Top Five Mistakes Made By Emerging Startup Studios

TL;DR: Hiccups and failures are inevitable with the growth of any asset class. My goal for this post is to help emerging studio directors learn from the past mistakes of others so they can find their footing in less than one year.

  1. Lack of portfolio focus
  2. Lack of studio focus
  3. “Idea-first” vs. “human-first”
  4. Undercapitalized
  5. Overlooking the importance of marketing

ver the last year, startup studios have been one of the hottest trends in the startup world. When we founded the Global Startup Studio Network in 2018, we identified roughly 100 studios around the world. Over the last year, this number has grown to roughly 400.

But first, what exactly is a startup studio?

A startup studio (also commonly called a venture studio or venture builder) is a small organization that comes up with startup ideas and then builds companies from scratch. Their team of industry experts pool their internal and external resources to repeatedly and systematically launch many startups. In some cases, the studio comes up with the ideas, and then they bring in founders to adopt those ideas. In other cases, the studio brings in founders pre-idea, and they build companies together from the ground up.

I was previously a VP at a startup studio when I co-founded the Global Startup Studio Network. My new company, Parallel, consults, advises, and will eventually invest in emerging studios around the world. Over the last three years, I’ve worked with over one hundred studios and am yet to see one studio “find their footing” in less than three years, which is also millions of dollars worth of burn. However, for the handful of studios that have hit their stride, they’re starting to see enormous success.

Hiccups and failures are inevitable with the growth of any asset class. My goal for this post is to help emerging studio directors learn from the past mistakes of others so they can find their footing in less than one year.

Here is a high-level synopsis of five common and fatal mistakes that I’ve seen many emerging studios make, and my suggested solutions:

№01: Lack of Portfolio Focus

Historically, many studios have been industry agnostic, meaning they’ll happily try to build anything that has a solid business model, early signs of product-market fit and product-zeitgeist fit. I believe that this is very risky, given my prediction that, in roughly five years, we are going to enter a saturated market of startup studios.

Instead of being industry agnostic, I encourage emerging studios to be the best in the world at building startups in one, niche industry. For example, “we’re an AI studio” or “we’re a PropTech studio” or “we’re a FinTech studio”.

Most importantly, this allows the studio to pull together a team of operators, partners, advisors, and mentors who are global experts in this one given field. Access to these experts is wildly attractive to prospective founders who are considering joining a studio. Plus, with better, more specialized inputs, this allows for greater outputs.

When new studios build companies that have nothing in common, they often end up with a large portfolio of average companies.

In a few cases, though, I’ve seen studios successfully “recycle” their technology and business models across industries. Pioneer Square Labs does a great job at this. According to Madrona’s Dan Li, “They take a boring/terrible/complicated process with lots of paperwork and manual review, and make it digital and seamless.” They’ve done this with Boundless for immigration, JetClosing for real estate, Lumatax for tax compliance, Shujinko for cloud compliance, and SigmalQ for financial reconciliations.

In conclusion, if you do choose to be industry agnostic, I’d highly recommend doing it in a fashion where you can recycle your technology, business models, and revenues across a large chunk of the portfolio, in true “factory” fashion.

№02: Lack of Studio Focus

I’ve seen many emerging studios hit a plateau around years two or three because they’ve been busy focusing on too many areas.

For example, they offer corporate innovation services, they work with startups to validate ideas for a small fee, they help startups with their pitch decks and go-to-market strategies, they incubate their own ideas, and also run a bi-annual accelerator program.

In essence, they end up being okay at a bunch of things, instead of being excellent at one thing.

My recommendation is to double down on one approach and constantly seek to improve your process. Choose the one offering that brings in the most revenue, gives you the biggest long-term upside, and requires the lowest cost.

Read Built to Sell if you haven’t already. Hire the smallest possible core-team of experts that you can get your hands on, and be laser-focused on your offering.

You could certainly work with corporate partners, or with local startups, or incubate your own ideas, or run a bi-annual accelerator program…but don’t try to do all of them simultaneously.

№03: Idea-First vs. Human-First

Many VC’s have been skeptical of the studio model because of the concern that founders who didn’t come up with their own ideas would be less bought-into the startup from an emotional standpoint.

I agree with this skepticism.

I often refer to the “idea-first” approach as the “surrogate model”, where you’d give birth to a concept and then seek out a founder to raise it.

When times get tough (which is inevitable with every startup), in the surrogate model, it is emotionally easier for the founder to throw in the towel.

When a startup is ready to leave the studio and seek additional capital from early-stage investors, they are largely being assessed on their grit and obsession. It’s easier for an investor to see and trust a founder’s grit when she, the founder, has had hundreds of sleepless nights because they can’t stop obsessing over their startup.

I believe that the idea-first model only works when the director of the studio is a “celebrity” or if the studio has had at least one or two major exits.

For example, Alleycorp has no problem attracting founders to adopt an idea because Kevin Ryan was the brain behind it. The same goes for Expa with Garrett Camp, and Science, because they founded Dollar Shave Club. In this case, if you’re a founder and you have the opportunity to build a startup with one of these folks, it’s a no-brainer.

In conclusion, I believe that it is crucial to seek out exceptional individuals as if you are a talent scout. Invest in them pre-idea and build a rock-solid program and process to collaboratively build startups from the ground up. Antler and Human Ventures do this extremely well.

№04: Undercapitalized

Studios are expensive to operate. According to the GSSN 2020 Data Report, the average annual budget for an experienced studio is $3.2m and $720k for emerging studios. Some bigger studios are spending up to $8m annually. This includes investments, core-team salaries, office space, etc.

Let’s say you want to raise enough capital from LP’s in Fund I to last five years (given the average life of a startup to be seven years). If you wanted to launch only 25 companies over these five years and invest $250k in each startup, you would need to raise at least $10m. But keep in mind…you need a big enough portfolio for the economics to make sense in the first place. After all, at the end of the day, it is a numbers game, and LP’s will want their money back.

It’s critical to understand that you’re likely not going to see any returns for at least five years (such is the nature of startups), so if you’re raising from LP’s and only have a five-year runway, you’re going to have to convince them to contribute to Fund II when you run out of cash, and that’s a difficult pitch to make when Fund I hasn’t performed very well.

I recommend either raising enough money to last ten years ($25m+) like a typical VC fund or raise enough capital to systematically crank out hundreds of companies in your first 3–5 years.

Currently, in an effort to make access to capital more abundant, the studio community is working to create more standardized practices around fund structures.

If you want to avoid the LP route, you could structure yourself as a corporate innovation startup studio. This is where you help corporations retain future market share by launching and investing in innovative tech companies. There is a massive appetite for this amongst corporates and more than enough lunch to go around. Prehype, Coplex and Founders Factory are three of the studios that have nailed this model.

Each corporate partner will fund your overhead and investments for ~5 years and you could launch anywhere from 15–30 startups per partner. You’ll have access to their resources, but they’ll own 40–60% of every company you create. If you have five to ten corporate partners, that’s a pretty healthy portfolio.

I would only recommend this model if you have abundant access to the CIO’s at Fortune 500 and Fortune 1000 companies, though. It’ll likely take you 9–18 months to cash your first check, and it’s risky to only work with one corporate partner.

It will also take 9–18 months to raise a fund from LP’s, so spend your fundraising time wisely.

№05: Overlooking the Importance of Marketing

We’re living in an era where content (especially video) is king, and I have only found a handful of studios that have embraced this golden opportunity. Pioneer Square Labs, High Alpha, Human Ventures and eFounders have fantastic blogs, but of the 400+ studios out there, we could be doing much better.

I come from a marketing background, so I’m certainly biased, but I believe that it is crucial to consistently answer the question “what is a startup studio!?” for your audience. This perpetually helps potential founders and investors understand the model more, ultimately creating a “rising tide lifts all boats” scenario over the next few years.

Many studios have specifically chosen to stay out of the limelight, or simply do not see the importance of world-class marketing efforts for their portfolio companies AND the studio itself.

I personally believe that marketing is of the utmost importance and is not to be overlooked.

Marketing, in this case, can be broken down further into two parts: digital and offline.

Digital marketing is obvious; launch a weekly podcast, video series, write blogs, pitch a reality show to Netflix (I’m serious about this one), etc. You basically want to be all over the internet talking about startup studios, telling founder stories, breaking down your process, etc. in every format imaginable. Plus, each one of your portfolio companies has to have an A+ website and marketing strategy (that aligns with their market).

Offline marketing is a bit less obvious. I recommend that your studio has a Head of Platform person whose core responsibilities include hosting monthly events (dinner parties, panels, networking events, retreats), 5–10 daily coffee meetings with prospective founders, and “owning the room” at every high-quality networking event in your community. This person could be thought of as your “Head of Sales”, so hire very carefully, as they are likely the face of your brand.

Additionally, every one of your founders (and their entire team) is a walking advertisement for your studio. I recommend considering a “founder etiquette” program where you coach your founders on all of the soft-skills that are necessary for them to be “on-brand” inside and outside of the office. This also overlaps with HR practices and compliance training. One slip-up, and you’re toast.

Here are a few random, yet wildly important questions worth pondering:

  • How would you like your founders to dress at investor meetings?
  • How would you like them to carry themselves around town?
  • How should they act at a networking event around other founders, mentees, and potential investors?
  • What happens if they post something inappropriate or controversial on Twitter?
  • What happens if they ask a potential hire how old they are during an interview?

All in all, I’m thrilled to be part of the recent explosion of startup studios. Hiccups are inevitable, and this is an ever-evolving learning process.

If you are interested in dissecting any of my above thoughts, I invite you to reach out directly at

Building for the future of work at Jack Spades Startup Studio. Former Co-Founder at Global Startup Studio Network. Former VP of Branding at Boulder Bits.

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