Barely two years after its conception, Prism Skylabs has made enormous strides.
The 20-person company, based in San Francisco, uses video surveillance equipment to give retailers Web-like data on customer behaviour in their brick-and-mortar stores. It has secured more than US$8 million in financing from investors like Pacific Partners and Andreessen Horowitz and has contracts with 70 retailers.
But like many start-ups finding success in Silicon Valley and across the country, Prism Skylabs is not the brainchild of a rookie entrepreneur who risked everything. One of its founders is Ron Palmeri, a longtime Silicon Valley executive. He is among a growing group of professed company builders who are parlaying past successes - along with their own capital and thick Rolodexes - into operating companies and venture funds that work on multiple companies at the same time.
"There's a group of us who are serial entrepreneurs who know a lot about building something and scaling it," said Mr Palmeri, who previously worked with CNET's founder, Halsey Minor, at Minor Ventures. Minor Ventures used this model to build companies like GrandCentral, now Google Voice, and OpenDNS.
In 2010, Mr Palmeri started his own operating company, MkII Ventures, with Allison Rhodes Messner, formerly of OpenDNS. The company is working on building out four ideas - a concept often referred to as parallel entrepreneurship.
"Venture doesn't allow us to explore, only to accept and deny," said Michael Jones, chief executive of Science, a builder platform in Santa Monica, California. He and a longtime entrepreneur, Peter Pham, started Science in 2011 with US$10 million in venture backing, followed by US$30 million from Hearst Corp.
Most of these investors-cum-inventors are motivated by personal passion to create companies. Under this model, entrepreneurs often tap their own networks and wallets to finance their ideas.
"I don't have any hobbies," said Max Levchin, a co-founder and former chief technology officer of PayPal. "This is what I do."
His first version of this model, MRL Ventures, helped start the mobile business-rating platform Yelp and created Slide, a personal-media sharing service that Google bought for a reported US$182 million but has since shut down. His new project, called Hard, Valuable, Fun, or HVF, will focus on a few big ideas with longer time frames.
Like Mr Levchin, many of the builders came out of the recent wave of technology successes. Garrett Camp, a co-founder of StumbleUpon and Uber, has started Expa to develop new products and services and build teams to scale them. In Chicago, two Groupon founders, Brad Keywell and Eric Lefkofsky, put US$200 million, primarily their own money, into Lightbank, an operating company. Lightbank has a staff of 20 and 60 projects in its portfolio, including Belly, a loyalty platform, and Frank & Oak, an online men's clothing retailer.
Company builders say they provide a missing link in the lifecycle of start-ups and do so more effectively than incubators. "The primary difference is focus," Mr Camp said. "I plan on creating just a couple of companies per year, and spending significant time with all of them."
Hunter Walk, a former director of product management at Google, said: "What's often needed at the early stages isn't more capital in a vacuum, but people with operational experience who can give their full attention to these companies."
Mr Walk is raising a venture capital fund, called Homebrew, with another former Google executive, Satya Patel.
Once an idea gains traction, builders typically turn to venture capital firms for additional financing while gradually giving individual teams more autonomy. "It's like raising children," Mr Palmeri said. "There's a point where they eventually need their own space, but you'll continue as a trusted adviser."
Some company builders invest in a mix of their own ideas and early-stage concepts that fit a particular theme. Others, like Mr Palmeri's company, focus almost exclusively on homegrown projects, though they will recruit co-founders and teams to expand the companies into independent entities. "It's a highly collaborative process," Mr Palmeri said. "By the time we look for outside funding, the idea may have taken many different shapes."
This approach resembles product development at large companies, like Apple or Google, only on a smaller scale. "The cycle of entrepreneurship can be pretty slow, so why not work on several ideas at one time?" said John Borthwick, chief executive of Betaworks, which was founded in early 2008 and is based in New York. (The New York Times Co is an investor.) "Over time, you can build common tools, databases, analytics - all the things that give each idea a head start in the marketplace," Mr Borthwick said.
One of the biggest advantages to working on several companies simultaneously is the ability to share resources.
"The dollars used in the early stages of start-ups are often highly inefficient because you spend a lot of time and money just to get the business going," Mr Jones, at Science, said. His operating company has 25 people on its staff, specialising in areas like human resources, marketing and real estate.
"The early days of a company should be spent thinking about strategy and technology, not worrying about negotiating leases," Mr Jones said.
When start-ups fail, he said, often it is not because the ideas are flawed but because management did not have the tools or resources to execute the idea, were pulled in too many directions or did not move fast enough. Mr Keywell and Mr Lefkofsky noticed the same pattern in previous companies they had started or financed.
"We decided to bring those competencies inside of Lightbank," Mr Keywell said. "The whole model is designed to reduce risk and increase reward."
Though some of the large venture capital firms have invested in ideas hatched by company builders, the concept has its sceptics.
"It's very difficult to manufacture innovation," said Andy Rachleff, a lecturer at the Stanford Graduate School of Business, former general partner at Benchmark Capital and chief executive of Wealthfront, an online financial advisory firm. "The reason most start-ups are successful is they had great insight, and the likelihood of having that killer insight more than once in a career is exceptionally low."
While this approach allows individual teams to focus on ideas without having to worry about the nuances of running a business, it can pull the company builders in too many directions.
In 2011, Evan Williams and Biz Stone, who founded Twitter, and Jason Goldman, another former Twitter executive, restarted Mr Williams' Obvious Corp as a builder platform. Recently, however, they said they would each focus more on individual ideas rather than work on several ideas at once.
"Turns out, we like focus," Mr Williams wrote in an explanation on the company's website.
Nevertheless, proponents of parallel entrepreneurship argue that the odds are better for those who pursue multiple ideas. "The percentage of companies that are successful should be greater than the traditional portfolio," Mr Jones said.
Venture partners can regard company builders as "a monstrous insurance policy", he added. "If something goes wrong with one of our portfolio companies, we can quickly dive back in and make things work." - NYT