Explaining startup studios

Your guide to understanding the world of startup studios
March 28, 2023

‍With the startup world booming, disruption and behavioural change is just around the corner. Almost every industry has adapted.

While there are winners, it’s no big secret that some startups fail.

Entrepreneurs are not alone in their struggles, they need to find experienced people ready to work with them and develop their ideas to make sure they succeed, or at least put the odds in their favour.

What comes to mind and what is often the main road is for innovators to join startup accelerators or incubators, you don’t however need cohort-based entities to help in the beginning of your startup. Some businesses can partner up with you.

That’s what startup studios are for. Although most of them are fairly recent, they are often confused with an involved venture capitalist or with a funding incubator. Startup studios however have their own identity.

Let’s take a closer look at what they are.

What startup studios are:

Startup studios try to get new companies off the ground with support and resources. They’re here to give an initial impulse that carries the project.

As studios gain more experience, they start developing their own ways to classify data, they find partners, create templates and communication themes.

This set of usable tools can be leveraged to not only help small business entrepreneurs but also corporations and large enterprises just as well.

A startup studio, also called startup foundry, startup factory, or venture studio, is a business that repeatedly builds startups out of market-tested disruptive ideas.

It does so by using its pooled resources.

Let’s put it another way:

a startup studio is a startup that creates startups.

It is an organisation of experienced founders, investors, and experts that either develops its ideas or partners with entrepreneurs if they have a disruptive business idea.

It then utilises its pooled money, expertise, and other resources like financial capital, team, strategical plans, management processes, and technical tools to help you establish the business.

As opposed to accelerators and incubators, studios will not work with you on a cohort basis, they will partner with you just like a cofounder would do, they will expect equity in return for their hands-on style.

While the studio collaborates closely with you, it might be working with several entrepreneurs at the same time, a style of building businesses called parallel entrepreneurship. As a business developer in the studio, you are known as a subsidiary, the studio itself is known as a holding company.

Once your startup is acquired or when you go public, the startup studio backs out from your business, just like other stakeholders do.

Why you'd want to consider joining one:

Here are a few reasons why you could consider a Startup Factory:

  • Efficiency
  • Large networks
  • Close development

Numbers don’t lie, startups co-founded by startup studios provide better returns to investors and scale faster.

The Internal Rate of Return or IRR for startups created by studios is 53%, on average non-studio startups have a 21% IRR.

The time between creation and seed round tells the same story, 10,6 months for startups created by startup studios, non-studio startups take, on average, more than 3 times that amount of time.

In short, venture studios accelerate the funding process for startups.

One reason for the success of famous studios is their systemised approach to company building, they create systems that streamline the venture building process.

From the initial thought of creating a company to its launch, everything is clearly defined and planned out.

By building companies over and over, studios have developed an insane efficiency that can directly benefit its founders.

When building a company, you need a bit of everything, and usually you find what you need by knowing someone who knows someone.

Startup studios magnify that effect, most of the time, founders of a studio are successful builders with their own networks, having led other companies, they know the ins and outs and different people you can contact for help.

Particularly potential partners, mentors and investors.

When compared to incubators, venture studios don’t aim at building cohorts to compete on Demo Day, they aim at maximizing the development time and creating the best possible outcomes.

By being more intimate, studios deeply understand the different problems at each stage of creating a startup.

They can build impactful business models, thoughtful designs and user flows as well as product journey, roadmaps and most importantly making sure funding is secure.

How startup studios work:

Here’s a quick rundown on how startup studios work, they usually follow these steps :

  • Ideation. The first stage is getting an initial idea on a given subject, it involves brainstorming, selecting problems to solve and sometimes getting outside help to create a disruptive business idea.
  • Validation. The second stage is checking the feasibility and scalability of your idea by conducting market research and going through the internal screening mechanisms developed by the studio.
  • Creation. If an idea makes it through, it comes to stage three, the development process. The idea is to start creating by making prototypes and improving them. An initial business plan is thought out. If an idea fails at this point, it either loops back through the creation process or is completely dropped.
  • Spinning out. By succeeding in the creation stage, the idea reaches stage four, the team now spins out and works under their own executive and support team. A team can be hired from outside the studio or be a part of it even if the latter is more often the case.
  • Scaling-up. The final stage is the scaling up. At this point, the idea should be precisely drawn out, the business plan working and the team operational. The business then raises funds and starts scaling up. At this point the startup studio is as involved as required and can just as well sit out waiting for dividends to come.

Startup studios or venture studios develop lots of businesses, they know how to face most issues and therefore optimize the different steps needed to create a business from scratch. As an entrepreneur, you can leverage their experience and network to significantly accelerate your growth and shorten the process.

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