To profit or to thrive? There’s a difference in these two measures of entrepreneurial success, and BuildGroup Management LLC is putting millions into the latter.

Announcing a $330 million funding round, holding company BuildGroup is seeding its long-term mission to nurture enterprise software startups with staying power. With a 20-year outlook on its investments, BuildGroup wants to free startups from quarterly pressures and time-stamped exit strategies.

Infused with cash from unnamed, private investors “from Texas and the Rocky Mountains,” BuildGroup intends for this to be its first and only funding round. Founded in 2015  by Rackspace Inc. alumni Lanham Napier, Jim Curry and Klee Kleber, alongside Pete Freeland from General Catalyst, the company plans to use the capital to grow its portfolio from four to 10 startups over the next five years.

BuildGroup has already deployed $57 million across four investments, which include the government app maker CSDC Inc., Python data science platform Anaconda Inc., cloud-based computerized maintenance management system Fiix Inc., and applied science and strategy consultancy Valkyrie Intelligence LLC.

Curing short-termism

Armed with their own successful startup and investment stories, BuildGroup’s founders have set out to address an ongoing problem in enterprise computing: Short-term milestones are forcing shortcuts in business decision-making, and that ultimately incurs more debt in the long term, according to Napier, who served 14 years as chief executive of Rackspace.

“Startups have a burn rate, and they’re making product decisions with a milestone in mind because they don’t have a permanent funding model,” Napier said in an interview. “They know they’re taking shortcuts and often make [computing] architecture decisions that ultimately incur debt.”

The industry saying goes, “There is never time to do it right, but always time to do it over,” and that’s the mindset BuildGroup is fighting. “For us, let’s just do it right the first time,” said Napier.

Open-source technology is a good example of a startup’s conundrum in decision-making, since it can be difficult to predict the ultimate success of one platform iteration over another. While open source provides readily available code, its employment can be hasty for a startup lacking the time and talent to differentiate its end product. BuildGroup hopes to provide the funding and executive insight for startups to take the time to create proprietary solutions for the enterprise and public sector that can make money.

“In the long run, we’re obsessed with greatness. It’s one part people, one part product, one part customer, one part culture and one part business model,” he said. “We think of those five dimensions holistically. I think part of the proprietary magic dust is at the intersection of those five. I think we’ll make products people will love, and a [work] culture where more people will show up.”

The stakes are personal

With $30 million of his own money invested in BuildGroup, the stakes are high for Napier. His founding team, as well as the new investors behind today’s funding, are dedicating a “significant chunk” of their personal wealth to BuildGroup’s progressive business model, according to Napier.

With industry giant Dell Technologies Inc. reverting to a privately run business model, at least for now, and Amazon.com Inc.’s willingness to take on massive losses to fulfill its business vision, BuildGroup is not alone in their desire to transcend investor pressures of quarterly profits. Most recently, famed investor Warren Buffet spoke out against the business burden of “short-termism,” calling for fewer quarterly market predictions on publicly traded companies.

Looking to do for startups what Berkshire Hathaway Inc. does for IPO-bound businesses, BuildGroup won’t shy away from milestones just because its model avoids today’s pressure cooker mindset. Reiterating the company’s five tenets, BuildGroup promotes a performance culture, developing talent and listening to customer feedback.  

“People get in such a hurry, it’s a hunter-gatherer view instead of a farming culture,” said Napier. “We can take our time, play a long game somewhat uniquely. Mother Nature has a lot of wisdom — I can’t hack that process. Startups need the freedom to pursue success.”

Photo: BuildGroup