Pioneering the Venture Studio Business Model

The venture studio model is a new model for entrepreneurship, combining company building with venture funding in order to compress time, iterate quickly, and scale faster. In 2015, we pioneered the venture studio business model with a focus on creating a new model for entrepreneurship.

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FROM IDEA TO EXECUTION

The High Alpha team is purpose-built to conceive, build, and launch new software companies from scratch. We’re experienced founders, product leaders, marketers, engineers, and operators. Meet the teams behind our studio services.

Venture Studio Business Model

For those looking to start a new company, one popular business model is called a venture studio. A venture studio business model, which is also called a startup studio business model, is a company that works to build several different companies in rapid succession. In the academic world, this model of business building is also called parallel entrepreneurship. There are a number of reasons why the companies that are involved in this type of startup can succeed. 

First, venture studios typically focus their resources on creating startups. This means that venture studios have a lot of experience building new companies and can apply this experience to achieve a greater chance of success. Furthermore, because of the repetitive nature of the company building, these companies are ideal for developing product and service prototypes rapidly. In addition, because these companies are typically building multiple startups at the same time, they have the ability to work on multiple projects simultaneously. Finally, the venture studio business model means that the same infrastructure can be applied to multiple companies at the same time. This means that venture studios are efficient when it comes to building multiple companies. For those wondering, “do venture studios work?” — the answer is yes. 

What is a Venture Studio?

One of the most common questions we hear is “what is a venture studio?” The definition of a venture studio is that this is a location that aims to create multiple companies in rapid succession. As alluded to above, this model is often referred to as a startup foundry or “parallel entrepreneurship.” In order for something to be classified as a venture studio, there are three separate criteria that the studio must meet. These include:

  • The resources of the venture studio are focused on creating startups from the ground up, meaning that there is a lot of time, effort, and dedication focused on working on a project for a certain period of time.
  • The venture studio builds several different startup companies in rapid succession, meaning that they are often working on multiple prototypes at the same time.
  • The venture studio has the infrastructure in place that lends itself to an efficient company-building machine. The venture studio often pools its manpower, technical tools, and skills to build several projects in a year, reusing infrastructure in an efficient manner.

People often confuse a venture studio with an incubator studio, also known as a business incubator. When comparing a venture studio vs. incubator, an incubator studio typically receives some sort of equity in the business in exchange for capital and expertise. This is a key difference that everyone should keep in mind.

Studio VC

One of the important topics of discussion when it comes to venture studios is the possibility of equity. Equity is incredibly valuable to startup companies, particularly given the potential for massive returns with the success of even one product prototype. Some people view venture capital firms as a subset of venture studios while others look at venture capital as a different entity altogether. Studio venture capital investors are typically much more involved in startups than a typical venture capital fund. With a typical venture capital fund, there are investors who pump in a tremendous amount of capital into a project that is already somewhat off the ground. Then, these investors expect a significant return on their investment within a few years. Sometimes, venture capital firms take a portion of the equity in the company in exchange for their investment. For the most part, venture capital firms leave the day to day operations of the business alone.

On the other hand, a venture studio fund builds a business from the ground up. They are heavily involved in getting the startup off the ground, working with prototypes, and providing assistance to the startup in the form of capital, expertise, manpower, and connections. When looking at a business agreement with a venture studio, the agreement may resemble that of a venture capital firm agreement. Sometimes, venture studios are going to take some equity from the startup company in exchange for the tremendous amount of resources the studio is going to provide. Startup studio equity will vary depending on the capital and the studio policy; however, this is an important point to examine in the agreement.

At High Alpha, a venture studio based in Indianapolis, we build new B2B SaaS companies from the ground up. We design, prototype, and validate our top concepts during our quarterly Sprint Week process, which is our forcing function for launching new tech startups. When we launch a new company, we essentially build a cocoon of expertise around the startup, across every discipline required to build a world-class company. The level at which we support our companies allows us to compress the amount of time it takes to move from an idea to a world-class business. Our studio services include brand, design, engineering, HR and recruiting, sales, marketing, finance, and data science.

Corporate Venture Studio

Many companies have a venture studio as a subset of an existing corporation. This is often referred to as a corporate venture studio and is called corporate innovation. Because of the tremendous amount of success that many venture studios have already enjoyed, existing corporations are looking to create an arm of the company that looks for new ways to grow and build. This comes in the form of investing in startups, as this has the potential to lead to exponential investment returns in exchange for existing capital which the company already has plenty of. Many corporations already have a powerful social venture studio that can make static capital work harder than ever before. This means that startup companies can take advantage of the tremendous amount of capital these corporations have while corporations can enjoy much larger returns on their capital than they otherwise might. For this reason, there has been significant growth in the number of corporate venture studios over the past few years.

Startup Studio Playbook

While startup studios are very popular, the venture studio platform is still very much evolving. One of the most popular areas of venture studios today is the healthcare venture studio. With so much new technology being created in this space, there are a lot of people who are looking to build new products that have the potential to save lives. While the playbook for venture studios is still very much under development, there are a few best practices that venture studios tend to follow. These include:

  • A high-quality venture studio is going to provide advice to young startup companies that help turn ideas into concrete operations
  • This will come in the form of operational guidance that comes in the form of human capital
  • In addition to human capital, venture studios are going to provide financial capital as well. The amount of financial capital will vary with the specific venture studio.
  • Venture studios may also set up portfolios that can provide a steady income to the startup company as it gets off the ground

In this manner, startup studios are going to provide operations, advice, capital, and guidance to help turn startup dreams into reality.

Starting a Venture Studio

There are many people who are wondering how to start a venture builder. For those looking for answers to the question, “how to start a venture studio,” this comes in the form of answering a few important questions. First, where is the funding going to come from? Startup studios function by providing capital to startups that help get the ideas off the ground. There are a few sources of funding available including the founder’s wealth, corporate funding, and money from outside investors. Next, how is the venture studio going to be structured? Is the studio going to fund a few startups on its own? Or, is the studio going to collaborate with investors to decide collectively how to invest in startups? Finally, what is going to be the focus of the studio? Is the studio going to invest in companies overseas? Is the studio going to function on a single sector of a single industry? How is the funding going to be distributed? It can be helpful for those looking to start a venture studio to learn more about this process. Some popular books to take a look at include Startup Studio Playbook and Anatomy of Startup Studios. 

Startup Studios by City

When looking for funding, it is important to find the right startup studio. There are lots of startup studios all over the world. Some of the top venture studios NYC include the MIT NYC Startup Studio, which is a trust with a tremendous amount of funding for those looking to create venture studio NYC. There is even a startup studio in London called Nesta which has enjoyed a lot of success. Superset venture studio San Francisco is another great example of a growing venture studio. There is more than one Atlanta venture studio that people should take a look at — Atlanta Ventures’ studio and The Core Ventures Studio are just two studios in the city.

If you can’t tell by now, there is a global startup studio network of companies building the next generation of businesses. At High Alpha, our venture studio’s mission is to build the next generation of B2B SaaS companies. In addition to a network of startup studios, in recent years, the Venture Studio Collective has grown, providing a tremendous amount of resources for those looking to start a new company. 

When someone is looking for a source of funding, it’s important to take a look at all of the options available, weighing the pros and cons and looking for a partner that has the appropriate reach. When considering fundraising options, it’s important to consider local, regional, national, and international partners. 

Venture Studio Partners

When trying to find funding for a new business, it is critical to find the right partner. A startup founder needs to create a list of criteria that will help them go through the list, finding the right resources to get their business off the ground. Some of the top venture studios in the world right now include Human Ventures, High Alpha, IDEO CoLab, Idealab, Superset Venture Studio in San Francisco, West Venture Studio, OC4 Venture Studio, and Techstars Venture Studio. 

All of these venture studios have enjoyed a tremendous amount of success; however, venture studios also need funding to be successful. Venture firms like True Ventures, Foundry Group, and Emergence Capital have a track record of working with venture studios. It is important for startups and entrepreneurs to take a look at all the options available, doing their due diligence to find the one that is right for their needs.

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