The three building blocks of a successful venture factory

Companies are now turning to building new businesses to fuel innovation and open new revenue sources. Half of CEOs surveyed in the fifth annual McKinsey Global Survey on new-venture building view the development of new businesses as one of their top three strategic priorities, and 90 percent of investors advocate for increased or maintained new-business-building investments.¹“How CEOs are turning corporate venture building into outsized growth,” McKinsey, October 22, 2024. Furthermore, according to other McKinsey research, new ventures are expected to drive over half of companies’ growth in the next few years.²“2021 global report: The state of new-business building,” McKinsey, December 6, 2021.

To bolster the chances of success, a key finding from our analysis, as well as our own experience, is that as companies build more new ventures, they become better at it. The most experienced builders, in fact, are twice as likely to see success as are novice builders. And, on average, they see 12 times more revenue in a business’s fifth year than do novices.³“How CEOs are turning corporate venture building into outsized growth,” McKinsey, October 22, 2024.

For this reason, companies need to not only build new businesses but also develop “business-building muscle” through a new venture factory (NVF). The NVF is a dedicated organization that creates and manages standardized tools, repeatable processes, and standardized capabilities to support the launch of new businesses. This specialized unit focuses on incubating and scaling new ideas, driving innovation and growth more quickly and precisely. When sufficiently developed, the NVF can be mobilized within days.

To better understand how to develop a successful NVF, we examined the strategies of “expert builders”—organizations that consistently launch multiple new ventures annually with high efficiency and success rates.

Three building blocks

Our analysis of companies that have successfully developed an NVF capability highlights three crucial areas of focus.

1. Developing incubation capabilities

The NVF acts as an in-house incubator by providing a pool of tested and standardized resources that each new venture can use. These incubation capabilities (tools, processes, best practices, seed capital, expertise, and key talent) are designed to directly support the common needs of multiple ventures. Key elements include:

• Hard-to-find expertise: a core team of founders and serial business builders who understand deeply what is needed to build, run, and scale a new venture; and access to specialized knowledge for acquiring companies or technologies
• Operational know-how: designers, developers, and product specialists who support rapid prototyping and product development; data experts who help ventures gain insights and refine their offerings based on data-driven analysis; and a dedicated team to build brand identity and drive market visibility for each new venture
• Tech infrastructure and data assets: standardized tools, APIs, and platforms that streamline operations, simplify access to corporate systems, and reduce risk (while providing new ventures with sufficient freedom of action); and access to curated and approved data sets or data products (such as customer, services, product)

By centralizing these resources, the NVF can quickly allocate resources, codify learnings that can be shared across all ventures, and develop capabilities that have broad application.

2. Accessing parent company assets

A key element of a successful new venture is the ability to use an asset or capability within the parent company that provides a competitive advantage. The NVF plays a critical role by providing ventures with controlled access to the elements of that competitive advantage (such as data and products), as well as mediating access to experts and leaders in the parent business. To scale this role across multiple ventures, the NVF works with functions and leaders in the parent company to put in place protocols, service-level agreements (SLAs), and practices to facilitate the effective engagement between the corporate mothership and each individual new business. The NVF should provide access to:

• Customers and supplier networks. Ventures gain access to the parent company’s existing customer base, supplier relationships, and partnerships, giving them a competitive edge.
• Financial support. The NVF coordinates with the parent company to lock down necessary financial commitments and releases those resources based on milestones rather than rigid budgets.
• Internal systems and expertise. The NVF helps ventures access essential internal resources such as legal, risk, and compliance support, as well as standardized tools (APIs) and data pipelines to access relevant corporate systems.
• Corporate leadership. Ventures receive direct access to senior leadership, such as the CEO or members of an innovation board, who can champion their initiatives and expedite decision-making.

In some cases, the NVF can also be decentralized and embedded within various business units, ensuring that it adapts to the needs of different parts of the organization.

3. Optimizing for the portfolio

Getting the full value from building multiple businesses requires the NVF to have portfolio management skills. In this way, the corporation not only increases the chances of overall success by distributing risk but also creates a central point for managing decisions and allocating funds for the maximum benefit of the business. The key tasks of the NVF include:

• Securing a business-building mandate from corporate leaders. An NVF needs the corporation to make a long-term commitment and provide a mandate to operate. That means explicitly articulating new-business building as a priority in the business’s strategy, validating it regularly with the board, and communicating it to various stakeholders. The level of commitment can evolve over time as the NVF gains experience and the value becomes clearer to the corporation. To secure the commitment, the NVF needs to provide a clear vision (for example, what kinds of businesses it will build to achieve the corporation’s broader goals) and methodology for building the businesses (for example, how it will raise and deploy capital).
• Developing a fact base to determine which ventures to build. The NVF analyzes relevant data to evaluate opportunities, assess needs and assets in the incumbent corporation, validate concepts, and gauge trends and successful models that can be replicated. This approach provides a fact base that allows the NVF to systematically develop the most promising businesses and resist any ad hoc or “pet project” efforts.
• Managing funds. The NVF operates similarly to a venture capitalist, in that the corporate entity commits a set amount of money up front with the expectation of a range of returns over a specified period of time. The NVF then tracks performance and allocates that funding based on stage-gate reviews and milestones that each new business hits. Depending on the structure, the NVF can invite limited partners to join the fund. Importantly, the NVF is also empowered to cut funding when a business continually underperforms.
• Allocating talent and resources. As the NVF develops new businesses, it will need to determine what resources (capabilities and people) to embed in the new business and which to carry over into the next one it builds. This balance helps to ensure that the capabilities and skills of the NVF itself are best applied to future new businesses.

This portfolio management process is organic and evolves with experience. Companies will often launch one business, adjust their approaches and methodologies based on how that one performed, and then launch another one. Over time, the NVF develops and standardizes new processes and best practices.

The NVF in action: Three case examples

Successful NVFs rely on the three key building blocks we’ve outlined, but how these elements come together—and the order in which they’re prioritized—will differ depending on the company, industry, and region. The following three case studies show how different companies have used these building blocks.

1. Saudi Arabia’s homeownership revolution: Establishing nurturing capabilities

ROSHN Group, a pioneering real estate developer, is a cornerstone of the Kingdom’s goal of increasing homeownership rates. To help achieve this, ROSHN has developed its own venture factory to not only contribute to the growth of the core business but also create independent new vehicles for value creation.

The first business the ROSHN venture factory developed was a “super-app” that allowed users to discover and purchase homes in minutes while also providing a wide range of home services and marketplace options. ROSHN used the development of this app to build capabilities to apply to other new businesses. That included codifying best practices, providing capabilities for future ventures, building an outsourcing function to access capabilities, and creating a flexible recruitment structure to find and keep nontraditional tech talent.

The venture factory also standardized an operating model based on agile processes typical of start-ups. Benefits include streamlining development and nondevelopment processes (such as procurement). It also standardized negotiation practices, helping to reduce the time required to form strategic partnerships from months to just a few days.

Impact

The app exceeded expectations by selling more than 1,500 housing units in its first year, significantly reducing conversion times and improving lead conversion rates. The success of the approach has also influenced ROSHN’s own operations. The company’s recruiting approach, for example, has evolved to enable it to hire entire tech teams remotely, giving ROSHN access to a larger and more diverse pool of talent.

The success has motivated the venture factory to build and launch other businesses, some of them building directly on the super-app as a powerful lead-generation engine to cross-sell other products and services to clients.

2. Banco Industrial’s digital transformation through an NVF and Zigi

Banco Industrial, the leading financial institution in Central America and the Caribbean, established an NVF to strengthen its position in the highly competitive digital finance market. The NVF’s first initiative was the launch of Zigi, a mobile app designed to help consumers manage their payments and finances seamlessly from their phones. Zigi was created as a fully independent new venture, with its own management team, processes, talent, funding strategy, and business targets.

Beyond developing Zigi, the NVF served as a strategic enabler, bridging the gap between the app and Banco Industrial to ensure the necessary support for its success. Its key responsibilities included:

• Building fully digital new businesses. The NVF played a crucial role in orchestrating existing banking services with entirely new solutions to create fully digital financial experiences. This involved integrating Banco Industrial’s assets with cutting-edge innovations, ensuring Zigi operated as a truly digital-first financial platform. By leveraging a mix of legacy systems and newly developed services, the NVF enabled faster go-to-market strategies and a superior digital experience for users.
• Strategic alignment. As Zigi’s features and capabilities evolved, the NVF ensured they aligned with Banco Industrial’s broader strategy. This included targeting the right customers, developing a complementary value proposition, and integrating existing capabilities. The NVF also facilitated the collection of rich customer interaction data, upgrades to core systems to enhance feedback loops, and data-driven personalization of future offerings for both Zigi and the bank.

Impact

Zigi has achieved more than 1.2 million downloads, maintaining a low customer acquisition cost (CAC) of $6 per user (for reference, digital banks without physical branches typically have a CAC ranging from $5 to $100 per active customer).

Through insights gained from Zigi, the NVF has also driven the development of a dynamic ecosystem of digital and physical financial solutions, enhancing customer experiences and creating value across Banco Industrial’s network.

Moreover, the NVF continues to evolve Zigi and explore new AI-driven ventures, including credit solutions and a white-label payments module designed to support banks and retail players looking to expand into fintech in the region.

3. The ENGIE Factory story: Taking a portfolio approach

ENGIE Factory was established in Singapore as the start-up studio of ENGIE Group, a French multinational power company. This strategic location allowed ENGIE Factory to collaborate with the Singapore Economic Development Board through its Corporate Venture Launchpad (CVL), a program that helps Singapore-based companies drive innovation through venture creation and start-up partnerships. Through CVL, ENGIE Factory gained access to valuable resources, including experts and advisers specializing in building within the sustainability field, as well as connections to new customers and partners.

ENGIE Factory has found that developing and scaling new businesses from scratch is the best model for its regional activities. This approach gives ENGIE greater control over each venture, ensures strong alignment with ENGIE’s decarbonization goals, and offers a path for long-term growth and value creation. To achieve this, ENGIE Factory developed a distinct portfolio approach that led to a range of benefits, including:

• Committed resources and clear processes. ENGIE Factory secured a firm commitment of resources from the ENGIE Group and established a governance structure to manage funding effectively. An investment committee oversees progress, makes funding decisions (such as releasing resources based on clear milestones), and establishes guardrails (including setting capital limits and requiring external funding when seed funding runs out).
• A consistent and transparent investment approach. ENGIE Factory follows an established playbook for each stage of business development, which helps accelerate decision-making, build on best practices, and highlight markers of progress. If a venture struggles, an NVF team can spot it quickly and step in with operational support, such as sales interventions, pivoting to a new approach, or closing the venture.
• A focused portfolio of zero-carbon ventures. ENGIE Factory focuses on ventures that promote energy efficiency, green mobility, and renewable energy, aligning with ENGIE’s global decarbonization goals. A prime example is the EVDots start-up. ENGIE Factory scaled this electric vehicle (EV) “charging as a service” start-up and partnered with ComfortDelGro, one of Singapore’s largest land transport companies, to roll out EV chargers, helping Singapore reach its target of 40,000 charging points by 2030.
• Shared resources. A shared infrastructure reduces costs and fosters a collaborative environment among founders. Four ventures in the Philippines, for example, shared resources including legal support, company formation guidance, and office space.
• Funding support. ENGIE Factory encourages joint funding applications. For instance, two ventures from Singapore and Australia, respectively, are applying together for a cross-country collaboration grant. Additionally, one venture raised funds through an introduction made by a fellow ENGIE start-up, showcasing how ENGIE Factory’s network opens new funding channels.
• Talent connections. When one venture needed a technical expert, another founder connected it with a suitable candidate who became a co-founder, demonstrating ENGIE Factory’s role in linking talent across ventures.

Impact

ENGIE Factory has launched 12 start-ups focused on decarbonization. Through shared resources, collaborative funding efforts, and strategic talent connections, ENGIE Factory maximizes each venture’s impact while keeping every initiative aligned with ENGIE’s broader sustainability objectives.

These three cases highlight how a venture factory enables serial business building. By focusing on three essentials—incubating new ideas, tapping into the parent company’s strengths, and smartly managing the portfolio—companies can launch and scale ventures faster and with more resilience. These elements are a core part of a recipe for creating real value and navigating inevitable market shifts.