In the ‘operational venture’ model the philosophy is that if you genuinely think you’re investing in a groundbreaking company you will need to spend at least 90 percent of the time working for the benefit of the entrepreneur, not the other way around. It sounds easy enough, but it isn't. Unless, of course, you really are Tonto in real life.
It could be that this hybrid ‘operational VC’ approach does not go far enough to really make the difference. The Letts Journal’s mothership, LettsGroup, addresses this with its ‘branded venture group’ approach which combines a new style IP focused conglomerate with an operational venture outfit. They are not afraid to back their own ideas and staff their ventures until the product-to-market fit is more evident and it can attract quality outside capital. It’s like a private equity approach to earlier stage venture building.
The folks at LettsGroup believe that current technology investment models are broken; too much money is wasted on too few innovations reaching either maturity or delivering real impact. They believe that it’s time to change the model to a more predictable, repeatable process that ensures innovation happens faster, and delivers greater social impact. They have their own methodology, resources and technology. Kind of like a Kanban continuous improvement system but for innovation. A counter philosophy to the 1 in 10 high roller casino approach taken by traditional venture capital firms.
Whichever direction the venture capital market is headed the options for finding alternative capital for quality start-ups keep widening - even in these crappy markets. Indeed there are more angels, family offices, alternative debt models and funds than ever chasing the next best idea. And the desire to find and back the newest goldmine is as old and entrenched as the west coast dust fields.
Technology is only getting better at auto-matching pools of money with interesting start-ups. So much so that WALL-E could become your next VC! This means that professional venture investors might have to get better at offering more than just their money. If even McDonald’s can create a full-service, fully automated offering then surely venture capital outfits can up their game.
This article was originally published in the Letts Journal.
LettsGroup is a branded venture group, providing operational assistance to its ventures, including LettsArt, LettsSafari, LettsCore and many more.
From its family history with the diary to deep tech - LettsGroup is driving UK innovation in the 21st Century
The eponymous Letts diary family started probably the world’s first corporate incubator in 1796, famously inventing the commercial diary in 1812 while launching a slew of paper based products including calendars, notebooks, ledgers and more. 5 years ago the all new LettsGroup, the UK branded venture group, green-lit 5 new ventures and kick started its unique branded venture approach.
Today LettsGroup, run by Philip Letts, the 7th generation of the Letts diary family, is using advanced technology and its unique incubator methodology to solve some of society’s biggest problems. It focuses on building next generation technology, media and climate ventures that deliver high growth and sustainable earnings. The new group is unified by its brand, its family heritage and its desire to do good while creating value over the long term.
The original incubator that John Letts started in 1796 created innovative branded products that utilised the technology of the time - the Gutenberg press. He mastered the printing press and coupled its power with leather-bound and sometimes gold embossed wonders of stationery.
Today, in the digital age, LettsGroup is powered by its own technology innovation aptly named LettsCore - think of it as a Gutenberg Press for the post information age. LettsCore is a Media-as-a-Service (MaaS) innovation that could transform the way we manage and even think about content. Initially it is focused on solving content’s biggest problem - trust and verification - due to its lack of embedded provenance. An inability to determine the reputation or even the origins of the information. LettsCore's content management blockchain is designed to fix this.
Added to this, generative AI explodes this content provenance crisis, making the case for LettsCore even more pressing. The wide-ranging problem that LettsCore seeks to solve was discussed by Google’s Vice President of News, Richard Gingras, at the World News Media Congress in Taipei.
"Will the many available generative AI tools further facilitate the creation of misinformation and disinformation? Assume they will. That should not surprise us. The Internet does fully enable the breadth of free expression as codified within the world’s sovereign domains — from awful to lawful.
Yes, determination of the provenance of content, whether it be an image or a paragraph, will be key. In most cases, the more useful path will be determining the reputation of the source publishing that information. What signals measure a source’s reputation? How does context impact that assessment? How might we detect patterns of endorsement or, conversely, patterns of coordinated disinformation behavior?
This impact of generative AI on disinformation will add further urgency to regulate such behavior — which will engender its own set of challenging consequences."
LettsCore’s technology is truly profound, and it has been years in development. Its first commercial use will be with another LettsGroup venture, LettsArt, to seamlessly distribute its users works of art across the internet while ensuring that the content is secure, attributable and tradable. This will help its Web3, no-code art website platform users, both creators and gallerists, to expand their reach and potential sales channels at the push of a button.
Philip Letts, Chair of LettsGroup added, “We are excited about the first commercial application of LettsCore and its ability to bring truly distributed content monetization and provenance in the fragmented, wild west of visual content we are experiencing on the internet today.”
Another LettsGroup venture, LettsNews, is looking at adopting LettsCore to implement atom level author attribution to news pieces at considerable scale. LettsNews is a crowdsourced AI news platform that helps consumers find high quality, more democratised news in a world where publishers are employing fewer journalists and reporters lack diversity of income. LettsNews’ groundbreaking news media marketplace will increase the earnings for modern news reporters.
LettsCore will come to the wider enterprise market in the second half of 2024, helping content to become more transparent and attributable in a world that is increasingly plagued by misinformation, disinformation and misappropriated content.
The first generation of the Letts family, back in the late 1700’s, used the Gutenberg press in new and interesting ways to drive the first wave of its innovative products. The 7th generation of the Letts family with the all new LettsGroup is betting on its own invention, LettsCore, to power it through the current century.
LettsGroup is a branded incubator group, which is active through @LettsGroup on twitter.
LettsGroup is revolutionising the venture model with advanced technology. Today, technology leadership is a huge determiner of economic and global dominance. LettsGroup is at the forefront, investing in deep tech and pioneering innovative solutions that will shape the future of society and economies.
Led by Philip Letts, the 7th generation of the Letts family and Executive Chair of LettsGroup, the company is equipped with a long-standing family legacy of innovation, and is now combining it with cutting-edge technology to create a systematic approach to venture production. They have two guiding principles and methods to achieve impact in venture building.
First, the Innov@te™ methodology uses a customer-centric approach. It places the customer at the heart of the innovation process. Through tight-loop systems of curation that involve data collection and behavioural analysis, LettsGroup ensures that its ventures are built to meet the needs and behaviours of the target audience, resulting in a higher chance of successful adoption of their products in the global market.
Second, their Size Zero methodology addresses the traditional notion that getting "too big" kills innovation. Instead, it focuses on efficiency and control in scaling ventures, providing a solid foundational structure for sustainable operations. The unique combination of methodologies allows LettsGroup to achieve repeat innovation and sustainable venture building, setting a new standard in the industry.
"LettsGroup is committed to pushing the boundaries of the venture model by leveraging advanced technology and deep tech investments," said Philip Letts, Chair of LettsGroup.
"In today's dynamic global landscape, technology leadership is a key determinant of economic and societal success. We are dedicated to investing in innovative solutions that will shape the future and drive ventures to the top of the global power rankings."
LettsGroup has already made significant strides with its initial ventures. LettsArt, the first NFT-enabled, fully accessible, website platform designed purely for the art world, has quickly gained traction, providing a new way for artists, art dealers and collectors to engage with and better monetize online audiences. LettsSafari, a subscription-based digital climate venture, has also gained momentum in addressing the biodiversity crisis through rewilding initiatives that are defining subscription economy eco-services. Additionally, LettsGroup is developing LettsNews, a fully automated, AI powered news network, and LettsCore, a groundbreaking Media-as-a-Service platform that is creating the first content blockchain.
As LettsGroup marks the 3rd iteration of Letts family incubators in 2023, it continues to redefine the venture model with its innovative approach, looking to drive ventures to develop industry-first practices. The company remains committed to its corporate values of innovation, sustainability, quality, integrity, and family, and aims to make a lasting impact in the world of venture building.
Subscription-based services are changing the game for ecommerce, media, and streaming industries. LettsGroup is paving the way, adopting subscription services for an array of its own ventures.
The evolution of technology has affected human behaviour and shifted business operations and competition accordingly.
Subscription models have seen consistent growth and pickup by businesses as large as Unilever and Walmart as well as many startups and small businesses.
Over the last decade, the subscription ecommerce market has experienced meteoric growth. According to Forbes, there’s been 890% expansion since 2014. Currently, there are 18.5 million subscription box shoppers in the U.S. and 35% of these active shoppers subscribe to three or more services, with a median number of subscriptions per active subscriber being two.
According to Hitwise, the average demographic of this consumer is a younger millennial with a college degree that lives in a college town with an income above $100,000 (£75,000). They are also often an Amazon shopper, a regular reader of online news and more likely to buy online than in-store.
There are three broad types of ecommerce subscriptions:
Replenishment subscriptions (32% of subscriptions) - which allow consumers to automate the purchase of commodity items, such as razors or diapers.
Curation subscriptions (55% of subscriptions) - that attempt to surprise and delight by providing new items or highly personalised experiences in categories such as apparel, beauty, and food.
Access subscriptions (13% of subscriptions) - pay a monthly fee to obtain lower prices or members-only perks, primarily in the apparel and food categories.
The future looks bright for the recurring revenue leaders.
More relevantly, subscription-based media is a major game-changer. With news media diving head-first into the digital world, ad revenues and circulation have been in decline, and an endless series of cost cutting and transformation plans has led to the industry stabilising around paid subscriptions. LettsGroup’s own The Letts Journal has been at the forefront of subscription-based systems, solely reliant on digital circulation with paywalled systems for revenue as an ad-free service. And, based on demographics alone, the internet paywall is becoming a key part of the future of profitable digital content circulation.
While newspaper staff numbers keep falling and print circulation declines, digital media is growing. Based on publicly traded companies, in 2020, ad revenue for digital newspapers stood at 39%. Digital newspapers share of ad revenue has been steadily climbing, as in 2011 it had accounted for just 17% of ad dollars. The trends are similar across the western world. Digital, subscription-based media is here to stay.
The increasingly dominant subscription economy will get tested as we have headed into its first major economic downturn. The effects could be hard to predict, but while the upward trajectory is bound to continue, the likelihood is that short term pressures will dampen new sign ups. Ultimately the sector will probably consolidate around 2-3 leading players in each category. While this could be bad for consumers and content producers, there is an emerging category that could point to the future.
It seems that creators are taking the subscription economy into their own hands. A number of paywall based newsletter platforms have emerged for independent writers and media startups enabling them to charge subscriptions to niche audiences. Some, such as Bankless, have developed subscription audiences in the hundreds of thousands. LettsGroup’s website system for the art world, LettsArt, provides a subscription-based platform for the art world and is free for artists. Artists can easily buy and sell their pieces, in a way that fully enables them to take complete control of the process.
LettsGroup has also launched one of the first online eco-services platforms for the subscription economy called LettsSafari. Environmentally conscious subscribers pay so that trees get planted, wild animals released and new rewilding safari parks are created and supported.
Just as new platforms will drive the emerging creator economy, we can expect Web3, including crypto, NFT’s and the metaverse, to shape big media over the next decade alongside other key technology developments like AI - all of which are factors LettsGroup will account for in the development of incoming ventures. The drive to digital is likely to become pervasive and, if so, micro payments should finally take off. A few cents for a media snippet supported by ads could prove to be an attractive alternative to the limited number of subscriptions we might be willing to sustain.
This article was first published in the Letts Journal.
LettsGroup is a branded incubator group, which is active through @LettsGroup on twitter.
LettsGroup unlocks repeat innovation methodologies out of a historical family
business model - the first of its kind.
LettsGroup, the family-run branded venture group, has become the first to crack the code to repeat innovation, following the release of the 3rd edition of the company's methodological framework, Innov@teTM. The tried-and-tested approach is a pivotal breakthrough in the world of innovation, thus allowing a model that codifies and ensures consistent venture production.
“Using our proven incubator methodology, and advanced technology, we solve some of
society’s most pressing problems,” Philip Letts, Chairman.
In 1796, John Letts built the world’s first corporate incubator. John Letts’s incubator developed a series of successful innovations including the first commercial diary, the Letts Diary. Further innovations included interest tables, specialist clerical and medical diaries, calendars, parliamentary registers, ledgers, and logbooks.
Now, in 2023, LettsGroup marks the 3rd iteration of Letts Family incubators, with its Executive Chair, Philip Letts, the 7th generation of the eponymous diary family. The world’s oldest corporate incubator has cashed out their invention of the diary, and cashed in on providing sustainable, repetitive innovation and venture building.
“It seems we are all becoming entrepreneurs. And yet no one has cracked repetitive
innovation,” Philip Letts, Chairman.
A series of corporate and innovative expertise has thus led to the establishment of LettsGroup. From LettsGroup’s tried and tested methodological approach, innovation can be a codified, patterned stream of service. Heavyweight international technology leaders have unified to support the growth of the branded venture group, including previous senior leaders of O2, Oracle UK and Ireland, EDS International, UBS, Broadview International, and Silverpeak. The team is littered with expertise in the cutting-edge world of innovation and tech.
LettsGroup is breaking through the market with a number of initial ventures, with the aim to establish a ‘Unicorn’ venture by 2030 - with the help of renowned tech investors. To highlight, these ventures include LettsArt, the first NFT-enabled, fully accessible, Web3 platform for the art world; and LettsSafari, the subscription based digital greentech platform that tackles the biodiversity crisis by expanding rewilding initiatives.
“Behind the scenes we are building a fully automated news network called LettsNews and
LettsCore, a groundbreaking Media-as-a-Service platform,” Philip Letts, Chairman
The methodology at the core of LettsGroup is Innov@teTM. Innov@teTM is the modern and extended approach of John Letts’ original incubator. Additionally, LettsGroup is in the business of repeated, technologically advanced, and sustainably conscious innovation. The methodological approach behind LettsGroup is the code to unfolding further new ideas to become projects, products, and ventures. Ford cracked the code for mass production. LettsGroup is cracking the code for innovation. More precisely, cracking a new innovation and venture every two and a half years.
But LettsGroup is not in the business of just throwing money and huge sums at problems or innovation. Its Size Zero methodology, accompanying Innov@teTM, presses Letts' theory that getting ‘too big’ kills innovation.
Both philosophies set out a necessary foundational structure to the successful operations of an ‘organisation’ for innovation, LettsGroup.
Where the family ventures, their simple philosophy follows, placing the customer at the heart of innovation. LettsGroup extends and optimises this philosophy, ensuring the customer is centre much earlier than in typical innovation processes, where many assume the centre to lie solely with entrepreneurs and inventors. This process is upheld further through tight-loop systems of curation, for which customer data collection and behavioural analysis is at the foundation.
Even more central to the corporate incubator is its seasoned founder, Philip Letts. The Chairman has over thirty years of experience in innovation, launching his first private incubator, Prophete, in 1997. From Prophete came Beenz - the earliest iteration of a crypto currency, boasting more than 6 million customers before its sale to Carlson Group companies.
Prophete was the first test of the Innov@teTM methodology. From Philip Letts’ second private incubator in 2006, The Visual Studio, came Maistro Ltd. Once again, the innovation was a breakthrough in the creative services marketplace, taken public in 2012. Furthermore, from The Visual Studio came Size Zero, a methodology handbook published in 2015 to guide young ventures to scale with
greater efficiency and control.
The company boasts the corporate values of innovation, sustainability, quality, integrity, and family. Led by the Letts family and managed by established industry leaders, LettsGroup is combining innovation with tackling the issues of society today, placing environmental consciousness at the forefront of these values. Its integrity is derived in its stance that no innovation supported by the incubator will be without deep considerations of sustainability, a pledge the Group has and will continue to uphold.
While just at its infancy, the branded incubator has produced its first, emerging ventures. Also a number of tech-centric ventures are being developed within the incubator, with LettsGroup producing a factory of new ideas, and a code to repetitive innovation.
