2010 Wharton MBA graduate Parisa Arash had an idea for website that would transform the way fashion retailers connect with fashionistas.
Problem was, she did not know a single line of code. She tried working with one programmer, then another — nothing worked out. “[It’s] something that happens all the time,” she said.
Then she found VenturePact, a new startup run by Engineering and College senior Pratham Mittal and Engineering and Wharton senior Randy Rayess. The company, which beta-launched this summer, works with entrepreneurs who have business ideas but not the technical know-how to design and build their products. VenturePact styles itself as a “venture capital firm that invests product development instead of capital.”
Entrepreneurs who are not tech-savvy either have to hire a team of engineers or outsource the development. Both pose significant problems.
For a startup, hiring its own engineers is a long and difficult process. And because the startup is worth little at first, engineers have little initial incentive to work there.
Outsourcing is even more problematic. The incentives just don’t align, Mittal said. “The outsourcing company is working on an hourly basis so it makes sense for them to delay the product as much as possible.” And without a vested interest in the product, outsourced programmers might not deliver on quality.
VenturePact’s method addresses this problem by putting entrepreneurs together with reliable development teams and project managers that VenturePact employs. The company takes equity in the startup and works alongside it to grow until the startup is large enough to hire in-house developers.
“It’s an interesting solution,” said Wharton junior Isaac Sukin, founder of the campus-based venture capital firm, Dorm Room Fund. “There are a lot of founders who would like to start companies but don’t know how to build the products they have in mind.”
After a successful trial period over the summer, VenturePact received a significant profile boost when venture capitalist Josh Kopelman posted about them on Twitter.
Forty companies applied for VenturePact’s services. They chose three to work with, and things have gotten under way. Just three weeks ago the clients were paired with their development teams and project mentors.
Arash’s company, Boupp, is one of these first three companies. She describes her experience so far as being overwhelmingly positive. “In Rayess and Mittal’s case, I did trust them, I do trust them,” Arash said. “They’re really able to move very quickly and that’s really important to entrepreneurs.”
Second-year MBA student Alexander Zorub has worked with VenturePact since the summer. For him, the company fills a big gap in the system. “It’s really intense. There are very few programmers — good ones — relative to the need right now,” he said.
Though some entrepreneurs have wondered whether they would need VenturePact after the initial development stage, Mittal waved that notion aside. Entrepreneurs often don’t realize how much goes into starting a company, he said.
He pointed to the complex legal and accounting procedures relating to startups and VenturePact’s extensive networks of specialized lawyers and accountants who entrepreneurs might not know otherwise.
Managing Director of the Wharton Entrepreneurship Program Emily Cieri stressed that, more than anything, startups just need to execute. “If they have a few success stories,” she said, “VenturePact will grow.”
VenturePact remains undeterred and its ambitions undiminished. It will be launching a second venture at Harvard University this week.
Rayess said, “Our goal is, you give us some money — some part of your business — we transform your idea into a reality.”
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