Short Description:
- In the Cofounder pattern, a venture firm identifies a market need or a technology and recruits, key members of management, to make it happen. This approach is more common in life science investing or with research coming out of a university. It also happens in Venture Studios with technology businesses.
Benefits:
- Being willing to do the work of Cofounder, opens up a different opportunity set which includes commercializing a patent or working with a deeply technical founder who wants help on the business-side.
- CEO transitions can be easier if that person is recruited for a certain stage of the business and has a less emotional attachment to the business.
- A firm can own more of the company.
Trade-offs:
- In the venture studio model where the technology is not truly novel or very hard to replicate, some believe that there will be a negative selection for management. The argument is that capable founders will start their own business and those with a missing ingredient will use the “crutch” of a venture studio. Or that management will not be truly invested in solving the problem or feel the emotional ownership required to break through during hard times