On March 13, 2026, the Built to Hold Venture Design Lab (B2H VDL) hosted the first in a two-part webinar series titled Designing Ventures for Profits, Not Exits. The session was presented by Erik Simanis and Patrick Donohue of the Built to Hold lab, with special guest Mark Yde (Senior Associate, Ajinomoto Group Ventures), with a live audience that included corporate innovation managers, investors, entrepreneurs, and researchers. A lively Q&A and discussion segment closed the hour.
The central argument of the session was that innovators who build ventures to hold for their realized profits—rather than to exit through a sale or IPO—are routinely applying an innovation approach that was never designed for their financial reality. That approach is Lean Startup.
The session made the case that Lean Startup’s defining financial characteristics—very low probability of success, long validation timelines, and persistent losses—make financial sense only within the structure of a venture capital fund, and that transplanting this method into a build-to-hold context is, as the presenters put it, “disastrous.”
You can view a recording of this session at the bottom of this post.
About the Lab and the Presenters
The B2H Venture Design Lab is a partnership between Half-Solved, the Center for Sustainable Global Enterprise at Cornell University, and the International Council on Systems Engineering (INCOSE). Its mission is to advance and disseminate the science of market creation and the practice of venture building for those seeking enduring profitability rather than exit. The Lab’s work spans training events (workshops, webinars, and an upcoming Cornell course), as well as applied research projects, including a current collaboration with MIT Alumni Angels focused on applying this new science to venture screening and due diligence.
Erik Simanis, who opened the session, has spent thirty years focused on the problem of how to innovate new, market-creating ventures profitably. His career spans doctoral research at Cornell, field testing of a venture methodology with corporations including DuPont, SC Johnson, P&G, and Sightsavers, and co-founding a venture incubation firm that guided ventures for Barclays, BMW, Pearson, Disney, Mars, and cleantech startups in emerging markets. Patrick Donohue’s background spans zero-to-one venture innovation inside and alongside companies including Facebook and Automattic. Mark Yde came to the Lab from a background in biotech research and commercial science, then VC, before moving into corporate venture at Ajinomoto Group Ventures.
What Was Presented: Slide-by-Slide Summary
Market Creation as the Focus
The presenters began by clarifying the scope of the discussion: they were speaking specifically about market-creating ventures—those that bring genuinely new core functionality into the world and spawn new markets. Examples offered included the microwave oven, microfinance, the credit card terminal, off-grid solar, commercial spaceflight, and plant-based meat.
This distinction was important: the financial dynamics of building something truly new are far more demanding than incrementally improving an existing product line.
Lean Startup: The Dominant Paradigm
Patrick Donohue introduced Lean Startup as today’s universal venture-building paradigm, noting that many practitioners use it without knowing the name. At its core, Lean Startup describes an organization searching for a repeatable and scalable business model under conditions of extreme uncertainty.
The method proceeds through customer discovery, selection of a beachhead customer, development of a minimum viable product (MVP), rapid build-test-learn iteration, and continual experimentation to find product-market fit (PMF). If PMF is not achieved, the team pivots and repeats. Donohue summarized the method with a vivid metaphor from the slides: it is the equivalent of “building the plane while you’re flying it.”
Lean Startup’s De Facto Financial Parameters
The presenters then surfaced three financial characteristics that result directly from the Lean Startup search process. First, the probability of success—defined as a venture reaching profitability—is extraordinarily low, at under two percent. Second, the validation timeline to reach profitability routinely exceeds ten years. Third, ventures sustain persistent losses throughout, typically exceeding forty percent of revenue.
Donohue noted that no one routinely tracks startup success rates against the metric of profitability—a fact that is itself telling—but that the lab was able to extrapolate them by analyzing Startup Genome data and from reviewing post-IPO company filings.
The Amazon Case Study: Two Views of Success
To make the financial stakes concrete, Simanis presented an original analysis of Amazon, widely cited as the exemplar of the Lean Startup success story. Amazon was founded in 1994, took nine years and $1.9 billion in losses to reach operating profitability, and today holds a $2.25 trillion market cap while commanding 38% of U.S. e-commerce and 30% of global cloud computing. It is, as Simanis put it, “a true black swan event.”
The analysis viewed that success through two very different financial lenses. From the venture capital perspective—using Kleiner Perkins’ $8 million investment in 1995, exited four years later at IPO—the return was approximately 55,000%, translating to an IRR of roughly 385%.
From the corporate perspective—imagining Amazon had been incubated inside Walmart and held for its actual thirty-year cash flows plus terminal value—the IRR is 32%. The session showed that this 32% holds up against corporate hurdle rate benchmarks (18–25% for new ventures), but barely, and only because the venture became the fifth most valuable company in the world.
More sobering was the next layer of the analysis. The 32% IRR assumes a 100% probability of success—what the presenters called the “crystal ball view.” When real-world failure rates are applied as probability-weighted adjustments to the cash flows, the returns deteriorate sharply: at a 10% success rate, IRR falls to 21%; at 5%, to 18%; at 1%, to 14%. Even incubating the fifth most valuable company in history delivers sub-hurdle-rate returns once the cost of the inevitable failed ventures is factored in.
Why Lean Startup Makes Sense for VC Funds
Simanis then explained why, despite these parameters, Lean Startup remains rational within a VC fund structure. VC funds spread bets across portfolios of one hundred or more companies simultaneously, capturing the statistical benefit of diversification. More critically, VC funds exit—they sell ventures at a multiple of revenues, relatively early and while the venture is still unprofitable. This allows the fund to capture all potential future profits in one large, time-compressed windfall. The presenters described this as the “get out of jail free card”: a VC fund can generate strong returns even if none of its portfolio companies ever becomes profitable.
The key performance indicator driving VC returns is product-market fit—evidence of revenue traction—not profitability. Solving for profitability might actually reduce revenue growth rates and hurt fund returns.
Why This Fails in a Build-to-Hold Context
The session’s financial centerpiece was a scenario designed to illustrate the mechanics of the problem for build-to-hold innovators. The scenario: a venture requiring $50 million of investment over ten years to reach $500 million in revenue with a 10% net profit margin (generating $50 million annually in free cash flow from year eleven onward), evaluated at a 20% hurdle rate.
Simanis walked the audience through the time value of money dynamics: $50 million arriving in year eleven is worth only $6.7 million in today’s dollars; by year twenty, that same annual cash flow is worth just $1.3 million. The venture’s NPV only turns positive when a terminal value (the present value of perpetual cash flows beyond the modeled period) is added—meaning the investment’s financial case rests almost entirely on assumptions about what the business will generate decades into the future. Even before adjusting for failure probability, this is a precarious basis on which to commit $50 million upfront.
Once probability weighting is applied, the scenario deteriorates rapidly. At a 20% success rate, the effective IRR falls to 13%—below the hurdle rate. To recover to a 20% IRR at that success rate, the venture would need to generate not $500 million in revenue, but $800 million. At 10% success, the IRR falls to 9%, requiring a $1.6 billion opportunity to compensate. At 5%, a $3 billion opportunity is needed to justify the investment. The presenters pointed out that all these examples are at a high success rate than <2% which new ventures face.
The conclusion Simanis drew: for anyone building ventures to hold for their cash flows, searching for a profitable business model by experimenting in market is, structurally, a non-starter.
Discussion: Perspectives from the Field
The final segment brought Mark Yde into dialogue with the presenters and included live participation from audience members.
Yde reflected on his trajectory from scientific research through VC and into corporate venture, noting that the lean startup paradigm “logically and emotionally feels quite corrupt” when approached with a scientific mindset trained in empiricism and methodical rigor. He identified survivorship bias as the most insidious dynamic in the VC ecosystem: celebrated successes like Amazon and Uber are the survivors; the ninety-nine ventures that tried to build the same thing and failed are invisible. He argued that the probability adjustment is the “real killer” and that corporate innovators must build very few ventures with very high rates of success, rather than spreading bets as a VC fund can.
Donohue raised the phenomenon of corporate innovation groups that are repeatedly shut down, noting that internal teams face financial accountability constraints that VC-backed startups simply do not. He cited the Disney+ example, in which the level of investment required for the streaming venture contributed to executive departures. He described corporations as subject to “fundamental laws” that don’t apply in a venture-backed context: they cannot simply fail and try again.
A participant challenged the group on framing, noting that thoughtful corporate innovators have long distinguished between “fail fast” and “learn fast,” and that reducing the broader field to its most reckless expression risks alienating practitioners who are already operating with rigor and customer-centricity. The presenters acknowledged the point, clarifying that their critique targets something structural in the Lean Startup method—not the carelessness of its practitioners—and that even disciplined, customer-focused application of the customer discovery, MVP, build-test-learn loop still produces structurally low probability of success. The reason, Simanis argued, lies in something embedded in the method’s DNA that will be the subject of Part II.
Another seminar participant asked about how corporates can change venture returns and navigate investment committees. Yde offered that corporate VCs, unlike financial VCs, are deeply attentive to profitability potential and probability adjustment, since their M&A screening parameters center on EBITDA-positive trajectories—not just revenue. He noted that financial models presented to corporate investment committees should explicitly address probability of success, not simply model optimistic scenarios. Simanis added that the real goal is to innovate in a way that changes the success rate itself, not merely to model for it: corporate turnarounds, he observed, achieve 30–40% success rates on complex legacy businesses, suggesting that much higher venture success rates are achievable with the right methodology.
Looking Ahead: Part II
The session closed with a preview of Part II, scheduled for Friday, March 20, 2026. Where Part I diagnosed the problem—the financial incompatibility between Lean Startup’s parameters and the build-to-hold context—Part II will introduce the solution: a framework of three pillars of robust venture design grounded in systems engineering principles. The central shift is from searching amidst uncertainty to engineering for robustness—building ventures designed to withstand and absorb uncertainty rather than discover their way through it. The three pillars to be introduced are Financial Vital Signs, Invisible Profit Barriers, and a Testable Train of Logic.
Key Takeaways
The following core points summarize the session:
- Lean Startup is the dominant venture-building paradigm globally, used knowingly or not by the vast majority of new venture teams.
- Its defining financial parameters—sub-2% success rate, 10+ year validation timelines, and persistent losses above 40% of revenue—are structurally compatible with a VC fund but incompatible with a build-to-hold financial structure.
- The Amazon case demonstrates that even a once-in-a-generation success generates only modest, sub-expectation returns when evaluated on a hold-for-profits basis and probability-adjusted for real-world failure rates.
- Time value of money creates a structural trap: early losses compound while future cash flows are heavily discounted, making the financial case for most build-to-hold ventures dependent on terminal value assumptions stretching twenty or more years forward.
- Venture capital’s true advantage is not a superior innovation method—it is the ability to exit before profitability, compressing decades of potential profits into an early, risk-removing windfall.
- Build-to-hold innovators—including corporations, legacy entrepreneurs, and deep-impact investors—require an innovation method that drives up the probability of success while driving down both the time and capital required to validate venture profitability.