What Is a Venture Studio Model?
The venture studio model is a framework for creating, developing, and launching new companies, characterized by its hands-on approach and active involvement in the startups it builds. Rather than finding existing startups to financially back, as a venture capital firm would, startup studios develop startup ideas and then find startup founders to run and scale them.
There are also several types of venture studio models, such as corporate venture studios, niche studios, tech transfer studios, and industry-agnostic studios.
The venture studio model is particularly attractive for entrepreneurs who value the support and resources it offers and for investors who appreciate the reduced risk and diversified portfolio. It's a collaborative, resource-rich environment aimed at efficiently turning innovative ideas into successful, scalable businesses.
How Do Venture Studios Work?
Idea Generation and Validation: Venture studios often start by generating a pool of business ideas. They may use market research, industry insights, and trend analysis to identify potential business opportunities. Once an idea is selected, it undergoes validation to ensure product-market fit and viability.
Resource Allocation: Unlike traditional startup companies that often struggle for resources, venture studios provide the necessary resources, such as initial funding, office space, and technology. They have an in-house team of experts in areas like product development, marketing, and go-to-market strategy.
Team Building: One of the key aspects of venture studios is their ability to assemble a strong team. They often have a network of entrepreneurs, technical experts, and other professionals who can lead and work on the new venture.
Development and Launch: With resources and a team in place, the studio then focuses on developing the product or service's minimum viable product (MVP). This phase involves building, testing, and iterating the product based on feedback.
Support and Scale: Post-launch, the venture studio continues to provide support to the startup and the startup founder chosen to run the venture. This could be in the form of additional funding, strategic guidance, or operational support. The goal is to help the startup scale and become a sustainable, independent business.
Exit Strategy: Venture studios also plan for an exit strategy, which may involve selling the startup to a larger company, taking it public, or finding other ways to get a return on their investment.
Venture Studios vs. Incubators and Accelerators
Venture studios often create their own business ideas based on market research and their own expertise. Unlike accelerators or incubators, they're not just supporting startups; they're actively involved in the ideation process.
They provide substantial resources, including capital, expertise, and operational support, to the startups they build. This can be significantly more than what incubators offer.
Equity and Ownership
Venture studios usually take a larger equity stake in the companies they help to create, reflecting their higher level of involvement and resource commitment.
Active Management Role
They typically play an active role in the management and daily operations of the startups, often installing their own team members in key positions.
Incubators and Accelerators
Supporting External Startups
Incubators and accelerators generally support external startups that come with their own business ideas. They provide a nurturing environment for these early-stage companies.
Resources and Services
They offer resources like office space, mentorship, and networking opportunities but usually do not provide substantial capital investment.
Equity and Ownership
Incubators typically do not take as large an equity stake in the companies they support, if they take any at all.
Incubators usually maintain an advisory role without getting involved in day-to-day management. Their support is more about guidance and less about execution.
Pros and Cons of Venture Studios
For a founder looking to take on a new, de-risked startup venture, a venture studio may offer a great opportunity. However, it's important to know the advantages and disadvantages of venture studios first.
- Venture studios provide significant resources such as funding, office space, and operational tools, which can be crucial for early-stage startups. Plus, with the resources and support provided, startups can scale and grow much faster than they might on their own.
- Founders have access to a wide range of expertise from the venture studio's team, including business strategy, product development, marketing, and more. This mentorship can be invaluable for navigating the challenges of a startup.
- With substantial backing from a venture studio, the financial and operational risks for the founder are considerably lower compared to starting a business independently.
- Venture studios often have extensive networks, offering startups connections to potential investors, partners, and customers that they might not have access to otherwise.
- With the venture studio heavily involved, founders may have less autonomy in decision-making and the direction of the startup.
- The goals of the venture studio may not always perfectly align with the founder's vision, leading to potential conflicts.
- Relying heavily on a venture studio can sometimes lead to dependency, which might be challenging if the startup needs to operate independently in the future.
Examples of Successful Venture Studios
These are some of the most successful venture studios' portfolio companies and the venture studios that conceptualized them.
Built by venture studio Flagship Pioneering, Moderna quickly made its way into the public eye during the development of the COVID-19 vaccine. However, the company got its start in 2010, when Noubar Afeyan, founder and CEO of Flagship Pioneering, met with Bob Langer, inventor and professor of engineering at MIT. The pair worked tirelessly to develop use cases for mRNA to transform the biotech and pharmaceutical industries. In 2023, the company's current revenue (TTM) is $9.12 billion.
Dollar Shave Club
Venture Studio Science didn't conceptualize the concept for this startup; however, the studio was the first investor in the wildly successful startup Dollar Shave Club. Science is both a venture capital firm and a startup incubator. The startup studio's other ventures include FameBit, which was later purchased by Google.
Hims and Hers
Created by venture studio Atomic, Hims and Hers are telehealth companies built to increase access to convenient and affordable healthcare and eliminate the stigma around certain medications and conditions. Launched in 2017, Hims became one of the fastest direct-to-consumer (DTC) brands, eventually reaching a valuation of $1.6 billion before going public.