Guide

Intro to Company Design

It's no secret that the real owner of Company Design is Sequoia. I decided to take some of my learnings working with, for, and helping invest in early-stage holding companies and put together some fundamental frameworks on how to start, build, and grow a holding company model, specifically fit for external capital.

The idea of "company design" for early-stage holding companies is a structured approach to creating and optimizing a company from the ground up, specifically tailored to the unique dynamics of holding multiple assets or subsidiaries at an early stage. Traditional companies, particularly startups, focus on product development, scaling, and operations. In contrast, a holding company contains several diverse assets or entities, which adds complexity to management, growth strategies, and resource allocation. "Company design" provides a blueprint for building and scaling holding companies effectively by focusing on structure, governance, operations, and value creation across multiple ventures.

Why I Started Working on "Company Design" for Early-Stage Holding Companies

I developed the concept of "company design" for early-stage holding companies to address the challenges that arise from managing and investing in multiple entities under one corporate umbrella. Unlike single startups that focus on building a product, holding companies need a clear design that allows flexibility, scalability, and potentially long-term (eek!) sustainability across different business models and industries.

I've been spending the last ten months talking to some very new, interesting holding companies that are surrounded by individuals to find out how they got to where they are in terms of Complexity, Size, Scale, etc. In short, there are a lot of types of holding companies, but not many are crafted in a way practical for venture investment. This guide is an attempt to bring you in the right direction as an investable holding company that is investable.

Key elements of these guides include the following:

1. Staying Loose

Early-stage holding companies need a flexible structure because they may encompass startups at various stages of development—some pre-revenue, others scaling, or even mature businesses generating cash flow. Each of these requires different levels of attention, capital allocation, and strategy. Following a venture-focused "Company design" allows the holding company to pivot easily between nurturing new ventures and scaling more established ones with the interest of exit. This approach prevents rigid structures that could hinder the development of individual businesses within the portfolio.

2. Keeping true "Founder Focus"

Holding companies with multiple subsidiaries or assets need effective governance frameworks that balance centralized decision-making with the autonomy of individual entities. "Company design" creates a governance structure that outlines how decisions are made at both the holding company level and subsidiary level, ensuring smooth operations while empowering each business to innovate. This reduces potential bottlenecks in decision-making and creates clear lines of authority and responsibility.

3. Allocating… A lot of things.

One of the biggest challenges for early-stage holding companies is how to manage capital and resource allocation across multiple ventures. "Company design" provides a framework for:

Capital Allocation: Establishing a strategy for distributing financial resources across subsidiaries, ensuring that high-potential ventures get the necessary investment, while also managing risk across the portfolio.
Shared Resources: Creating systems for shared operational resources like finance, marketing, and HR that can serve all the entities within the holding company, reducing overhead costs and increasing efficiency.

This approach ensures that capital and resources are deployed strategically, with a focus on creating value across the portfolio rather than solely at the holding company level.

4. Fresh "Venture Air"

Including a "company design" approach to structuring and growing your personal holding company encourages a culture of that good ol'fashioned innovation across all businesses under the holding company umbrella. By structuring the company in a way that supports autonomy at the individual business level, it allows each subsidiary to operate with an entrepreneurial mindset. At the same time, the design ensures that innovations from one business can benefit the broader holding company through shared insights, technology, or market approaches.

5. Spend Money.

One of the largest differences between all kinds of holding companies and a venture-investable one is the intensity of growth and exit expectations. Similar to a singular company, founders have to focus on growth - with occasional sustainability - but mostly growth. And that means spend, so that structure is new. The design accounts for potential liquidity events, mergers, and acquisitions, or spin-offs, ensuring that value is retained and grown over time.

6. Navigating Risk.

Early-stage holding companies face a unique set of risks, such as over-investing in a single venture, spreading resources too thinly, or failing to create synergies between different subsidiaries. "Company design" incorporates risk mitigation strategies such as diversification across industries or geographies, establishing internal checks and balances, and implementing performance metrics to track the success of each venture. This helps ensure that the failure of one asset doesn't jeopardize the entire holding company.

7. Value Creation Through Synergy

One of the core ideas behind "company design" is creating synergies between the holding company’s various subsidiaries or investments. By designing the company to encourage collaboration and cross-pollination of ideas, resources, and talent, the holding company can extract more value from its portfolio than if each entity operated independently. This could manifest through shared technology platforms, co-marketing initiatives, or operational efficiencies across businesses.

8. Positioning for Investment and Scalability

"Company design" is also intended to make early-stage holding companies more attractive to investors. By creating a clear and strategic blueprint for how the company operates, grows, and allocates resources, it increases investor confidence. Investors are more likely to back a holding company with a well-thought-out structure that demonstrates its ability to manage risk, scale efficiently, and capitalize on opportunities across multiple industries.