Are startup studios the ultimate partners for startup entrepreneurs?

With some careful considerations, startup studio could be the co-founder you’ve been looking for.

A few days ago, I attended a workshop called “non-technical founders guide to developing tech products” given by IC Studio, a startup studio in Hong Kong. While the idea of startup studio is not particularly new (some called themselves venture builders), they have been gaining popularity around the world in recent years. The most recognizable brand in Asia is probably Rocket Internet (Germany). Lesser known, but equally impactful, is Science (US), the team behind Dollar Shave Club. IC Studio is one of a kind currently within Hong Kong’s startup ecosystem.

So, what’s the difference between incubators/accelerators, angels/seed investors, and startup studios?

Many entrepreneurs are familiar with incubators, accelerators and the various tiers of startup investors, but less so with startup studios. Here’s how I’d like to distinguish them at a high level:

  • Incubators/accelerators focus on mentoring startups. They are fixed-term programs you have to apply for. Most come with office space, mentorship, workshops, networking opportunities, and other expertise that lead up to a demo day. Once you graduated from your batch, you’re on your own.
  • Angels/seed investors focus on financing startups. These are folks who provide initial funding for your startup. Most are well-connected and experienced entrepreneurs themselves, so there could be an abundance of networking opportunities and thoughtful guidance in addition to funding.
  • Startup studios focus on building startups into businesses. Repeatedly. The people behind them are serial entrepreneurs, seasoned executives, veteran investors and skillful makers. Many use movie studio as an analogy to describe their approach. They take promising ideas, validate them vigorously, in parallel, using shared infrastructure and resources. Those demonstrate product/market fit with validated business model are turned into new tech companies.

How are startup studios different from each other?

One major distinction among startup studios is whether the flow of ideas originates in-house or pulls from network outside of their organization. The two camps operate somewhat differently.

  • Startup studios like Idealab (US) or Pioneer Square Labs (US) ideate, validate and raise fund all from within. As product/market fit emerges, the startup spins off on its own and searches for co-founders, domain experts and other professionals to execute and grow upon its validated business model.
  • Others like Betaworks (US) or Expa (US) partner with entrepreneurs to drive their ideas toward product/market fit as co-founders from day one. A common trait shared by this type of startup studios is that they all excel in a certain discipline. Betaworks emphasizes its expertise in design and data science, while Expa specializes in product strategy, system design and user experience.

IC Studio belongs to the latter camp. Its specialization addresses one of the biggest pain points facing startup entrepreneurs in Hong Kong today — full stack technical talents.

How do I evaluate whether startup studio is a viable option for me?

I think the most important thing is being honest with yourself about: a) your motivation for doing a startup, b) what you can bring to the table, and c) what’s lacking that prevent you from turning your idea into a product.

  • You can’t fake personality, passion or purpose. Building a startup into a business is hard. Many startups went through hell before becoming successful. Without passion or purpose, you’re simply not going to have enough grit to get you through the tough times, with or without a startup studio on your side.
  • Passion is good, but blind optimism is disaster. It’s important to believe in the problem you’re solving, but don’t fall in love with your idea so much that you develop a confirmation bias for it. You need to have the courage to pivot when data shows that your business model doesn’t work. This is an area startup studios can add a lot of value.
  • It goes without saying that most teams work best when members’ skill sets compliment each other. I think that’s the reason why Betaworks has a “hacker in residence” program to complement their expertise in design and data science.
  • Does that mean if I’m a hotshot hacker, builders like IC Studio is not a viable option for me? Maybe. As a technologist myself, I appreciate the fact that it takes a village to build products. If you think about the enomous time and energy it takes to build your MVP, validate and iterate through it, this build-measure-learn loop is so much more efficient with a startup studio as your partner.

At the workshop, Rafal Czerniawski, CEO and co-founder of IC Studio, shared his experience evaluating product development options startup founders went through in getting their MVP built. The options discussed were: DIY, hiring freelancers, outsourcing to vendor, and building your own team. When he compared the way IC Studio works against these options, the value of the startup studio became apparent.

Startup studios are known for being hands-on and operationally-focused. You get to learn how to make better decisions about customer development and product development from those who have been there before. For the right startup founder, startup studios lower your startup risk and turn your idea into a business with actual, usable product.

What are some of the things to look out for if I decided to partner with a startup studio?

Here’s a list of things I would look out for:

  • Because a startup studio will become your co-founder, it’s only logical to exercise the same care as bringing in a “human” co-founder.
  • As with any co-founding partnership, include founder vesting in the agreement to protect yourself and your partner(s) in case one of you wants out.
  • Be clear and upfront about who owns the IP or how the IP is shared if one of the co-founders decided to split.
  • Find out how experienced the startup studio team is, if they’re market-oriented, and whether they can help you build and test business models — addressing three major reasons for startup failure.
  • Human capital scales differently than financial capital, so ensure your startup is getting proper attention when the number of startups increases at the startup studio.

With some careful considerations, startup studio could be the co-founder you’ve been looking for.

As a startup founder, there are many things you need to take care of in order to make your startup a success. Without proper guidance, a non-technical founders could approach product development the wrong way. That can lead to major issues down the road especially if you’re launching your first startup and you don’t know any better.

While startup studio may or may not be a suitable option for you, it is encouraging for local entrepreneurs to see Hong Kong’s startup ecosystem continues to evolve for the better.

Thank you for reading. Please share this with your friends and hit that ♥ button below if you like what you read.

If you have partnered with a startup studio before, I’d love to hear about your experience at the comment below.