CEO Insider

During and After a Pandemic, Diversified Companies Represent a More Efficient Investment Alternative

Why I Co-Founded a Diversified Platform Company

With a career focused on what’s next, I’ve led multiple technology firms ranging from startups to public companies. My business involvements relate to digital revolutions and how emerging technologies will disrupt our lives. By early 2016, I came to the conclusion that Virtual Reality (VR) and Augmented Reality (AR) would be the next big disruptors.

With an opportunity to enter the early stages of a powerful new technology cycle, the most logical next action might be for me to lead or start an immersive technologies company. The immediate entrepreneurial step would be to identify a specific niche and develop a firm within one aspect of this wide ranging industry. However, throughout my career in innovation, I have come to realize that single-focus companies have a higher likelihood to fail, especially in early stage industries.

Instead, I decided to form a first-of-its-kind VR/AR platform company dedicated to developing innovative enterprise solutions. Seven out of the world’s ten most valuable companies use a platform business model, but when it comes to early cycle investing this model has rarely been effectively utilized.

How Platform Companies Work

Today, my company, The Glimpse Group, is a successful, diversified platform company composed of nine unique VR/AR subsidiary companies. The Glimpse model combines the best features of an accelerator, incubator, and holding company, all while maintaining the diversification of a venture portfolio.

Platform companies are not focused on one particular product or service. Instead, they consist of multiple, collaborative subsidiaries that form a diverse ecosystem. Typically, these subsidiaries develop solutions complementary to one another. This structure enhances cross-functional innovation and leverages a unique outlook for best practices.

A More Efficient Investment Strategy

Markets and early stage investments are unpredictable. However, a platform company, even an early stage one in an early stage industry, provides a path to more predictable growth.

For an investor looking to invest in an emerging industry, there are a few alternative investment paths:

  • Diversifying the portfolio by sourcing and investing in multiple early stage companies requires significant effort in time for due-diligence.
  • Investing in an already diversified venture fund is challenging because these dedicated trend focus funds are rare in the early stages of an industry.
  • Investing in a single early stage industry company, significantly increases failure risk.

Platform company subsidiaries work insync with each other under the guidance of a seasoned executive team. By investing in one parent company composed of unique subsidiaries, you have a consistent source for news and updates. Your ability to obtain concrete research, direct questions, and engage in industry variant opportunities are all emboldened.

Why Platform Companies Are Most Prepared for a Recession

When compared to other business models, platform companies can offer investors a competitive edge especially in times of economic uncertainty because platform companies…

  • Are able to pivot solutions and address changing customer needs.
  • Apply a “lean startup” model to a whole industry.
  • Are more agile.
  • Run lean and think smart.
  • Adjust faster to developments and allocate resources efficiently.
  • Apply portfolio management theory to the corporate structure.

Platform Structure Leads to More Agile Workflow

The power of a platform company is catalyzed by its diverse, internal ecosystem. Each subsidiary operates as an independent entity. When a problem demands a multidimensional solution, subsidiaries have pooled agency. This structure builds creative, productive work environments for developing complex, innovative solutions.

Additionally, human capital can be symbiotically distributed throughout the ecosystem. Within a platform company, subsidiaries have access to a shared network of motivated, experienced, and capable staff.

This personnel structure enables not only the retention of competitive, quality talent—offering a dynamic work environment and an increased firm capacity to invest in premier candidates—but allows for the subsidiaries to focus on their industry tailored projects while maintaining inter-departmental connectivity.

Furthermore, there is an additional flexibility within talent resourcing. If a subsidiary needs extra help, team members from other subsidiaries can temporarily join a project and offer assistance—all with little to no time and money wasted on job postings or onboarding.

The Mental Perks of Synergistic Subsidiaries

Bringing together people from different backgrounds and industry expertise can be especially useful for lateral thinking. Lateral thinking was first coined by Edward de Bono in 1967.

This thinking technique “encourages thinkers to disrupt logical thought and arrive at the solutions from another angle.” For example, the General Manager or CTO of one subsidiary can apply their knowledge of an industry into an entirely different sector.

The platform company model, especially in the early innings of a tech cycle, enables a lean cross-application of subsidiary solutions. Through well managed communication circuits, subsidiaries can collaborate and adapt on specialized solutions.

Subsidiary B might provide feedback for a solution developed by Subsidiary A. While giving their input, Subsidiary B might realize that A’s solution can be tweaked and applied to their industry. With no limitations in sourcing key insights for development, Subsidiary B can quickly and economically build laterally on Subsidiary A’s efforts for an industry customized solution. This flexibility ensures that all subsidiaries have a detailed pulse on client needs and an increased lifetime of firm invested innovations.

Inevitably, this industry specific, high-capacity, money-smart approach leads to solutions and services that are like the best pair of suit pants—not only tailored, but also flexible

Focus on your passion

Another unique element of a platform company lies within its business development structure. The subsidiaries focus all their efforts on their passion: building their products and services and taking them to market. They get to live in their creativity, build big ideas, and stretch the unexpected. In complement, the parent company assists with the supplementary back office functions like legal and accounting as well as the essential task of capital raising.

A platform company structure represents a more efficient mentality for workplace productivity. Subsidiaries do not have to overburden their cognitive load by stressing over legal and financial documents and researching information that is outside of their domain of expertise.

While a subsidiary develops their solutions, the parent company’s senior management can provide expert mentorship. Different minds can come together to provide feedback and look at the applications of solutions through diverse perspectives. By playing to independent interests and strengths, managers can maximize an environment of productivity and positive workplace culture.

Increase Likeliness of a High ROI

More subsidiaries means more chances to reach the market, which leads to more successful monetization opportunities. A platform company puts the serial entrepreneur model on steroids.

By casting a widened net, there is an increased prospect for certain subsidiaries to evolve into major market players. As it is impossible to perfectly predict the futures of all industries and innovation, the diversification of subsidiaries means the larger firm can better pair work initiatives to demand trends.

This greater room for growth and market domination means a better investment for you. While developing multiple solutions, platform companies are also more likely to garner significant IP over time. At Glimpse we have already filed for 15 patents, many of them with inventors that are part of multiple subsidiaries.

Moving Forward

COVID-19 caused an economic shutdown and the possibility of a recession is looming overhead. These are challenging and unpredictable economic times. Now more than ever, we all must be proactive, not reactive.

Our society is adjusting to an abnormal new normal. Many companies will be stuck in their old ways and they will unsuccessfully attempt to operate with a “business as usual” mentality. The companies that do not innovate will fail.

Platform companies are agile. They’re synergistic. They can morph quickly if necessary and adjust to real world feedback. Platform companies maintain the creativity and responsive bounce of a small-start up with the expertise and capacities of a leading firm.

I am happy to connect if you want to learn more about my company’s structure and the possibilities of developing your own platform companies.

Written by Lyron Bentovim. Have you read?

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Lyron Bentovim
Lyron Bentovim, Founder and CEO of The Glimpse Group, a virtual reality company in New York City that has produced VR solutions for a variety of businesses and institutions such as Panera Bread, Snapchat, Subway, Chanel, Cornell, Fordham and more. He holds an MBA from Yale School of Management and a Law degree from the Hebrew University. Lyron Bentovim is an opinion columnist for the CEOWORLD magazine. Follow him on LinkedIn.