So What Exactly IS a Startup Studio?
A question that comes up more than occasionally is ‘what exactly do you mean by startup studio?’ And this is a fair question as the concept really only picked up steam in 2009.
To start, we should figure out what a startup studio is not. It is not an incubator, and accelerator, or a venture capitalist — although they often contain facets of all three.
Startup studios operate as a platform on which you can launch your startups. If your startup were a rocket, the startup studio would be the launch pad, Houston control, the ground crew, and NASA’s legal department making sure you’re allowed to take off.
Whereas venture capitalists are focused on providing capital to young businesses, they provide little human ‘capital’ or support. They prefer to vet startups and then decide if the current team can handle launching the startup at all before investing.
On the other hand, accelerators and incubators tend to provide everything but capital. They provide a place to work, advice from experienced founders and investors, and other kinds of non-financial aid such as getting over legal hurdles, help with HR, and general management advice.
Both of these styles of business have one key weakness: the VC or incubator has to vet, say, 300 startups in various stages of development in various industries — just to select 3 or 4. It’s almost a form of a gambling as you have to hope that all the different facets of the business are going to work together (the management, the idea itself, the development team, etc).
Too many bad picks in a row and the firm could be in real trouble.
Startup studios are different, they strive to reduce this kind of uncertainty.
Startup studios strive to provide both investment and human aid, a kind of blended incubator/venture capitalist. But startup studios have one other key differentiator: they’re involved from the very start. The idea, business plan, and team are put together from the inside with input from experts and experienced founders. This allows startups studios to be much more active in managing risk and ensuring that a startup has the best shot possible at really taking off.
Whereas a venture capitalist might have to identify weaknesses of a startup before they invest, and then try to find a way to mitigate the weakness, startup studios try to remove faults and pitfalls in the first stages of conception.
Since the studio is involved from the start in putting the startup together, potential problems can be avoided entirely. For example, because the studio helps to handle HR, potential CTOs are vetted and recommended by experienced founders and investors. There’s not need to spend a lot of time hoping to find the perfect CTO or public funding.
So, who is a potential founder at a startup studio?
A potential founder may arrive with a specific idea, or perhaps a market he wants to work in, or maybe he just has a lot of experience and knows that he wants to found a company (but isn’t sure what kind). Startup studios recruit these kind of people and help them work out a business plan from the start.
To better serve their founders and CEOs, startup studios build a launchpad for their startups. Like life, startups have basic needs that must be met before they can actually begin to function and grow. There are legal, investment, recruitment, structural, and marketing concerns that all have to be met. And, because all startups share the same basic needs in the very beginning, startup studios industrialize the process.
By streamlining the process and by keeping the funding in-house, startup studios are able to push startups through the first stages of development to MVP as quickly as possible. Because the studio takes care of so many of the peripheral aspects of launching a startup, the team can then focus on what matters most: their product.
Because startup studios utilize such a process, they often have many startups at different stages of development under their aegis. This in turn adds to the available human capital as the CEOs, founders, and investors can communicate and bounce ideas off of one another.
Like most non-traditional VC approaches to startups, the idea of a startup studio can be traced back to Bill Gross and his Idealab. Originally created to rapidly build and test ideas and to get investors to invest in the ability to generate startups rather than in the startup itself, others took the concept and ran in a different direction.
One of these directions morphed into the startup studio as some incubators realized it would be easier to just fund their own startups rather than vet them upon entry just to turn around have have to pitch again for funding.
The first proto-startup studios to come into existence were the likes of Rocket Internet in Berlin and Betaworks in New York City. The former being particularly pioneering and having quite a long track record for success.
The goal of Rocket Internet was to clone successful American startups and launch them in different geographic areas. This was the idea was already tested and proven, all they had to do was build it again and launch.
To meet this goal they had to build, fund, and deploy quickly. Time was of the essence. And, out of necessity, they built the first real startup studio.
Since then the concept has taken off. Betaworks and Rocket Internet continue to churn out profitable startups and dozens of other startup studios have joined the fray. Including several here in France such as eFounders and yours truly, Le Studio.
As the model continues to prove its value both in the US, Europe, and elsewhere other models of startup support and investment have begun to become more like startup studios. Google Ventures and Anderseen Horowitz (link to article), for example, while VCs, have become much more active in providing advice and human capital to their investments.
Le Studio VC is a Paris-based startup studio. Providing seed capital, expertise, and guidance, Le Studio acts as a launchpad for startups. By both investing and participating in the initial stages of development, success is more likely and more rapid. This is the story of one of the founders that came to Le Studio with his ideas and half a year later he has built a business.
If you are interested in starting your own company or working with us — let us know at Le Studio!