Startup Studio Spotlight: Dovetail Ventures
Hello fellow startup enthusiasts, and welcome to another startup studio spotlight! In this spotlight edition, we took a deep dive into Dovetail Ventures, a startup studio that specializes in the productization of innovative, customer-facing solutions.
Dovetail, based in New Zealand, and Sydney, Australia, was founded by Ash Fogelberg and Nick Frandsen in 2015. Since then, the team at Dovetail has contributed to the success of many disruptive companies across multiple industries, including the popular fintech unicorn, Afterpay, which has revolutionized the retail industry and e-commerce transactions.
Dovetail’s multidisciplinary team offers a variety of coveted skill sets for the startup world, across strategy, product, design, development, delivery, growth, and quality engineering. Each of these elements of the startup studio plays a key role in driving the success of their startup companies. A few of their most prosperous ventures, which include Marmalade, Provider Choice, and Runn, are tech solutions designed to improve business operations and efficiency.
As you’ll read in the interview, the studio is on the brink of some exciting new developments and business expansions. We were thrilled for the opportunity to hear from the studio founders exactly what has made them so impactful at spinning out innovative startups that thrive in their respective industries.
Have we piqued your interest yet? Keep reading to learn more about Dovetail and the processes that have been instrumental in its success.
Where does the name Dovetail come from?
The name Dovetail comes from the ‘dovetail joint’ in woodworking. To us, a Dovetail joint represents strength, which we have adopted to mean creating robust, strong digital products and startups that have a resistance to being pulled apart. We bind different facets of our expertise to create the strongest possible whole.
What sets you apart from the rest of the competition in the startup studio space?
Dovetail originally began 6 years ago as a digital product agency, which continues to be one arm of our business, in addition to our venture studio and VC. What this means is that we have several years of experience designing and building tech for some of the world’s most notable tech unicorns, including Afterpay, which was recently acquired by Square for $29b. We are one of the few venture studios globally that has a team of 90+ technologists working for us day in and day out, several of whom have entrepreneurial backgrounds themselves and have launched and sold their own successful startups prior to joining Dovetail. The teams are able to improve our capabilities by working on these larger agency engagements and applying learnings and new skills to building our ventures.
Another major factor that sets us apart from others in the startup studio space is that we ensure 100% alignment with our ventures. We truly only win when they win. We think of our ventures as co-creation between us and the founders, where we effectively assume the position of technical co-founder for the first 12–18 months of a startup’s existence. During this time, we provide a dedicated team of product experts, designers, and developers to each venture, as well as additional support on commercialization and growth as required. There is no margin on the cost of our work during this time, and our only upside occurs when the startup succeeds (i.e. exits).
Another key differentiator of ours is that we are in the midst of raising our first venture capital fund to be able to further support our startups in their Seed and Series, A, B, etc. rounds. Historically we’ve been limited to accelerating the growth of our ventures through our technical expertise, but now we have the added advantage of injecting them with capital in their various rounds. To top it off, we share ownership of all of the ventures in our portfolio with the entire team at Dovetail. This program fosters a culture of ownership, accountability, and responsibility that is shared by all of us.
What are some of the key differences that you see in the market of Australia and NZ versus other countries in the world?
The venture studio model is still quite uncommon and unknown in Australasia, with only a few players operating in the market. One aspect that makes our model quite unique is that our venture studio is directly plugged into Dovetail Capital, our VC arm, which is able to make pre-seed, seed, and Series A investments into the startups emerging from our studio. In recent years, funding at these early stages in Australia and NZ has been incredibly hard to access, so we are bridging a gap in not only building incredible companies but funding the ones we have extremely strong conviction in when most other venture capital firms or Angels would not have.
How has the startup studio model allowed you and your studio’s companies to navigate the pandemic?
Dovetail was very fortunate in that we have grown rapidly throughout the course of the pandemic, as have an overwhelming majority of our ventures. Most of the founders we work with are non-technical and come to us with brilliant ideas and deep domain expertise, but lack the capability to get their ideas off the ground. With COVID, we have seen a rapid digital transformation unlike ever before as these traditional sectors that our venture partners tend to emerge from having to pivot, some with more success than others. This has birthed a necessity for antiquated sectors to turn to technology and digitization to offer their solution or service in a new and improved way. For us, this has created a breeding ground for novel ideas and truly disruptive companies.
How would you describe your studio’s approach to developing new ideas? How do you source your clients and how do you decide which ideas to take into your studio for further development?
Entrepreneurs approach us with ideas every single day, but as with other venture studios and VC firms, we have to maintain a high standard and only select the ones we think are winners. Ideas that we think may be viable after reviewing pitch decks, researching the founders, and having a series of calls with the founding team are taken through an intensive due diligence process, typically led by 3 of our Doves. If after this period we have conviction in the viability of the business, we then kick off what we call a discovery, which is an 8–12 week period of diving even deeper into the industry, gathering user feedback and market research, and getting started on what an MVP might look like.
If after discovery both our team and the founders are happy with the outcome, it is at this stage that we officially kick off our partnership. This stage typically lasts 12–18 months as we design, build, iterate, and scale the product, as well as working shoulder-to-shoulder with the founders every day to support them however we can.
We are industry agnostic at Dovetail, but we do have deep experience in the FinTech space, as well as building marketplaces and B2B SaaS. For us, a winning idea so far is (1) typically one that comes from an untapped traditional sector that is ripe for disruption; (2) addressing a real problem that will potentially improve millions of lives; (3) based on the firsthand experience of a commercially savvy founder with deep domain knowledge.
What does the studio’s level of involvement look like after the business has launched?
We work side-by-side with founders throughout the first year to 1.5 years of their startup’s existence, which often includes the launch. Post-launch, we work diligently with the founding team to iterate and improve the solution based on user testing and feedback. Another feature of Dovetail Ventures that is unique is that our startups can actually employ a member of Dovetail’s team to join their startup full time once our formal day-to-day engagement wraps up and the venture begins to grow their own internal team.
On top of that, we remain a key shareholder and continue to provide founder support and capital to our ventures. Once we hand off the tech, we assume more of an advisory role to our ventures, where we help the teams on business strategy, funding, operational issues, growth, and beyond. We stay extremely close to our venture companies and maintain strong relationships with the founders throughout the entire journey.
What unique benefits does the startup studio model provide entrepreneurs?
Our venture studio model enables entrepreneurs who lack technical experience to bring their ideas and solutions to life when they might not otherwise have had the chance. By co-creating and co-investing in novel ideas, we combine the best of both worlds when it comes to our proven ability to build great companies and an ambitious founder with intimate knowledge of a particular industry’s problems and how to address them.
Do you have any key insights or trends from this year that you see transforming the venture studio model?
The amount of capital that is flowing in VC has never been greater. By educating traditional VCs of the potential for venture studios like ours to accelerate the growth and success of local businesses, we create a win-win situation for our startup companies and local investors.
To wrap up…
We’d like to give a huge thank you to the Dovetail team for contributing to this Startup Studio Spotlight! We enjoyed getting the inside scoop on all the exciting things happening for this innovative studio, and we will be watching for all the massive success on the horizon for their team.
We hope you enjoyed this interview as much as we did. At Startup Studio Insider, we are passionate about sharing the inside scoop on the startup studio model directly from the source! If you work for a studio or know of one that we should feature, drop a comment below, and we will be in touch. Keep up to date on all startup studio spotlights and more by following us on social media.
