When I tell someone that I work at a venture studio, their immediate response usually falls into one of three categories:
“Oh, so like a startup incubator?”
“Is that like an accelerator?”
It’s for good reason, though. Startup accelerators, incubators, venture builders, startup studios — there’s a lot of terminology floating around out there, and there’s a lot of overlap. Incubators, accelerators, and venture studios are just a few of the support systems that founders can take advantage of when starting a company. Ultimately, though, the right decision for one entrepreneur isn’t going to be the right fit for every other entrepreneur.
What is a startup incubator?
At its core, a startup incubator is a program that provides participants with workspace, mentorship, and community. The startup incubator definition is a collective, community-minded program for startup founders that is purpose-built to help founders succeed. Incubators may be specialized, focusing only on companies in a certain industry or geographic location.
Incubators provide foundational business services, as they are meant to support founders from ground zero as they find product-market fit. They commonly supply startups with internet access, networking opportunities, regulatory compliance help, and may help founders build their initial advisory boards. Most notably, a startup incubator gives founders a chance to connect and learn from one another in a role that can be isolating. Speaking with and learning from other entrepreneurs helps incubator participants to learn from others’ mistakes and grow their networks in a collaborative environment.
Some of the best startup incubators located around Indianapolis include Purdue Research Park and the Flagship Enterprise Center. Corporations and government entities may also sponsor incubator programs, providing founders with the basics needed to strike out on their own or join a startup accelerator. The startup incubator business model typically revolves around corporate or government sponsorship, where corporations fund an incubator in exchange for first access to startups that emerge. Some incubators charge entrepreneurs to participate, while others take a small percentage of equity in participating companies.
How does an incubator compare to a venture studio?
If an incubator is a slab of wood, a venture studio is the threshold, paint, and doorknob that are needed to construct and hang a door. An incubator is meant for entrepreneurs who already have an idea for a business but need support in starting it. A venture studio surrounds a founder with all of the expertise that they need to build a business. At High Alpha, this includes finance, HR, marketing, and design, which enables our founders to focus on building their business, securing their first customers, and fundraising. Our venture studio team supports the day-to-day operations of the business.
Venture studios build the companies that they want to see in the world, often centered around a certain specialty, like B2B SaaS or food tech. This means that venture studios come up with new business ideas, validate those ideas, and eventually build a company based on those learnings. While an incubator recruits founders with a variety of ideas, a venture studio first synthesizes new business ideas and then finds founders to run them. Although it’s less common, we welcome entrepreneurs to get in touch with us about their B2B SaaS ideas.
Incubators and venture studios also differ when it comes to financials. At High Alpha, we take a percentage of equity in the companies we build. In exchange for equity, a venture studio provides a variety of services, including finance, recruiting, HR, marketing, and sales. Incubators take little to no equity from a company, as their programs are usually funded by outside sponsors. At High Alpha, we often make venture investments in our studio companies as well.
As a whole, venture studios are dedicated to the success of a new company. They provide startups with all of the resources and expertise needed to build a successful company, priming founders for growth.
What about startup accelerators?
Accelerators are yet another tool that entrepreneurs can use to launch and scale their startup. While incubators provide office space and networking opportunities, accelerator programs are targeted toward startups that have a fleshed out product and a preliminary team. Accelerators typically contribute funding to startups in exchange for equity. Unlike an incubator, in a startup accelerator, participation is time-bound. Y Combinator, one of the most well-known accelerators, accepts startups into its three-month program that culminates in Demo Day, where startup founders present their startups to begin the fundraising process.
If you’re interested in learning more about building a company via the venture studio model, reach out to our team or learn more here.