Nov 19, 2023
Hey there, fellow entrepreneur 👋
I assume you’re here because you’re curious about venture studios, and so far no one’s been able to clearly articulate what they do. Are they like accelerators, incubators, or a different version of a VC? Do they help with design, GTM, or development? Do you hire them or do they hire you 🤔
There are various takes on these questions out there, which can be rather confusing for the uninitiated. I will attempt to rectify this by offering a more nuanced view of the venture studio landscape as opposed to preaching yet another doctrine.
When I started my venture studio journey, I wasn't familiar with the term. I hadn't heard about any of the major players internationally or the success stories they had helped birth. Having done product management for the better part of my professional career I kicked things off the only way I knew, by doing some good old discovery. As part of that, I interviewed a number of founders, venture studio folk, and VC investors to hear the different sides of the story. I wanted to understand how venture studios are perceived, what tradeoffs founders make when choosing them, and how they stack up against other players in the space like VCs and accelerators.
Only months later, whilst talking to one of our VC partners, did I realize that juggernauts like Snowflake and MongoDB came out of a venture studio (i.e. Sutter Hill and Alley Corp). But it wasn’t these impressive success stories or a preconceived notion of what a venture studio is, that drew me in. Instead, it was the opportunity to work with exceptional founders and assemble a team around them that helped them navigate the extremely difficult journey of taking an idea from 0 to 1 and then all the way to product-market fit.
And that, in broad strokes, is what founders should expect from a venture studio. But let's take a closer look at the venture studio landscape.
Venture studios are perhaps the most versatile players in the startup ecosystem. They’re co-founders, teammates, investors, and guides rolled into one. Instead of merely writing checks and cheering from the sidelines, these entities plunge into the entrepreneurial journey, elbow-deep. They become integral partners from the get-go, assisting in ideation, strategy formation, product development, and more. Simply put, it's about a collective journey where capital meets industry and functional expertise.
Every entrepreneur knows the thrill of a new venture. But with that thrill comes uncertainty. A single misstep in understanding market dynamics, an oversight in product design, or a hiccup in tech development can snowball into botched product launches, lackluster brands, and failed go-to-market motions. So venture studios prevent you from ever failing? No, of course not, but they help avoid avoidable mistakes and get you back up on your feet faster when you do fail. This ultimately leads to an accelerated pace of learning, the recipe for reaching PMF.
As emphasized by HBR in their article on venture studios, they're not just financial anchors; they’re protective shields, ensuring that the startup journey remains as hiccup-free as possible.
Venture studios are not nearly as vocal about the successes they’ve contributed to as their VC counterparts. Is that because they’ve got humble people at the helm? No. They’re simply not as incentivized to do so. They don’t often hero their work and they avoid the limelight because they want to make sure it stays on the founders. The goal is two-fold: 1) they don’t want to dilute the PR/media coverage their ventures are getting; 2) they are cognisant of, and try to protect their ventures from the stigma of founders seeking “external” help for core activities, such as building their product or brand.
But dare to scratch the surface and you might find your jaw on the floor. Notable venture studios have birthed some of the biggest names in the startup arena. Sutter Hill gave us Snowflake, and Alley Corp launched MongoDB. Aircall and Front, which have reshaped the cloud calling space and customer communications respectively, owe their genesis to the eFounders studio. Add to that list global names like Betaworks, Expa, and Atomic, and the venture studio model’s success starts to look less and less like a fluke. These studios have played pivotal roles in fostering startups like Affirm, Yelp, Bitly, and Hims and Hers, transforming them from fledglings to market leaders with multi-billion dollar market caps.
VCs: The primary financiers. They’re the high-octane fuel that startups require to skyrocket but are generally hands-off when it comes to day-to-day intricacies.
Accelerators: Startup school, in essence. They offer mentorship, resources, and a bit of seed money. But, the clock's ticking; it's a quick sprint, not a marathon with them.
Bootstrapping: The lone wolf route. Relying on your own resources, navigating by intuition and fuelled by sheer determination. I have a ton of respect for bootstrapping founders, and some of our agency’s biggest customers fit that profile.
Venture Studios: Think of them as seasoned allies. Always there, through thick and thin, ensuring every aspect of the venture is streamlined and optimized.
This is where it gets interesting. In order to fully unpack venture studios, I need to touch on the two major approaches they apply to their ventures.
Incubation: Nurturing Ideas into Reality
In the incubation approach, a venture studio takes the lead in conceptualizing new business ideas. This process typically involves extensive market research, trend analysis, and industry insights to identify promising opportunities. Once a viable concept is crystallized, the studio takes the reins and assembles a team of experienced operators to execute the vision.
These operators, often serving as CEOs, are carefully selected for their expertise and track record in the relevant industry or domain. They bring a wealth of experience to the table, ensuring that the startup is led by individuals who understand the intricacies of the market. This approach is akin to planting a seed, nurturing it, and eventually entrusting it to skilled gardeners who can make it flourish.
The incubation model provides founders with a structured pathway from idea inception to product-market fit. It mitigates the risk associated with inexperienced founders and accelerates the learning curve.
Co-creation: Collaboration from Day One
In contrast to incubation, the co-creation approach is characterized by a collaborative effort from the very beginning. In this model, venture studios actively seek out founders who possess deep domain or subject matter expertise. The idea for the startup may originate from either party, be it the studio or the founder, fostering a sense of shared ownership from the outset.
Co-creation ventures often prioritize finding founders who are not only passionate about their idea but also possess a profound understanding of the problem they aim to solve. The venture studio's role is to complement the founder's expertise by providing the necessary resources, guidance, and support to transform the idea into a successful business.
This approach is akin to a dynamic partnership, where the synergy between the studio and the founder is paramount. The studio's involvement extends beyond financial backing, encompassing mentorship, skill gap bridging around the execution, and strategic guidance. Together, they navigate the challenges of the startup journey, with a shared commitment to achieving product-market fit.
In summary, while venture studios share a common goal of nurturing and scaling startups, their approaches can vary significantly. Incubation involves the studio taking the lead in idea generation and appointing experienced operators, while Co-creation emphasizes collaboration from day one, with a focus on founders' domain expertise. Each approach has its merits and is tailored to suit the unique needs and circumstances of the startups they support.
The venture studio model, though distinct, isn't monolithic. Aside from the approaches covered in the previous section, one can further organise venture studios based on their specializations. Here's a closer look:
Discovering the world of venture studios has been an enlightening detour from my well-trodden path of leading product strategy and development at various startups. And I hope that by sharing my discoveries I’ve saved you a bit of time and put you ever so slightly closer to pursuing your idea or connecting to the right folks to take their venture to the next level.
I’m more convinced than ever about the power of partnerships in order to create something truly special. So, if our visions resonate, why not join hands? The best adventures, after all, are those shared. 🚀
If the answer is Yes, then we’d love to chat and explore whether you gel with our venture studio team and our approach. Get in touch.