Venture Mechanics, Led by Ron Wiener, Opens “Berkubator” for Tech Startups, Introduces Three New Companies
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focus on the day-to-day structure and backbone of running a company. The second is that something is broken in the current system and needs fixing. That is what’s interesting here: In his long experience, Wiener has lived (or seen) just about everything that might go wrong with a company, from knock-down, drag-out management fights and bad funding decisions to failed market strategies and burned investors. And now he wants to do something about it.
The idea of Venture Mechanics is to align investors with entrepreneurs from the very beginning of a company, and then streamline the management team so it can focus on just what it’s good at. Part of the model, which will be tested out in the coming year or two, involves selecting a founding team that will typically lead the company for only the first 12 to 18 months, followed by a “takeover” team that will lead the next stage of growth. It’s usually the case that the founders are not the right people to lead a company once it becomes stable and profitable, Wiener says. Yet most young companies today are led by founders who won’t want to give up control.
“This is a radical departure from the world we’ve been living in,” says Weiss, the finance expert.
Here’s how it works, in a nutshell. Venture Mechanics regularly organizes what it calls “spaghetti sessions” where it invites a dozen or so entrepreneurs and investors to a restaurant to brainstorm startup ideas. They hash out business models and market strategies and see what sticks. As the ideas evolve, Venture Mechanics puts together a small management team around the fledgling company and handles the mundane duties that often take up founders’ time—things like legal issues, insurance, office space, human resources, and employee benefits.
In this new model, most companies will be set up as LLCs, for tax-saving reasons, and to pay out profits to stakeholders efficiently; this also avoids stock options, which usually end up being worth nothing because they are tied to a liquidity event or an “exit.” The idea is that the Venture Mechanics companies will be launched on about $250,000 of initial capital, and will need $1 million or less to get to cash-flow break even. Venture Mechanics is looking for an ownership stake in (and eventually revenues from) small, niche technology companies. And here’s the key: they are not looking to sell these companies, but rather to own them for the long term and use their profits to … Next Page »