Venture studios are increasingly appearing inside Fortune 100 companies and venture capital firms. They are created by large, innovative corporations. They are found in very successful, founder-focused venture capital firms. The basic definition of a venture studio is a group of seasoned entrepreneurs who assist in avoiding crucial and frequent pitfalls early in a company’s founding.
That seems simple enough, but there are four things about Venture Studios that you should be aware of right now:
- The model has some variations.
- The best early execution partners are venture studios.
- They maximize the likelihood of success.
- They represent the advancement of venture investing.
Those factors are explained in detail as follows.
Venture Studio model has several variations.
This venture model can be referred to in a variety of ways. Startup Studios, Company Builders, Venture Capital Studios, Venture Builders, and so on.
The point is that we all share the common goal of changing the game in terms of how to build and scale businesses from the ground up. That is something that all Venture Studios can agree on, even if we do it in different ways.
The range of expertise (marketing, design, development) and equity/capital structure of each venture studio will be different. Some venture studios gather their own ideas and develop them. Others are made to assist already-established startups in getting past the execution phase, into funding, and scaling.
Companies leave with a few customers, a Minimum Viable Product (MVP), and a business plan, but they are far from scalable and repeatable commercialization. Think of it as a “launch factory.”
Others, which aim to develop entrepreneurial ideas into a workable business unit or a spin-out, are aligned with particular corporations. Then there are those that incorporate a variety of these. The increased likelihood of success and the experienced entrepreneurs are the key connections.
Venture Studios are the best early execution partners.
An intriguing lens examines the statistics of startups associated with a specific accelerator. You’re likely to see something like “60% of our startups are still producing, operating, or thriving or something similar.” Sure. How many of those “graduates” have achieved scalable, repeatable commercialization? In reality, 80 percent of the startups that left accelerator XYZ are still statistically likely to fail. Does this imply that accelerators are bad? Certainly not. In the entrepreneurial ecosystem, accelerators play an important educational role. However, education can only take you so far.
Startups must have their MVP ready to hand over to customers. They require an operating plan as well as a weekly check-in to reprioritize them. They require an investor deck and introductions to those investors in order to raise capital. However, while 90% of startups fail, 70% fail during the execution phase.
For example, they hire the incorrect management team. Why? Because when they do, the discipline, tried-and-true methods, and best practices they learned in a lecture will be a distant memory. The same concept applies to the establishment of product management, the customer feedback loop, the product roadmap, the associated engineering schedule, and so on.
Venture studios maximize their chances of success.
The impact of seed-stage portfolios is to boost returns by lowering execution risk. Contract writing, sales model construction and adaptation, board selection and operation, patent or trade secret decisions, cash management, and a variety of other factors all contribute to execution risk. Most people make mistakes at some point, and as a result, they fail.
However, failure occurs most frequently after year two, as the startup progresses from launch to execution. As a result, the experienced entrepreneurs who assist the founder do so by “doing it with them” rather than “telling them how.” Studies show that experiential learning is the most effective form of learning, particularly when combined with didactic (classroom) learning. That is why aspiring surgeons must complete a residency program.
The goal is to figure out what works. What does the data imply? In the startup world, this means leveraging experience to address execution risk using tried-and-true methods and best practices.
According to the Global Startup Studio Network, startups that launch from venture studios have a 30% higher success rate. According to Santiago Perez of Polymath Ventures, the average investor return in the venture industry is 21%, but it rises to 55% when we consider venture studios.
Studios are the next step in the evolution of venture investing.
Most investors, particularly early-stage investors, like to “invest in innovation,” but they forget to innovate their own models. As operators became investors in the early 2000s and EIRs became more common, venture capital gradually evolved. Since then, the Venture Studio model has emerged as the most recent way to generate high alpha. For further details, you can take a look at our comparison between venture capital and venture studio.
Venture studios are not a difficult concept to grasp; they simply do not fit neatly into an existing investor box. We believe that the Venture Studio model is the best strategy for achieving the ecosystem’s game-changing breakthrough in the area.
Satom is a venture studio that focuses on ideating, validating, and scaling to empower small and middle-sized blockchain companies. We love blockchain technologies, particularly Web3-related ones. So if you have any ideas to run a Web3 startup or face any difficulties while running your startup, you can contact Satom for helps.