CIOs venture capitalists VCs startups

Even if they never watch Dragon’s Den, most CIOs could probably see some similarities to what they and venture capitalists do.

Like VCs, CIOs get pitched by all kinds of companies to take an interest in their products and services. Like VCs, they need to separate the hype from the value. Like VCs, they are highly accountable for the decisions they make about what companies are worth and investment and which are not. No wonder so many people think CIOs and VCs could learn from each other, that CIOs should apply VC best practices and even that CIOs will start to look a lot like VCs.

I want to suggest an alternative theory, one that doesn’t deviate too far from what others are saying but which I think reflect more about what CIOs really do.

Introducing ‘venture builders’

In a recent post on VentureBeat, Ali Diallo discusses the emergence of a very different kind of organization within Silicon Valley that shows a remarkably pragmatic approach to turning innovative ideas into real organizations. They’re called venture builders.

Unlike incubators and accelerators, venture builders don’t take any applications, nor do they run any sort of competitive program that culminates in a Demo Day. Instead, they pull business ideas from within their own network of resources and assign internal teams to develop them (engineers, advisors, business developers, sales managers, etc.).

. . . Venture builders develop many systems, models, or projects at once and then build separate companies around the most promising ones by assigning operational resources and capital to those portfolio companies. 

The thing is, there is a vast difference between taking an equity stake in an organization and merely coming on board as a customer. VCs are deeply invested in their portfolio companies — not merely from a financial perspective but in terms of helping hire and fire leaders, giving guidance on business models and go-to-market strategies. CIOs have a job to do and once they have achieved the right balance of risk and reward, they simply want a good partner who will provide good results for their organization, not necessarily other customers.

As CIOs are increasingly constrained by budgets and human resources, I think venture builders might be a better role model to follow. As a sort of startup to build other startups, they remind me of what today’s IT department is challenged to do: solve business challenges by cobbling together an appropriate mix of vendors and technologies. Just as a venture builder is a new kind of holding company, a CIO’s team is becoming much more involved in applying its expertise to the customization and management of disparate IT components, particularly from an on-demand perspective.

CIOs still aren’t providing startups capital (other than one-time or subscription fees) but they certainly provide a lot of intellectual capital to promising suppliers in terms of what works well in their organization or their industry. Here’s hoping some of what venture builders learn about nurturing startup talent can get passed on to the IT leaders who share similar objectives.

What do you think? Are venture builders and CIOs alike? Are VCs a better corporate cousin? Should we avoid such comparisons entirely? Share your thoughts in the comments below. 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net



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