And why we think it’s going to work
Traditionally, venture capital’s purpose has been to simply assign capital to a business in exchange for equity. The philosophy of this model is that with smart bets, the return of a venture fund can outpace that of a regular market…and sometimes by a great deal.
Unfortunately, as Vinod Khosla of Khosla Ventures has said:
“95% of traditional venture capitalists add zero value to startups” while “70–80% may even add negative value” when providing advice to their portfolio companies.
While this is a pretty extreme criticism of the VC industry, it does highlight that the likelihood of success — and the resulting return — is diminished for all but the best pairings of the best startups and best VCs. The key to outsized returns, it appears then, is to provide extreme value to startups alongside funding.
The key to outsized returns, it appears then, is to provide extreme value to startups alongside funding.
Part Startup Studio
At High Alpha, we are pioneering a new model of entrepreneurship that unites company building—via a “startup studio” model—and venture capital as a venture studio.
The unique side of High Alpha — and how we truly think we can win—is that we actually co-operate our companies at their earliest stage.
As a startup studio, our primary role is to create and launch businesses. We bring hundreds of business ideas into the top of the funnel—either by conceiving of the idea for the business ourselves through conversations with VCs, analysts, industry experts, and from our experience in the SaaS industry or by partnering with top entrepreneurial talent to address a topic in which they have subject-matter expertise. During a process we call “Sprint Week,” we take our best ideas and transform them into business concepts — complete with branding and positioning, software click-through models validated by buyers and users, a go-to-market strategy, and business case. The winner of Sprint Week is funded as High Alpha’s newest studio company.
If a significant number of businesses fail in their first year of life, then by providing access to high-quality resources that are knowledgeable of the nuances of B2B SaaS startups, we not only de-risk these nascent investments, but we also can help them grow exponentially.
High Alpha is a shared services team that provides design, product, marketing, finance, and talent services that allow our studio companies to grow quickly and efficiently, while avoiding some of the early pitfalls that sink some startups during the critical early stage of finding product-market fit and building a company.
Beyond this, we also provide strategic advice and knowledge from successful entrepreneurs through our monthly Speaker Series, weekly Office Hours with High Alpha’s partners (each of whom have operated companies of their own), and other methods.
Part Venture Capital
High Alpha also has a venture fund that invests in high-growth B2B SaaS companies — both from our studio and externally. As a VC firm, we have access to a wide network of top-tier VCs. When our studio companies are fundraising, we’re able to provide introductions to high-quality co-investors, while creating momentum for the round by investing ourselves. By attaching ourselves to high-growth companies outside our portfolio, we’re able to learn from some of the best current SaaS operators and create opportunities for sharing their knowledge across our portfolio.
While we take a much more “hands-on” approach with our studio companies, we also provide strategic support for our external investments. Our partner’s past experience in operating high-growth SaaS companies—as well as our learnings from co-operating our studio companies—enables them to draw on relevant experiences when providing advice to all of our portfolio companies.
Creating a “Venture Studio”
Through this combination of a startup studio and venture fund, High Alpha has pioneered a new model — the “venture studio” — that we believe truly embodies the most meaningful and additive versions of venture capital, enabling our portfolio companies to be highly successful in their growth and operations. As a company, High Alpha is still young (2 years old), but we are increasingly convicted that by continuing to attract the right talent to our model, we will be able to create great solutions to meaningful problems.
High Alpha has pioneered a new model — the “venture studio” — that we believe truly embodies the most meaningful and additive versions of venture capital.