1st Story: Inside StartupGym

Here we are, we are live: the first building block of our story.

When did it all start? We usually ask ourselves where we came up with this crazy idea of building and investing in companies systematically, and the same happens every time we start a conversation. To be honest, making the interlocutor comfortable with our model is the tough part, and we are still not convinced we pitch it the right way. StartupGym is a mix of different specialties, the most coherent but different things you can think of. This is why we finally decided to shed some light on ourselves.

After operating for a year and a half, we have learned a lot, including about ourselves, and now we are ready to share it with the world. Starting from this first attempt, we will begin sharing content and engaging with our strong community through articles, blog posts, a newsletter, and many other forms of media. We have also launched our new website as a clear definition of who we are. Our ultimate goal is to contribute to the ecosystem we work in and make sure our impact is as wide as possible.

The birth of a Studio: our story and where we come from

Looking back to the last 18 months, the journey has been really intense. Building StartupGym was not an easy task, even for people who already ran several companies in the past. We had to face several challenges, and the more we were building the more obstacles we found: this is a conglomerate of early-stage companies, where the holding company was itself in its pre-seed stage. We learned a lot, and we are now able to share many lessons from this crazy ride. Many will come, as we learn new things every day.

The idea of building a Studio came in late 2020, during a return trip from Turin. That day, we (Enrico Pandian and Giuseppe Balzano) responded to the call for help from one of our friends who invested in an early-stage Startup. The company, after some months, was already not performing: no scale, no interested investors, and a declining market. They were pretty stuck, with no ideas on how to continue and the investor was starting to realize he lost money on his investment.

Could you help me revive this company? I will introduce you to the CEO, he needs some advice and direction from other experienced founders. Oh, by any chance is it interesting for you as an investment?

Back in 2020, we were actively running a private investment vehicle with which we made more than 160 investments worldwide, mostly in pre-seed companies. Investing in early-stage Startups was our natural next step. During that trip back to Milan, we soon realized that an opportunity was lying straight in front of our eyes: founders would benefit from other founders’ experience and guidance, particularly at the very early stages. Not only do they need capital, but they often need strategic direction and operative support in fields they are not comfortable with yet. Things that usually an Angel Investor should provide, just in a systematic way and on a large scale. Having this in mind, it was also clear we didn’t want to launch another Accelerator or Incubator since we were not a big fan of the model.

Moreover, the most challenging thing we were experimenting with our investment vehicle was that even if we had a very good deal flow, the vast majority of companies we analyzed had either:

• poor idea quality, but a good founding team;
• exciting business model, but an under-delivering team;
• both;

We convinced ourselves we wanted to play an active role in drafting business models and scouting for talents because the opportunity existed right between the two sides of the equation: the founders and the ideas.

In short, we wanted to:

• Have control over the ideation phase, deciding which market trends to follow;
• Select the founders we like the most and couple them with ideas we wanted to launch;
• Guide, mentor, and operatively support them through the pre-seed journey;

The last element of the equation is the capital source: we wanted to make big bets at the earliest stage when nothing was on the table, not even some slides.

When ideas were starting to take shape, we met Tarek Fahmy. At that moment, Tarek was just leaving the Silicon Valley, where he was leading the entire product team at Wish. He joined the company when it was less than 10 people working in a small studio, and drove it until they IPOed 8 years later. From the very beginning, it was crazy how much we were aligned without having him part of the initial brainstorming sessions, he shared our vision since the first chat. Tarek joined the two of us before we even started fundraising. The team was complete and we were ready to lift off.

Our core DNA: builders for builders

The first tough part is always to explain what StartupGym really is. As we really like to describe ourselves, quoting the Italian author Luigi Pirandello

This is a meta-company: a company that builds other companies

To define what our company really is, we will start by telling what it is not:

• StartupGym may be confused with Incubators because we support Startups. But we are not, we believe running batches of Startups in parallel naturally leads to a high level of defocus and reduces the chances of success of the Startups. Instead, we run single batches, because we want to be directly and highly involved in the early operations. We think we can provide enormous value because our entire team successfully did it several times in the past;
• StartupGym may be confused with Agencies because we offer services to our portfolio companies. But we are not, our founders will never pay any consultancy fees to us. We are their co-builders, their unfair advantage with respect to the competition. Since day 0, Founders have a team of developers, designers, hiring managers, finance and operations hats, admin, accounting, and legal at their disposal. Everything they need to have during the 0–1 phases, all in one place, all included in the deal;
• StartupGym may be confused with Financial Holdings because we will have shares in several companies. But we are not, we actually create companies ourselves;
• StartupGym may be confused with a VC Fund because we deploy capital to Startups. But we are not — not even remotely. Funds are not able to operatively support Founders, their management fee structure does not allow them to hire operators. VCs are capital providers, necessary for the industry, but they are not able to solve all the founders’ needs, especially at the pre-seed stages.

Going deeper, we are convinced there is a clear market failure in the Venture Capital market: we believe it is highly not democratic because its access is not for everyone. It’s a closed market, for a few selected individuals. Founders are required to afford to take huge risks for starting a long journey without any guarantees and promised results. Moreover, the market is also poorly meritocratic: personal connections and instincts dominate over logic and data, especially at the pre-seed stages. The combination of the above makes talents scared about starting an entrepreneurial journey, leading to a complete failure of the market because it misses success stories and possible moonshots.

Considering the big picture, poor talent means poor quality ideas, which leads to scarce investment returns for VCs. Poor returns lead to skepticism among funds’ Investors (the LPs), which are then hesitant to allocate money to the asset class. Little money invested by LPs into VC funds leads to inadequate investment rounds into Startups, which limits Startups’ growth. Finally, little growth means poor upside and incentives for founders who are then more than reluctant to start a new Venture. And this repeats itself over and over, it’s a dog chasing its tail.

The main goal of the Project: sharing our Vision

We designed StartupGym to be the place where talented people can build their dream companies, by receiving capital and operational guidance from experienced operators and previous founders.

StartupGym is the earliest investor because we invest in people, even before ideas.

Since the very beginning, we committed ourselves to build companies that can make our society a better place. We strongly believe that more and more capital will be invested in companies with the promise to positively impact Society. In the coming years, more and more public and private investors will exclusively support non-extractive models: both will finance Startups characterized by a concrete and positive impact on the world. In other words, financial returns will not be the only criterion for determining the investment thesis: in the long term, we foresee that financial returns will actually be a driver for impact and more and more extractive models will be penalized by the market until bankruptcy. For this reason, it is necessary to develop internal skills to effectively recognize “Impact” and its outcomes on financial performances.

StartupGym is on a mission to empower purpose-driven founders to build companies that will positively impact the world.

On the other end, we believe that capital has now become a commodity. More and more Startups have easy access to investment sources and this will become even more true in the future with the democratization of the market. In the early stages, what really makes the difference is often intangible and derives from experience. For these reasons, more and more Venture Capitals are opening operational branches: Afore, Ark, Project A, Founders Factory, Flash Ventures, FoodLabs, and many many others. Operator VCs will outperform the standard ones because they will attract more and more Founders, given the ability to support them. In a flourished VC ecosystem, operator funds are becoming the new standard.

If you managed to stay until now, thank you. This first story is a bit unique because we consider it our official kick-off. Don’t hesitate to drop us a message if you want to get in touch. We are always eager to hear from our community and supporters.