Startup studio

A startup studio, also known as a startup factory, or a startup foundry, or a venture studio, is a studio-like company that aims at building several companies in succession. This style of business building is referred to as "parallel entrepreneurship".[1]

History

Idealab, founded by Bill Gross in 1996, was one of the first to introduce the 'incubator industry', and has started over 75 companies. Idealab was founded to test many ideas at once and turn the best of them into companies while also attracting the human and financial capital necessary to bring them to the market.[2][3]

The startup studio trend had really begun to gain momentum around 2008. Today, there are over 65 startup studios across the world, of which 17 have been built since 2013.[4]

Types

There are several types of startup studio models.

"Builder" studios

A builder startup studio focuses on creating and developing a company, mostly from internal ideas.[5] Notable examples of this model are Atomic,[6] Pioneer Square Labs,[7] and Rocket Internet.

Unlike business incubators and accelerators, venture builders generally don't accept applications concerning their portfolio of companies, and the companies instead "pull business ideas from within their own network of resources and assign internal teams to develop them."[5]

According to VentureBeat, Nova Spivack was "part of the early technologists who pioneered the venture production studio model. He wrote about the model in 2011 at a time when most of its production elements were still in gestation. Nova actually invented the Venture Production Studio term, calling it a 'new approach to building startups.'"[5]

"Investor" studios
See also: Venture capital financing and Corporate venture capital

Investor venture studios bring in early-stage external startups and help them grow by providing them both funds and expertise. Studios Betaworks and Science, Inc. fall in this category.

At the very end of the spectrum, some VC firms are growing closer to the startup studio model by intervening very operationally in the startup they invest; for instance Andreessen Horowitz and Google Ventures. However, this participation is usually limited to some areas, such as recruitment, fund raising, or PR relations.[8]

"Incubator" studios
See also: Business incubator

Incubator startup studios are accelerators that get equity in exchange of providing funds and expertise, but also get involved in building the startup.

Overview

Business model

Startup studios are often mistaken with startup incubators and startup accelerator, or operational Venture Capital firms.

The startup studio model is defined by three important criteria:[9][10]

  • Startup studios focus their business on creating startups

Unlike startup incubators or VCs, the main goal of a startup studio is to build a startup from the ground up. This implies an important involvement of time, dedication and resources to working operationally on the project for a period of time.

  • Startup studios build several startups following a repetitive process

One focus of a startup studio is the rapid development and prototyping of new products. They work on multiple startups and projects simultaneously instead of building one project at a time.

  • Startup studios build an infrastructure that enables an efficient venture building process

Startup studios own an infrastructure made of pooled resources: technical tools, management processes, and a multi-disciplinary team. By building several projects a year with the same team, startups studios can re-use this infrastructure, software and best practices across products.

Features in early stage ventures
Startup studios in the early-stage entrepreneurship environment

Startup studios occupy a specific place in the entrepreneurship environment, based on the amount of human and financial support they provide to the startups:[11]

  • Incubators and accelerators focus on providing advice and some operational guidance to the startups they select. They are mostly providing ‘Human Capital’.
  • Startup studios provide a high level of ‘Human Capital’ along with some ‘Financial Capital’. They dedicate a team to the development of their startups and inject limited funds early stage in their startups.
  • Angel investors and early-stage VC focus more on ‘Financial Capital’: they provide funds to help their portfolio startups develop, sometimes along with some guidance and strategic help.
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See also

References
  1. Lapowsky, Issie (November 25, 2014). "The next big thing you missed: tech superstars build 'startup factories'". Wired.
  2. Farmer, Ryan (2004). Idealab: First Mover, Last Survivor. California Institute of Technology.
  3. "Bill Gross: A Devotion to New Ideas | Stanford eCorner". ecorner.stanford.edu. Retrieved 2016-08-29.
  4. Chernova, Yuliya (March 11, 2015). "Human Ventures Names CEO as Startup Studios Proliferate". Venture Capital Dispatch via The Wall Street Journal.
  5. Diallo, Ali (January 18, 2015). "How 'venture builders' are changing the startup model". VentureBeat. Retrieved 2016-05-09.
  6. Geron, Tomio (2017-01-23). "Atomic, With First Fund, Looks to Upend Venture-Capital Model". Wall Street Journal. ISSN 0099-9660. Retrieved 2017-07-27.
  7. "Pioneer Square Labs Grabs $12.5M To Dream Up, Then Kill Off Or Spin Out Startups". TechCrunch. Retrieved 2019-01-05.
  8. O'Dell, Jolie (August 13, 2013). "In a valley of VC clones, Google Ventures does more than just write checks". Venture Beat.
  9. Elziere, Thibaud (September 16, 2014). "Startup Studio: the 3rd Co-founder Model". Medium.
  10. Rao, Leena (February 16, 2013). "The Rise Of Company Builders". TechCrunch.com.
  11. Elziere, Thibaud (April 22, 2015). "Startup Studios: The Rise of Human Capital". Medium.
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