What It Takes to
Create New Businesses

This Brief is deliberately narrow. It is not a general view on corporate venture building, banking or innovation. It reflects KT11 Venture's perspective on creating new businesses across seven connected domains of investment and capital markets in CEE: Private Banking, Wealth Management & Investing; Asset Management; Capital Markets; Corporate Finance; Treasury; Custody & Securities Services; and Digital Assets, DeFi & Tokenisation.

These are the businesses we work on. They are regulated, capital-intensive, infrastructure-dependent and shaped by specific economics, customer relationships and market structures. The observations that follow should be read in that context.

Across these markets, senior decision-makers have spent much of the past two decades operating through one period of uncertainty and structural change after another.

The global financial crisis. A sovereign-debt crisis. A pandemic. War in Europe. Geopolitical fragmentation. Inflation and rapidly changing interest rates. Consolidation and changing ownership structures. The rise of digital-first competitors and platform-based distribution. Crypto-assets, blockchain and tokenisation moving from the margins towards regulated financial markets. And now AI, with consequences for technology, work, customer behaviour and business models that are still difficult to judge.

The infrastructure has changed as well. Cloud and API-based technology, external financial infrastructure, new data capabilities and increasingly digital market infrastructure have altered what can be built and how. Customers have changed with it: digital access, price transparency, self-directed investing and expectations shaped outside traditional financial services have changed the competitive reference point.

In CEE, several of these forces can be amplified by smaller economies and capital markets, currency movements, political and regulatory change, shifts in international capital and the proximity of geopolitical risk.

In businesses built around trust, regulation, capital and existing customer assets, uncertainty naturally raises the threshold for taking risk.

And creating a new business is risky.

There is no established revenue base. No certainty that customers will come. Economics have to be proven. Technology has to work. Regulation has to be navigated. Capital has to be committed before the outcome is known.

For an established investment, wealth or capital-markets business, improving what already exists feels considerably safer and can therefore be the entirely rational choice.

The customers are known. The products exist. The organisation understands the model. Budgets can be defended. Performance can be compared with competitors. And if the market turns against you, there is usually an external explanation.

This is not an argument that established institutions are incapable of creating new businesses, or that their managers are inherently conservative. There are important exceptions, including institutions that have committed capital and management attention over long enough horizons to build genuinely new businesses at scale.

The question is why this remains difficult enough to be the exception rather than the routine outcome of innovation activity.

The difficult case is not a failing business.

For domestic institutions and regional banking groups in CEE, the harder strategic problem is often a business that still works.

Established products generate revenue. Existing distribution reaches large customer bases. Pricing, product architecture, relationship models and affiliated products can still produce attractive economics. That gives management every rational reason to protect the current P&L, improve what exists and postpone a more fundamental break with the model.

In CEE, those incumbent economics can be especially attractive. Recent EBA supervisory data show many CEE banking markets reporting returns on equity above 15%, while several Western markets remain below 10%. That does not mean every CEE institution or business line is more profitable. It does mean that, in many markets, the opportunity cost of disrupting economics that already work can be unusually high.

The danger is that decline rarely arrives as a single event. It can be gradual: margins compress, customer behaviour shifts, younger customers form different habits, new competitors first look too small to matter, technology changes faster than the operating model, and market share moves a few points at a time. The organisation adapts enough to remain viable, but not enough to create the next growth engine.

The danger is not that the existing business suddenly stops working. The danger is that it keeps working long enough to delay building what comes next.

That can leave an institution financially healthy while becoming strategically more fragile. The pattern is visible well beyond financial services: strong incumbent positions, established economics and organisational scale can coexist for years with a gradual loss of competitiveness before the problem becomes undeniable.

The same logic can apply across investment and capital markets. A profitable wealth-management, asset-management, brokerage, capital-markets, custody or treasury business can continue to generate attractive returns while customers, technology, distribution, market infrastructure and competitive economics change around it.

A new proposition may require lower prices, different products, another customer relationship, a different technology stack or an operating model that initially produces weaker economics than the incumbent one. Judged against the current business, it can therefore look unattractive precisely when it is most important to explore.

Playing it safe can be rational for the current P&L and still be dangerous for the institution.

Managers are accountable for the businesses they run today. Their budgets, targets, teams and often their compensation are tied to them. Building something genuinely new can require capital and management attention to move away from those businesses, challenge existing revenue pools or create an organisation whose success may ultimately reduce the importance of the one they currently lead.

None of this requires managers to be irrational or resistant to innovation. Protecting the existing business can be entirely rational from the perspective of the individual business, function or manager — even when creating something new might be rational for the institution as a whole.

Business as usual is expected to protect current revenue, operational resilience and existing customer obligations. A new business is trying to create future revenue under uncertainty. Put both through the same resource-allocation logic and the existing business will often win — rationally, by the criteria of the core.

There is another asymmetry. When an established business underperforms, the causes can usually be distributed across markets, competition, regulation, technology or the wider economy. Creating a new business is a much more explicit management choice.

A failed new business is different. Someone chose to build it. But playing it safe is also a decision.

Digital challengers have used the same period of uncertainty and structural change to build businesses outside the incumbent model — with different products, economics, technology and distribution. Some will fail. Others are already competing for customers, assets and revenues that established institutions once considered their own.

The strategic question is therefore not whether creating a new business carries risk. It does. The question is whether not creating one carries less.

Defending the existing business is not a passive choice. As competition intensifies, it can mean years of restructuring, cost reduction, tighter budgets and difficult decisions simply to protect revenues, margins and market share — without any guarantee that the position can ultimately be preserved.

Creating something new carries a different kind of risk. But it also creates the possibility of new customers, new revenues and new value — for the institution, its clients and its other stakeholders.

Innovation became an easy substitute for building.

The economics described in the previous chapter help explain why innovation activity became so attractive.

It gave established institutions ways to respond to change without immediately having to make the harder commitment to create a new business. Transformation programmes, innovation teams, labs, accelerators, startup collaboration, venture clienting and corporate venture capital all offered different ways to improve, explore, experiment, partner or invest.

All of these approaches can create value. Many were never intended to create standalone businesses in the first place.

They also made innovation increasingly visible. Startup challenges, hackathons, demo days and innovation events provided tangible evidence that an institution was engaging with new technologies, entrepreneurs and new ways of working.

Visibility itself is not the problem. The problem begins when innovation activity is mistaken for the creation of new businesses.

An institution can run successful innovation programmes, launch pilots, work with startups and invest in emerging companies without creating a new business of its own. Those activities may produce learning, partnerships, new capabilities or improvements to the existing business. Those are legitimate outcomes.

But they are different outcomes.

And that distinction becomes important when innovation is expected not merely to improve or explore, but to create the institution's next businesses.

The problem is therefore not that these models failed at what they were designed to do. It is that most of them were never designed to carry an opportunity all the way into a standalone business.

At some point, innovation has to enter the accounts.

A venture is different. In the sense used in this Brief, it is a separate legal entity built around an economic opportunity, not a programme inside somebody else's budget. It consumes capital. It incurs costs and losses before it produces profits. It has customers to win, revenues to generate and economics to prove. It creates assets and liabilities. It can require further capital, be stopped, written down, sold or become valuable in its own right.

Management can change. Sponsors can leave. Innovation budgets can be reduced. Strategies can be rewritten.

The venture still exists.

It may ultimately succeed or fail. But both outcomes are economically real.

That changes the shareholder-value test. The relevant questions are no longer how many ideas were generated, pilots launched or startups engaged. They are how much capital was committed, what evidence it produced, which businesses were stopped before more capital was lost, which reached customers and viable economics, which deserved further investment — and what value the resulting businesses created.

The objective is not to produce more innovation activity. It is to create an asset that did not exist before.

The scarce assets are still scarce.

Much has changed in how a financial business can be built. But many of the assets on which investment and capital-markets businesses depend have not become easier to create.

Established financial institutions already operate inside the regulated and market infrastructure of their industries. Depending on the institution and the market, their assets can include banking or investment-services licences and regulatory permissions; stock-exchange, clearing and settlement access; custody and securities-account infrastructure; primary-dealer or market-making roles; payment and cash-management rails; balance sheet and funding capacity; established market and counterparty relationships; and access to a broader banking and investment-product range that can support cross-sell and more complete client propositions.

They also bring customers, assets under custody or management, distribution, trusted brands, proprietary data and accumulated knowledge of their markets.

These are not peripheral advantages. In many financial businesses, they determine whether a proposition can be offered at all, how quickly it can reach the market, what economics it can achieve and how credibly it can scale.

And they remain difficult to replicate. A licence can take time and capital to obtain. Customer assets and relationships have to be won. Distribution has to be built. Market roles and infrastructure access require regulatory, operational and institutional capability. Balance sheet cannot simply be created by a better technology stack.

These are exactly the kinds of assets that a challenger can spend years trying to obtain — or may never be able to replicate economically at all.

That creates an interesting asymmetry. Established institutions already hold many of the assets that new financial businesses need. What has changed much more fundamentally is the other side of the equation.

What challengers once had to build has become easier to buy.

Digital challengers historically started with a different set of advantages. They could build around modern technology, focused propositions, specialist teams and digital distribution without first having to change an established organisation and its legacy infrastructure.

Increasingly, those capabilities are no longer exclusive to companies built from scratch.

Cloud infrastructure, APIs, specialised software platforms and external financial infrastructure have changed what a new business has to build itself. Depending on the proposition, important components of onboarding, execution, custody technology, portfolio infrastructure, payments, data and core systems can increasingly be bought, configured or integrated from specialist providers.

The same is increasingly true of specialist capability. Product, engineering, design, regulatory, legal and other expertise can be assembled around an opportunity rather than permanently replicated inside every organisation. External partners can contribute technology or products they have already built. In the right structure, each side can contribute what the other would find expensive or slow to reproduce.

AI pushes this further, but it should not be used to make claims the evidence does not yet support. There is good reason to believe that AI can increase the research and analytical capacity of a small senior team and reduce the cost and cycle time of pre-scale experimentation. There is not yet comparable evidence that it materially reduces the steady-state operating cost of a regulated financial business.

The capabilities that once distinguished a digital challenger are becoming more accessible. Many of the institutional assets it needs to operate and scale a financial business are not.

That changes what has to be built.

A financial institution no longer has to choose only between building everything inside its existing organisation and watching somebody else build the new business outside it.

More of the technology can be sourced. More specialist capability can be assembled around the opportunity. Existing products and infrastructure can sometimes be used rather than recreated. External companies can contribute capabilities they have already developed.

That changes both the cost of experimentation and the point at which an institution has to make a large commitment.

A new proposition can increasingly be researched, modelled, prototyped and tested before a full organisation is built around it. Technology choices can be validated earlier. Potential partners can be tested. Customer behaviour and willingness to pay can be explored. Regulatory assumptions can be challenged before they become expensive architecture decisions.

That matters because the first question should not be how to execute a predetermined business plan. It should be whether there is a sufficiently attractive business to build at all.

The cheaper it becomes to answer that question, the more opportunities can be investigated seriously — and the easier it becomes to stop weak ones before substantial capital is committed.

Growth cannot remain somebody else's problem.

An established business can be optimised for a very long time. Costs can be reduced, products improved, channels digitised and existing customers served more efficiently.

None of that answers where the next business will come from.

Optimising today's business and creating tomorrow's growth are different management tasks. An institution that does only the first is making an implicit decision about the second.

Growth therefore cannot be treated as the residual outcome of transformation, innovation activity or the annual strategy process. If creating new businesses matters, somebody has to be explicitly responsible for creating them.

Stop confusing ideas with businesses.

Financial institutions do not generally suffer from a shortage of ideas. They have strategies, innovation teams, technology roadmaps, consultants, startup programmes and employees who see opportunities in their markets.

The harder problem is what happens next.

Who turns an opportunity into a business? Who tests whether customers will pay? Who assembles the technology and regulatory architecture? Who commits the first capital? Who stops the case when the evidence is weak? And who continues building when the evidence is strong?

The hard part is not having the idea. It is carrying it into a business.

If the objective is new-business creation, the mechanism has to extend all the way from opportunity to operating business.

Turn the challenger playbook around.

Established institutions have spent years studying digital challengers: their technology, customer experience, pricing, speed and operating models.

There is a more useful lesson to take from them.

Challengers did not inherit the incumbent model and try to improve every part of it. They selected what customers valued, discarded what they did not need and rebuilt the rest around a different economic and technological architecture.

Established institutions can turn that logic around.

Start with the assets challengers find hardest to replicate: licences and regulatory permissions, customers and assets, distribution, custody and securities infrastructure, market access, balance sheet, payment rails, trusted relationships and institutional knowledge.

Then combine those assets with what has become easier to access: modern technology, specialist infrastructure, entrepreneurial talent, external products and partners, and increasingly AI-enabled building capabilities.

The automotive industry offers a useful parallel. Competitive learning does not have a permanent direction: companies that were once treated mainly as followers can become reference points for technology, speed and operating models. The lesson is not to copy another market mechanically. It is to learn from whoever has become better at the problem, then combine those practices with advantages they do not have.

Small team. Wider capability network.

The fact that more technology and specialist capability can be accessed externally does not mean that new-business creation itself can simply be outsourced.

The team responsible for a new business does not need to contain every skill required to build it. It does need to retain the capabilities that determine what should be built, why it could work and how the pieces should fit together.

A small core team therefore needs to combine domain judgement, opportunity judgement, business-building capability, architecture, orchestration and accumulated learning.

Wider capabilities can then be assembled around the opportunity: technology and engineering, product and design, specialist regulatory and legal expertise, financial infrastructure, distribution capabilities, external partners and capital.

External does not mean outsourced. If the architecture, decision knowledge, regulatory learning, vendor relationships and reusable components disappear with each supplier or project team, the ability to build does not compound.

Technology can be bought. Engineering capacity can be added. A platform can be licensed. External specialists can be hired.

But none of those can decide whether the business is worth building.

Choose the people for the problem, not the methodology.

New-business creation across investment and capital markets in CEE requires an unusual combination of capabilities.

Innovation expertise without understanding the underlying business is not enough. Banking expertise without experience in creating something new is not enough. Strategy without execution is not enough. Technology without commercial judgement is not enough. And a model imported from another market is not an answer simply because it worked there.

A generic venture-building methodology cannot tell you whether custody creates an advantage in a particular business, whether existing distribution economics make a new proposition unattractive, whether a Treasury opportunity can scale regionally, whether tokenisation changes the economics of an instrument, or whether a banking or investment-services licence creates a genuine right to win.

The same applies geographically. CEE is not a smaller version of Western Europe and it is not one homogeneous market. Market size, customer wealth, currencies, regulation, product conventions, financial infrastructure, distribution structures and incumbent economics differ across countries.

A Western solution cannot simply be resized for CEE. And CEE expertise without deep knowledge of the business being built is equally insufficient.

Remove any one of the three and the risk of building the wrong thing rises sharply.

There are two ways we can build from here.

The analysis in this Brief leads to a practical choice. An institution can decide that creating new businesses should become a permanent capability of its own. Or it can decide that a specific opportunity is worth building without first creating a permanent internal venture-building organisation.

Neither route is inherently superior. The right choice depends on what the institution wants to own: the repeatable capability, or a role in a specific venture.

A · Build the capability with you

For institutions that want to create new businesses repeatedly across investment and capital markets, KT11 Venture can work with the institution to design, establish and activate a permanent new-business-building capability under the institution's control.

The institution brings the assets that can create an advantage: customers, distribution, regulated infrastructure, capital, data and market knowledge. KT11 Venture brings business-building capability together with domain judgement and CEE market understanding across the businesses in which it operates.

The objective is not an innovation programme and it is not to outsource venture building. It is to establish a permanent institutional capability that can identify, validate and build new businesses — and carry learning from one venture into the next. That permanence matters: creating new businesses repeatedly requires ownership, management attention and capital commitment that survive individual programmes, sponsors and budget cycles.

B · Build the venture with you

A permanent institutional capability is not always necessary. Sometimes the starting point is a specific opportunity that appears worth building.

In those situations, KT11 Venture can develop the business through an appropriate venture structure under KT11 Venture control, combining its domain and business-building capability with institutional partners where their assets create a genuine advantage.

Depending on the opportunity, an institution could participate as a strategic partner, investor, distributor, infrastructure or licence partner, or in another role that fits the business — without first having to create its own permanent build organisation.

The venture is then built around the business and the assets it needs, rather than around the institution's existing organisational structure.