Venture studios are currently popular. Within corporate innovation, they are being discussed more and more. Although the interest in venture studios is positive, there is some confusion associated with it.

While businesses are creating their own internal venture studios, my focus will be on venture studios that are independent of major corporations. Let’s find out six reasons to partner with venture studios in this article.

1. Your company is frequently constrained by Legal, compliance, regulations, legacy technology stacks, security, and other risk-mitigation measures.

Most businesses face constraints. It is difficult for operationally focused organizations with long-standing products and systems to explore new technologies or opportunity areas. Large corporations frequently face legal or compliance risks that are too difficult to overcome. Startups thrive on speed and iteration, whereas corporate systems are not built for either.

2. Your company should prioritize short-term goals.

Everything is measured in quarters, which is especially true for publicly traded companies. It’s difficult to invest time or money in a new venture that will take years to reach any meaningful scale when you’re focused on meeting quarterly sales targets. H2 and H3 innovations that are transformative and disruptive initiatives, quickly appear to be cost-center sinkholes with no real ROI potential.

3. Your organization lacks entrepreneurial resources.

Most businesses are made up of smart, hardworking individuals who want their employers to succeed. However, large organizations are not structurally designed for entrepreneurs, those who think outside the box, and those who do not follow traditional career paths. Every company has mavericks and hustlers, but they are difficult to identify, empower, and incentivize.

Finally, large corporations are not designed to foster rapid innovation outside their core — to create new ventures or startups that could one day be billion-dollar enterprises. This is where venture studios come in.

4. Venture studios reduce the gravitational pull of corporations.

By creating startups on the outside, you can reduce your influence and focus on your core business. A startup is technically a self-contained entity. It has its own governance structure and is incorporated separately. While there are numerous variables to consider, this usually allows the startup to forge its own path. In contrast, an internal venture may be pulled away from net innovation and growth opportunities in order to achieve the corporate’s more immediate goals.

5. Venture studios share the financial risk, resulting in incentives that are aligned.

According to the earlier definition, a venture studio must also invest in the startups it assists in the creation of. While large corporations have a tendency to want to “own everything,” this is not required for the creation of scalable value. Instead, venture studios work with corporate partners and other investors to share risk and align incentives. 

Everyone is motivated to grow the pie when everyone owns a piece of it. Furthermore, because a startup requires higher levels of funding, a corporation may not want to incur that expense on its own. Especially if the startup is not assisting in meeting short-term targets, other investors (such as angel investors and venture capitalists) are more comfortable making these bets.

6. Venture studios are more efficient.

Startups win because they can iterate and learn faster than the competition. Startups can do everything faster as independent entities, from hiring to building products to pivoting. Startups struggle with scaling because the skillset, approach, and systems required are vastly different from those required in the early days, when your businesses are built to do exactly what they are built to do. 

Venture studios, as creators and investors in startups, are a great “tool in the toolbox” for scaling, whereas larger companies are better suited to scaling. This is why the relationship between a corporate partner and a venture studio is crucial, as it can result in a genuine unfair advantage in the creation and growth of new businesses.

Is a venture studio the best option for your business?

It all depends on your business strategy. Without a doubt, the concept of incubating new ventures and spinning them out as independent startups appears to be quite radical, but it is not. There are ways to build necessary controls and governance into the model around what the startup can and cannot do, or how it might be re-acquired. They still benefit from the external founders, with upside potential, external capital, and the ability to move extremely quickly. 

In general, the Venture Studio Model outperforms other similar approaches to entrepreneurship. If you are having trouble and looking for a strategic venture studio to partner with, you can contact hello@satom.vc, where you can get both capital and other effective support to help your startup run faster.