Venture studios have been making big waves lately, touted as a “new model for entrepreneurship” with recent features in the Harvard Business Review, Forbes and Stanford Business (just to name a few). But is all the buzz warranted?
Many would argue that the venture studio model is disrupting the traditional way of building and investing in ventures. By bringing in all-star entrepreneurial teams to ideate, incubate, launch and scale startups, they’re achieving higher success rates than other entrepreneurial models, including incubators and accelerators. Industry players are catching on fast, with investors like Bezos Expeditions, Foundry Group and Emergence Capital, as well as corporations like P&G, Nike and Amazon investing in and applying the model to accelerate growth and boost profits.
Sound intriguing? We’re about to give you a peak behind the curtain, diving into exactly what a venture studio is, how it works and most importantly, why they have higher success rates than traditional incubators and accelerators.
What is a venture studio?
Venture studios, aka startup factories or venture builders, specialise in building ventures from scratch. Unlike traditional incubators or accelerators, they take a more hands-on approach to venture building, with blended, multidisciplinary teams of experienced entrepreneurs, designers, content creators, marketers and growth marketers working together to ideate cutting-edge business ideas and turn them into profitable businesses.
One of the key benefits of working with a venture studio is that they provide a wider range of services beyond the typical funding and mentorship provided at incubators and accelerators. They’re often involved in every phase of the venture, from concept development to scale, taking on different tasks, including product development, validation, marketing, fundraising, talent acquisition, and more. The approach provides ventures with the crucial support needed to get off the ground and thrive, not just during the beginning stages but in the long term.
How do venture studios work?
Venture studio teams launch multiple ventures a year in parallel tracks, taking the lead in everything from concept ideation to product development to marketing all the way to the scale phase. The approach is highly cost-efficient, optimising available services, talent and resources by sharing them across multiple ventures. Here’s an eagle-eye view of the process:
- Validation is key to every stage of the venture development process from idea to scale.
- Data-led decisions are made on which concepts to build, pivot, or kill.
- Concepts with high market potential are carefully nurtured through the MVP phase.
- Successful MVPs are spun out as independent ventures or turned into corporate spin-ins.
In many cases, both the venture studios and the founders they recruit share equity in the ventures they build, giving them a meaningful stake in their success or failure. This rewards model has proven successful across startup ecosystems and VCs alike, attracting high-quality entrepreneurial talent with proven track records for success.
How are venture studios different from incubators and accelerators?
While accelerators, incubators and venture studios share some similarities, they have several key differences.
Most accelerators provide programs that last around 12 weeks, some offering seed funding in exchange for equity. Programs focus on training, mentoring and networking, culminating in a demo day to gain potential investors. Their goal is to “accelerate” growth for companies that already have an MVP. On the other hand, incubators provide startups with shared coworking spaces, networks, and operational expertise but tend to provide little or no funding. Their goal is to “incubate” early-stage ventures, usually before the MVP stage.
In contrast to both these approaches, venture studios don’t fund or work with existing startups. They create multiple ventures in-house from scratch and then recruit experienced founders to grow them.
Do venture studios actually have higher success rates?
Venture studios have gained popularity in recent years as a new approach to entrepreneurship, but are their success rates higher? Well, let’s take a look at some of the numbers. According to a 2022 report by Global Startup Studio Network (GSSN):
- Venture Studio startups have a 30% higher success rate than traditional startups.
- 84% of startups coming out of studios go on to raise a seed round.
- 72% of those ventures make it to series A (compared to 42% of traditional ventures).
- Time from zero to series A is 25,2 months for venture studio startups compared to 56 months for traditional startups.
- The average internal rate of return (IRR) for startup ventures is 53% compared to 21,3% for traditional startups.
So, why do venture studios have higher success rates?
These are just a few reasons:
Startup studios use shared resources, networks and infrastructure across multiple ventures, reducing costs and getting the most out of each resource. They use a validated approach to identify only a few high-potential ventures per year and then put 100% of their focus into bringing them to life. Essentially, they use factory-like efficiency to build companies and scale their growth at light speed.
The best entrepreneurial talent
Startup studio teams are made up of experienced entrepreneurs, growth hackers and experts with a proven track record of successful business ventures. They work under equity reward models, which gives them skin in the game, resulting in higher long-term success rates.
Startup studios are equipped with established processes, experienced team members, and a thorough validation approach that enables them to identify potential challenges and address them proactively before they escalate into major issues. This allows startup studios to operate more efficiently and confidently, reducing the likelihood of setbacks and increasing their chances of success.
Proven business model
Venture studios excel at identifying promising concept ideas and launching them quickly using lean validation techniques. The approach enables them to test and validate ideas without wasting time and resources on concepts that may not succeed. As a result, they have high long-term success rates that can be replicated across ventures.
When it comes to the effectiveness of venture studios, the numbers speak for themselves. Now, what if we were to pair this approach with the existing assets and scale strengths available in corporations? In short, a surefire formula for venture success.
By partnering with venture studios, large corporations can supercharge their corporate assets to generate data, develop new concepts, validate assumptions and reach product-market fit with greater speed and efficiency.
So why wait? If you're ready to take your corporate assets to the next level, there's no better time to start exploring the benefits of this approach.
Corporate venturing is a proven strategy to boost innovation, accelerate growth and build new revenue streams. We can help you harness the power of your unique corporate assets to create a pipeline of profitable ventures that will future-proof your business for years to come.