Sponsors of Independent and Corporate Builders:
Kindred Spirits but Not Identical Twins

Investors in independent builders and their corporate executive counterparts share the imperative for growth. But each financial backer plays its role differently. Venture capital firms, angels, and private-equity investors usually put money into independent earlier-stage ventures, seeking to capitalize on opportunities ignored or mishandled by established companies. Their C-suite counterparts sponsor employee builders to launch new businesses from the inside or, in some cases, to buy later-stage companies created by entrepreneurial builders.

Both corporate and independent venture building satisfy Harvard Business School professor Howard Stevenson’s definition of entrepreneurship: “pursuing opportunity beyond the resources under control.” But corporate entrepreneurs—unlike their independent counterparts—have to worry about strategic alignment with their company. They must access budget, staff, and other resources currently committed to existing activities or markets and redesign decision making, management systems, and team culture to mirror the nimbler and informal requirements for launching any new venture.

If you’re a builder inside a corporation, the good news is you already have what your outside counterparts spend an enormous amount of effort seeking: potential funding and access to resources, technology, facilities, talent, and even customers. But too often, those resources can often feel like mere window displays to a sidewalk shopper—nice to imagine, but hard to obtain. The corporate builder must learn to tap these resources by building alliances with those who control them across the organization.

However, if you are an inside builder, your potential sponsors operate within different parameters than do their venture capitalist counterparts. External sponsors tend to focus on whether there’s a clear path to a big and rapid exit, since their key metric is internal rate of return (IRR), which is highly sensitive to the time their capital is invested. While the venture capitalist has a portfolio of investments and expects more than 10 percent of them to result in a total loss of capital, corporate backers operate within tighter constraints.

Corporate sponsors evaluate investing in internal ventures through the lens of their company’s cost of capital and return on investment. Their focus on value creation and value capture usually relates to a venture’s potential impact on earnings, growth, or both, rather than a profitable exit. And this usually means that new ventures inside big companies have to offer much larger scale possibilities than many of their outside counterparts, simply to register on the host’s financial radar.

They are also playing a longer game, even while they and you may have to show accelerated returns to an impatient public market or investor group. When a corporate sponsor is acquiring an independent venture, the sponsor (and you, if you are the one selling) has to worry whether the acquisition will fit strategically and culturally into the company’s milieu, capabilities, and customer network. And many acquisitions, if not most, do not.

With that background, let’s see how your Builder Personality might best match with prospective investors.

Fueling the Driver:
Finding Capital with the Right Octane

The best sponsor for a Driver is focused on product–market fit. Some investors see that fit as the magical ingredient and don’t particularly care which kind of builder can show it to them. Andy Rachleff, cofounder of Benchmark Capital, a famous Silicon Valley venture firm, puts it this way: “In technology, I believe success is almost exclusively a function of whether or not the company finds product–market fit. And it’s not at all an issue of perseverance, or hard work, or personality. If you have the right product–market fit, you could be the world’s worst executive and still succeed in a very big way. How else can you explain twenty-four-year-olds running billion-dollar companies? Personality archetypes, to me, don’t matter very much.”²

If you’re a Driver, this emphasis on product–market fit favors you. You tend to do well with outside investors like Rachleff, given their focus on the product solution you so confidently tout—provided you can back it up with traction in the market. The ideal investor partner with your personality strikes a careful balance between excitement for your product vision and not “going native” and thereby losing objectivity. You need your investor to remain objective about the current level of market development and the maturity of both your product line and the market it addresses.

Your passion for your solution is great, but it can lead to overreaching when it comes to negotiating a fair valuation, especially in your venture’s early stages. A seasoned investor can help you develop a more realistic view of market maturity and corresponding valuation. This smarter view can enable both of you to align expectations, so invested capital, valuation, and product–market fit are more in synch.

If you’re a Driver inside an existing corporation, you face three challenges. The first is whether your host company is the right kind of sponsor for the business you’re pursuing. There may simply be no match between the strategic interests, or resources, of your firm and your idea. Most corporations are not in the business of making venture-capital-style investments without strategic alignment.

If there is a persuasive, or at least plausible, case to be made that your proposed new venture does align with your company’s vision, you face a second hurdle: how can this investment be structured to provide the right level and timing of financial support, while also providing you and your crew with the kind of compensation rewards you want for undertaking the endeavor?

With respect to negotiating a reward structure that motivates you and your team, you may fall prey to rigid policies and lack of precedents within your company, unless your firm has had experience designing investment and compensation frameworks for other insider-led ventures. In fact, you may be more willing than your other three builder counterparts to share the risks of your ideas with your corporate sponsor. So be ready to suggest novel arrangements and even new business models that might mitigate your firm’s risks while offering you higher compensation in exchange for your taking on more risk and achieving predetermined milestones. For example, phantom stock, spin-outs, a negotiated buyback option in exchange for allowing your new venture to take root outside the company—these are examples of the kind of flexibility your company needs to motivate and keep an ambitious Driver and his or her team in the organization.

Third, both you and your potential sponsors need to agree that a personality like yours can successfully launch a scalable business with or within a company like theirs. Why? As a Driver, you are probably the spikiest of the four Builder Types, and those sharp edges can be a challenge inside a corporate environment. Your personality is often easy to spot, precisely because your brusqueness, intense ambition, and obvious self-confidence may stand out from your softer-edged colleagues.

A corporate sponsor supporting you as a Driver may also need to decide whether he or she is willing to get out of your way, so both of you can see whether your idea is likely to pan out as successfully as promised. You have your own firm ideas of what it’s going to take to bring your notion to market, including the kinds of people you want involved. You’re unlikely to appreciate suggestions that you hire colleagues who do not fit the operating intensity you envision in your venture.

Your Builder Personality is also arguably the least suited to be lashed to the rest of the corporate infrastructure—budgeting procedures, meeting protocols, IT system specs, and HR hiring and compensation policies. Your sponsor needs to open up the road a bit for Drivers like you, but must also be prepared to deal with ruffled feathers left in your exhaust. You can be disrupters in both a positive and negative sense, so expect your inside sponsor to keep an eye on that balance for both your sakes. Your ideal internal sponsor buffers the corporation from you and does a bit of the reverse, but is careful not to put a governor on your engine. After all, the sponsoring company may need precisely your personality to achieve market-changing impact.

Indeed, truly entrepreneurial Drivers may be harder to find inside existing corporations in the first place. They are often the first people to leave a large company after having failed to convince their firms to embrace their ideas. Keep in mind, however, the track record of the marriage between corporate Drivers and their employers is not exactly encouraging, as a recent Accenture global study on corporate entrepreneurship found: “Three-fourths of large companies feel that their employees are sufficiently entrepreneurial; yet, of all the entrepreneurs who worked in a large company previously, 75 percent left because they felt that they could not be entrepreneurial within the corporate setting.”

The examples of these problematic relationships are legion: from members of the Traitorous Eight, who left Fairchild Semiconductor and then spawned the high-tech innovation explosion that became Silicon Valley, to Mark Cuban, who was fired from his first two corporate jobs, never to return to working for anyone but himself. Some corporate Drivers, when paired with the right sponsor, can unleash their commercial gifts inside a large enterprise. However, many cannot and leave to build on their own, often selling their creations to a large company that was unable to foster disruptive growth from within. For corporate sponsors and other members of the C-suite, we see this as a bit of a cautionary tale, because acquisition is far more expensive than accommodating the aggressive nature of a Driver who builds breakaway value.

Chartering the Explorer:
Engineering the Right Fit

Explorers are often drawn to investors who share their systems thinking. If you’re an Explorer, your focus on solving challenging problems by creating systematic, carefully engineered solutions can be an excellent fit for venture firms composed of partners with engineering backgrounds. Drawn in by how well your personality can describe the intricacies of the problem and the completeness by which your solution addresses it, investors can create a geek fest in early meetings with Explorers like you.

The question of your motivation can catch some investors by surprise. For many Explorers, money—after a certain point—is not all that motivating. But compensation in the form of cash and equity is one of only two financial tools outside investors have to motivate builders and their teams.

It turns out the other tool, investment capital, can be more motivating to Explorers. As an Explorer, you want to move your ingenious solution from product to portfolio to platform, and doing so requires the right steadfast capital partner. Your ideal partner shares your voracious curiosity and accompanying appetite for commercializing systematic solutions. Access to supportive capital to continue inventing can be far more appealing to an Explorer who’s playing for a higher-order goal—market impact and perhaps industry transformation.

If you’re an Explorer working in an existing company, are you focused on solving a challenge that’s strategically significant for your company? This question is not about your intellectual prowess. You have the same systems-thinking, disciplined yet creative minds we’ve already seen in your independent entrepreneurial counterparts like Brian Coester, Tom Phillips, and Mark Bonfigli, among others.

But savvy corporate sponsors know not every problem is strategically valuable, and not every great problem solver makes a great business builder. It’s not as easy as simply pulling people out of the engineering department or lab and assuming they can be turned into overnight entrepreneurs. Scientists, technologists, and engineers may all be great at the discovery process, but they often lack the skills to commercialize their own ideas. That’s probably one reason why less than 1 percent of the inventions patented in the United States ever make money. And your company’s growth agenda is too important to be left to amateurs.

So if you are a corporate Explorer, you and your potential sponsor might be better off thinking like a Captain, assembling a team of complementary players who can leverage and commercialize your proposed solution. After all, you probably don’t have to worry about the kinds of divide-the-pie controversies and recruiting challenges that many outside entrepreneurs face. Some of the people you need may already work for the company; management can decide what they work on and with whom—and you can be the beneficiary.

This access to inside colleagues can help you realize the commercial value of your own idea. Norbert Berta, the Explorer behind Johnson & Johnson’s invention of the caplet dosage form, which was key to the Tylenol brand recovery, needed his colleagues’ capabilities to capture its value. So consider the kinds of talent necessary to successfully marshal a new venture through the five growth dynamics, and don’t be reluctant to seek and accept other insiders who can help. But be wary of accepting your sponsor’s suggestions too quickly. You may well want and need the freedom to hire your analytical peers from outside.

As with any new venture within or even outside an existing company, cultural conflicts are likely to develop. Explorers tend not to be too focused on the softer sides of the enterprises they build. But culture is likely to be particularly important to your sponsor and your company. So be on the lookout for early signs of tension and possible schisms in this area. It’s not that your sponsor necessarily expects your venture to be a clone of the existing business, but you do need to make sure to reflect the core values on which your company is based and by which the customers know it.

Commissioning the Crusader:
Finding Your Queen Isabella

If you are a Crusader, your ideal financial sponsor is someone whose horizon matches your own vision, with the temperament and patient capital to boot. You need investors whose role is more like the one Queen Isabella played for Christopher Columbus than the rapacious one Gordon Gekko displayed with his portfolio companies in the movie Wall Street. In other words, you want a sponsor more interested in long-term development than in short-term profit. To some extent, there is always tension between an early-stage venture capitalist’s desire for a timely exit and a founder’s quest to build a long-term, successful enterprise that grows well after the early supporters have cashed out. But that tension can be especially acute with Crusader-led ventures.

Investors experienced in funding Crusaders are well aware of both the appeal and the risks of supporting the exciting vision of these mission-centered entrepreneurs. However, your Crusader charisma and vision to make the world and markets better by tackling big problems can lure some investors who aren’t prepared for the patience it will take to accomplish a mission of this magnitude.

Your Builder Personality has a gift for attracting early customers and followers. But many first-time Crusader entrepreneurs have not yet faced the practical difficulties and operational challenges to convert a big vision to lasting value in an indifferent, skeptical, or even hostile market environment. If that’s you, beware of joining forces with a venture firm or early-stage investors that have not supported your kind of builder before.

First-time Crusaders need a capital partner willing to apply a heavy hand on the tiller at certain key moments in the development of their company. Your charismatic nature can inadvertently make this expert supervision a bit tricky. Take Nate Morris, for instance. His company, Rubicon Global, aspires to be the Uber of garbage. The exciting ambition of Morris’s vision, combined with his impressive early customers such as Wegmans, Walmart, and The Home Depot, have allowed him to attract many famous sponsors, including John Ashcroft (former attorney general) and Leonardo DiCaprio. However, it was an experienced investor, Peter Kellner at Richmond Global, who pushed Morris to hire the right operational team and tighten the focus on profitability and efficiencies of scale.

The challenge for some Crusaders is they can attract investors without the necessary expertise or capital structure—investors drawn in more by the builder’s vision than worried about the operational reality of how the company can convert idea to value. A string of impressive customer wins or favorable press can confound this challenge, postponing the day of financial reckoning. However, most investors—public or private—will eventually expect the business to generate positive earnings. At that point, rhetoric, however inspiring, will not trump actual results in the market: number of customers, revenue trajectory, cash flow, capital efficiency, and the like.

This gap between mission and financial reality can be particularly difficult if you’re a Crusader working inside an established corporation. Here, it may be easier for potential sponsors to spot you than to support you. Sometimes, the crusades you advocate may be seen as competing with the current mission of the company or are maybe just confusing to the internal workforce or outside customers. So as we suggested above, before you ask for funding from an inside sponsor, you should carefully assess how well your crusade aligns with the strategy, brand, heritage, and culture of your company.

If your Crusader vision is compatible with, or complementary to, where your organization is headed, unleashing your prodigious builder skills can be a game changer. Perhaps your company needs a fresh infusion of passion and purpose to galvanize its troops or reposition itself in the minds of its market. In these cases, you may be just the right catalyst to advance your firm’s growth agenda. In fact, your firm may have some things to learn itself from the leadership style and skills you bring to bear in inspiring followers to embark on that quest.

Furthermore, as with your Explorer counterparts, your corporate sponsor may be able to surround you with the very kind of operational get-it-done skills that prevail in most companies. As we’ve seen with builders like Nate Morris and Angelo Pizzagalli, Crusaders tend to focus on longer-range objectives and are comfortable with delegating large swaths of the routine operations to others. Making it easier and faster for you to recruit a fully functioning team can turbocharge your Builder Personality.

Your insider sponsor will have to strike a fine balance here between a legitimate concern about operational execution under your leadership as a Crusader and your need to build your form of new business value with your own distinctive personality. Too much over-the-shoulder monitoring on the sponsor’s part may stifle the very spirit your Crusader style can foster in your team.

If the mission you can get chartered is strategic enough, chances are it—and you—will generate ripple effects in the existing organization. Other executives may question the urgency of this new agenda and be reluctant to give or share important resources under their control. Watch out for the kind of tokenism this attitude can produce. For example, an executive might free up a mediocre staffer to appear to support your mission. You and your sponsor need to keep translating the importance of your expedition to the people running today’s operation.

Crusades are not for the faint of heart or the light of wallet. But they can be amazingly fruitful endeavors worth patience and investment commensurate with your own distinctive vision and leadership prowess. As an independent Crusader, try to recruit compatible investors that not only share your passion for the goal but also can shore up some of your limitations as you scale the business. And if you’re a corporate Crusader looking for internal investment support, strive to match the promise of your mission with the premise of your company’s own strategic vision and cultural roots.

Whether you are working outside or inside an existing company, as a Crusader you are likely to need investors comfortable with the somewhat longer, and probably more expensive, runway your business will need to lift off. The more explicitly you can align your respective expectations and agree on interim progress milestones, the better—for both of you. Switching metaphors, you can ill afford to have sponsors looking for the first off ramp on what will probably be a long road ahead.

Endowing the Captain:
Securing Investors Who Value Teamwork and Track Record

If you’re a Captain, you build for growth in a manner attractive to many sponsors, particularly those who tend to back proven team leaders rather than untested entrepreneurs, hot product ideas, or trendy markets. They gain comfort in the way you build, whether you do so in an independent venture or a corporate one. You attract and inspire talented teams that are loyal to you and focused on your clearly articulated vision for the business. You are pragmatic, and you carefully manage your investors’ expectations for how you will methodically prosecute your plan. You manage under the mantra “no surprises,” carefully delivering on your commitments and perhaps even underpromising and overdelivering, both practices that build trust and confidence with many investors.

In startups, more conservative financial sponsors are most likely the best fit for you. These investors would prefer you grow more slowly and conserve cash, rather than risk a higher burn rate in hopes of winning the race to an installed user base or a land-grab strategy. It’s important you find backers who share your steady-as-she-goes method of piloting your ship.

In fact, investors who like to back Captains may want to build a stable of them, supporting them from venture to venture. These Captains are seasoned leaders who can be good stewards of invested capital, and many can claim to deliver consistently strong returns. We have seen venture firms like Highland Capital Partners and Venrock execute such a strategy over decades.

Sponsors with more of a “swing for the fence” expectation may not be a good fit, because they’re likely to be frustrated by your more conservative, methodical approach. Some Silicon Valley investors push Captain CEOs to pursue growth more aggressively than the executives are comfortable with. In these cases, the multiple bets embedded in the sponsor’s portfolio may encourage them to be more risk prone than the builder, whose entire net worth is often tied up in his or her company.

We encourage you, if you’re a Captain, to spend extra time with your prospective sponsors confirming alignment on growth rate, risk, and exit expectations. Ironically, your own track record of successful leadership may attract sponsors that are not an ideal fit, so beware.

Corporate Captains are often the favored sons and daughters of executive management for many of the same reasons their startup counterparts find it easier to attract sponsors. If you’re such a Captain, your collaborative style and mindset tend to be highly valued in large, complex companies. Unlike builders in the independent startup world, corporate Captains may be tapped by senior executives to lead a new initiative that was not the Captain’s idea to begin with, rather than seeking support for a venture of their own choosing.

Large companies—not to mention consulting and accounting firms, investment banks, or commercial lenders—are target-rich environments. They can present many value-creating possibilities that may be the perfect assignment for a Captain. If you work for such a firm, your executive team may have already identified a promising opportunity for significant value creation either within or outside the firm’s current business portfolio. For example, a new product or line of business, an acquisition of another company with intriguing technology, or even a new business model that needs testing. In any event, the opportunity needs a leader. Frequently, a corporate Captain-in-the-making gets named to take on such an initiative, simply because the person has that glimmer of an entrepreneurial spirit.

The issue here is not that one Builder Personality is better than another (they’re not). But it may be easier for a Captain operating inside a corporation to mesh with established cultural expectations and processes to get a new value initiative off the ground and onto a growth trajectory. However, as a corporate Captain, you will still need executive sponsorship to run occasional interference when you encounter obstacles working through normal channels and procedures.

As a Captain operating inside an established corporation, you have another key resource to fuel your growth: talent. You should try to secure your share of the best draft picks from within your company’s ranks, while also retaining the freedom to go outside as necessary. Don’t jump to the conclusion your best team members are other insiders. After time spent in corporate-style positions, insiders may well lack the instinct, style, and truly entrepreneurial spirit that’s required. Because a good Captain will assess what skill sets he or she needs, be ready to ask your sponsors for whatever exceptions to your normal HR policies your outside-talent acquisition may necessitate.

As a corporate Captain, you can tap a host of other resources, including market and technology monitoring, to fuel your venture’s growth. If you have particularly astute research and strategic thinkers in your company, involve them—as advisers and other resources—with your efforts. This kind of knowledge transfer seldom comes with the bureaucratic baggage of the other resources under your control and can keep your peripheral vision tuned to important trends in the marketplace.

Similarly, you can leverage your Captain’s operational strengths by accessing appropriate systems, channels, and parties active in your current business. For example, you might expedite connections with distribution systems, access existing customer relationships, and piggyback onto your company’s purchasing networks. These kinds of resource linkages can add real muscle in growing your venture, provided the overhead burden and procedural complexity involved don’t outweigh those potential efficiency and scale benefits.

However they may come to their roles, Captains are also likely to be much less fiery as corporate entrepreneurs than their other three counterparts. After all, Captains are consensus builders and problem solvers with a keen focus on operational execution—instincts not far removed from their fellow corporate colleagues. Drivers may have long since lost patience with the sclerotic decision making and risk aversion that often characterize incumbent businesses. They have either left or may be working in frustrated isolation. Explorers may struggle with building an interdisciplinary crew whose style and processes mesh with the host culture. And Crusaders may provoke a disruptive tug-of-war that competes, or even conflicts, with the company’s existing mission and vision.

As either a startup or corporate Captain, you may have a somewhat easier time securing the investor sponsors you’re looking for than your other three builder counterparts. You tend to be no-drama Builders, willing to keep strategy and team closely aligned. Your ability to build and manage teams that get things done is an attractive strength in both independent and corporate venture settings. Especially for startup Captains seeking investors, you should not be shy about stressing the capabilities of the individuals you’ve assembled, and you should let potential investors take their measure directly without the kind of center-stage needs your three counterparts sometimes fall prey to.

Despite these advantages Captains enjoy, your longer-term challenge with financial sponsors may arise precisely because of your strength as a team Captain. Sometimes, customers and markets are ripe for truly breakthrough, even breathtaking, disruption of the sort that Drivers, Explorers, and Crusaders propose, spikiness and all. But Captains tend not to get behind these kinds of radical opportunities. So stand ready to periodically challenge your own Captain defaults to creatively and boldly evaluate where the real gold is in the mountains you are prospecting.

If you’re an independent builder, understanding how your personality best matches with various styles and preferences of investors can help narrow your search for funding. And if your business is an acquisition candidate by a larger company, you need to anticipate how well you and the culture you have imprinted will mesh with the potential acquirer. This step is critically important, at least if you’re interested in more than a take-the-money-and-run outcome or have an earn-out tied to the postacquisition performance of your company.

Similarly, if you are an employee eager to become a corporate business builder or if you join such an initiative, you also need to pay attention to how you can best align your aspiration with the underlying strategic agenda of your company. Most firms are short on the kind of gutsy champion talent you have to offer, but you have to be an adroit player of the inside game to get the resources you need to launch and grow your idea. And be creative in thinking about the range of nonfinancial internal resources you might need to tap in nurturing your business concept, perhaps even while developing it under the radar of your company’s usual business procedures.

And finally, if you happen to be an investor in a startup, an acquirer of an ongoing business, or a sponsor of a venture, you will improve your own odds for success by understanding the personalities of the builders at the center of those businesses. Finding, matching, and supporting them may well be your best shot at growing your own business, as well as helping them grow theirs.