The Entrepreneurs Guide To Startup Studio Models

Dianna Lesage
Jun 16 · 9 min read
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Startup Studios transform unique ideas into strong independent companies. These entities don’t run programs as accelerators do and they don’t have cohorts like incubators do. The secret sauce of a Startup Studio (also called a Venture Builder or a Startup Factory) is the way they work on startup ideas. The industry term for this is “operational model” but there is no reason to use vague language to make things complicated.

A Startup Studio’s goal is to develop startup ventures until they’re full-blown, wildly successful, companies.

They do this by finding or developing great ideas, using technology and funding to build MVPs, and going through the process of validating these MVPs in the real world.

If all goes well, the Studio “spins off” the new venture- meaning the Studio recognizes this new company they’ve developed could be huge and now they need to find some people to run it as an independent startup venture.

Once they’ve recruited a team to come run the startup, the Studio team (who built the startup from scratch) hands off the venture to the new team and gets back to work on the next great startup idea.

As you can see, the Startup Studio model is very different from accelerators, incubators, and other innovation programs. Instead of using financial and physical resources to help entrepreneurs accelerate ideas, a Startup Studio uses its own internal team to do it.

The problem is, no one really knows about Startup Studios and that’s an issue for two reasons. On the one hand, it’s a problem for Studios because they can’t survive without amazing entrepreneurial talent- they need entrepreneurs to know about them. On the other hand, it’s a problem for entrepreneurs because they’re missing out on a huge opportunity to get their startup ventures off the ground or to join a team that they would be perfect for.

Studios exist.

They’re growing.

Entrepreneurs can get involved.

The question is, how?

1st Co-founder Studio Model

For Entrepreneurs Saying: “I have an idea, but I can’t launch and scale the startup on my own.”

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This is a very common scenario. If you’ve ever had a business idea in your life, you know the feeling of frustration that comes from being in this position. Luckily, Startup Studios were built to solve this problem.

The 1st Co-founder Studio Model is built on partnership.

A Studio operating using this model will be actively taking “pitches” from entrepreneurs who have great ideas but lack the resources to bring them to life.

Here are several Studios in this category: Pioneer Square Labs, Human Ventures, Madrona Venture Labs, Blenheim Chalcot, Alley Corp +

*This is not an exhaustive list of Studios operating using this model, these are simply examples. Check out their websites and begin to notice the consistencies among their operations & messaging.

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https://blenheimchalcot.com/about/

The Studio will often set up an agreement where the entrepreneur keeps roughly half of the equity in the venture. The Studio gets the remaining equity. The Studio employs their own team members to work hand-in-hand with the entrepreneur who brought them the idea.

They’ll conduct market research, validate the concept, fund the tech development, run the numbers using their own analytics resources, develop a go-to-market strategy (a business plan if you will), work on building the product or service out fully, help with marketing, set up the foundations for fundraising, and recruit the remaining team members which may include a dedicated tech engineer, a UX designer, a marketing professional, and other strategic positions.

The entrepreneur who had the original idea will likely stay with the startup as the CEO or COO and the startup will move into the fundraising part of the startup process. From this point on, the startup runs more like a traditional startup than a Studio project. Once funded, the startup is nearly fully independent from the Studio and runs like any other startup venture.

2nd Co-founder Studio Model

For Entrepreneurs Saying: “I have an idea and an MVP, but I need specific resources and expertise to get it off the ground.”

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The 2nd co-founder model is suited more for startups that have an idea, a small team, some form of a product built, and some proof of traction.

What founders in this position really need is operational help, tech support, and connection opportunities. These startups are often not-yet-funded but have been operating outside of “stealth mode” for a few months to a year. It’s common for startups in this situation to have a niche focus and it’s best if these startups have a specific “ask” for a Studio such as “our team needs help building the full prototype” or “our startup needs beta testers and we don’t have the funds to promote it using paid marketing- we need help with this.”

Here are a few examples of Studios operating using the 2nd Co-founder Model: Hangar, Expa, Timeal, Innovation Department, FKTRY+

*This is not an exhaustive list of Studios operating using this model, these are simply examples. Check out their websites and begin to notice the consistencies among their operations & messaging.

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One thing to note is that Studios are not Venture Capital firms (no matter what they tell you!) For a Studio to truly be a Studio, the entity needs to provide much more than capital, advice, and connections to a startup venture.

The true test of a Studio is whether they employ their own internal team members to work alongside founders on their startup ventures. I don’t mean in a coaching or programming capacity either- I’m talking co-founder style. The 2nd Co-founder Model is a great example of how Studios are narrowing their focus instead of saying “we create companies from the ground up.” Studios using this operational model are more likely to say “we help scale companies in a variety of ways using our internal resources and connections.”

Builder Outsource Studio Model

For Entrepreneurs Saying: “I have an idea, a team, a go-to-market straetgy, and my own operational resources- I just need someone to build the product for me and help with sales and other growth functions.”

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This model is best suited for entrepreneurs who don’t need a hands-on partner but is in need of technical product building, designing, and managing.

The Builder Outsource Studio model may sound like a “service for hire” firm where an entrepreneur requests a product build and pays a firm to design it- but it is not quite that simple.

Yes, the Builder Studio will take over the engineering part of the project and yes, it is up to the entrepreneur with the vision to shape the rest of the company but with a traditional “service for hire” shop you, as the founder, need to tell the shop exactly what you want them to build. With the Builder Outsource Studio Model, there is more of a collaboration happening between the founding team and the builder firm.

Here are a few examples of Studios operating using the Builder Outsource Studio Model: Rocka, Concepter, Spark Foundry, Differential+

*This is not an exhaustive list of Studios operating using this model, these are simply examples. Check out their websites and begin to notice the consistencies among their operations & messaging.

Rather than simply providing tech services for a fee, the Builder Studio is often taking some equity in exchange for help building and managing the tech. Because of that equity, they have “skin in the game” which means they’ll work hard to shape the product and growth strategies because they have a stake in the outcome. However, Builder Outsource Studios do not typically work on the startup venture beyond product- meaning a builder Studio won’t help with sales, marketing, connections, acquisition, funding or growth.

3rd Co-founder Model

For Entrepreneurs Saying: “I have an idea but I need help with building the product, with sales, with marketing, and with growth/ scale objectives.”

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The 3rd Co-founder Model sits at the intersection of the Builder Outsourced Studio Model and the 1st Co-founder Studio Model. Essentially, an entrepreneur (and startup team if applicable) will approach a 3rd Co-founder Studio with an idea and some specific requests. Most often, the startup team will need help building the product. But, beyond this technical assistance, the startup team needs help getting customers and scaling the venture.

Unlike a Builder Outsourced Studio Model, a 3rd Co-founder Studio would assist with “growth hacking” and getting the resources in place to accelerate the scale of the company.

Here are a few examples of Studios operating using the Builder Outsource Studio Model: Beeso.io, Unstuck Labs,

*This is not an exhaustive list of Studios operating using this model, these are simply examples. Check out their websites and begin to notice the consistencies among their operations & messaging.

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https://www.unstucklabs.com/

Because the Studio team is partnering with your Startup team to bring this product or service to the market, 3rd Co-founder Studios will take a larger percentage of equity (~25%) than a Builder Studio would (~10%).

Think of the 3rd Co-founder Model as your “hired” technical co-founder. The Studio team is in the trenches with your startup team working to solve problems and develop technical solutions that lead to the success of the company. Essentially, a 3rd Co-founder Studio will help with anything digital, but for the most part, they won’t help with sales, fundraising, recruiting, HR, legal, providing space, generating leads, accessing connections, or any of the other resources traditional Studios are known for.

Studio Model Overview

There are many ways to categorize Startup Studios. For example, eFounders, a Startup Studio based out of France, prefer to segment the Studio industry by value proposition (see matrix below). They recognize that Studios have two key activities (ideation and spin out) and they split Studios based on where they fall on each of these axis.

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This is helpful for Studios to define themselves and approach partnerships within the industry- but it doesn’t help founders identify which Startup Studios to partner with or join.

The graph below is focused on segmenting Studios based on their level of partnership (will the Studio be in the trenches with your startup team or more hands-off?) and by value proposition (what does the Studio bring to the table)?

Using these two metrics and an understanding of their needs, startup founders should be able to more easily choose a Studio to partner with.

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For more information on Startup Studios check out www.studioupstart.com where you’ll find videos, articles, news updates, and more.

If you’re interested in joining a startup studio, fill out this form.

Studio Upstart is also a consultancy and part of what we do is placing entrepreneurs within Studios. If you have a good idea to pitch to a Studio or want to join a Studio as an internal team member, fill out this form and we’ll get back to you asap.

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Dianna Lesage

Written by

Endlessly curious about the human condition. Founder of Studio Upstart- www.studioupstart.com. Connect w. me on LinkedIn!

The Startup

Medium's largest active publication, followed by +717K people. Follow to join our community.

Dianna Lesage

Written by

Endlessly curious about the human condition. Founder of Studio Upstart- www.studioupstart.com. Connect w. me on LinkedIn!

The Startup

Medium's largest active publication, followed by +717K people. Follow to join our community.

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