A Brief History of the Venture Studio Model
The history of venture studios traces back to 1996 with the establishment of Idealab. Pioneering the model, Idealab focused on e-commerce and achieved significant funding and exits. Subsequent waves of startup studios emerged, including early movers like Blenheim Chalcot, Rocket Internet, and Betaworks.
Betaworks, based in New York City, became a notable success by supporting startups like bitly, Giphy, and Tumbler. In 2011-12, a new wave began with studios like Science Inc and Atomic, the latter gaining acclaim for building companies like Hims and Bungalow. The next wave, around 2013, featured studios like Expa, founded by Uber co-founder Garrett Camp, and others like Pioneer Square Labs and Human Ventures.
The venture studio model landscape has seen substantial growth in recent years. In 2019, it gained validation through M&A activities, with Deloitte acquiring Makers.do and EY acquiring ETVenture. Additionally, established companies like Boston Consulting Group, Mars Incorporated, and Procter & Gamble entered the startup studio arena. And renowned individual investors, including Peter Thiel, Marc Andreessen, and Jeff Bezos have invested in the startup studio model.
As of 2022, there were 724 active startup studios worldwide, and the number is growing. That is because the venture builder model is proving to bring high returns on investment. Here are the five main ways it achieves that:
- Rapid Prototyping and Iteration
One of the key strengths of venture studios lies in their ability to prototype and iterate on business ideas rapidly. By leveraging a shared pool of resources, including talent, technology, and market insights, venture studios speed up the process of testing and refining business models.
This accelerates the time it takes for a startup to move from ideation to a market-ready product, ultimately increasing the chances of success. The iterative approach allows for quick adjustments based on market feedback, reducing the risk of failure and enhancing the overall return on investment.
- Efficiency and Cost Savings
Venture studios often provide startups with shared infrastructure, such as office space, software tools, and other resources. This shared ecosystem creates economies of scale and allows for cost savings.
Common operational functions such as legal, finance, human resources, and marketing can be streamlined, reducing the financial burden on individual startups. This efficiency improves the financial viability of each startup within the studio and contributes to a higher overall return on investment for the studio itself.
- Access to Diverse Talent and Expertise
A significant advantage of venture studios is their ability to attract and retain top-tier talent. Startups within a studio benefit from access to a pool of experienced entrepreneurs, industry experts, and specialised professionals. This diverse talent pool provides invaluable mentorship, strategic guidance, and networking opportunities. The collective expertise within a venture studio enhances the probability of success for each startup, contributing to a more robust portfolio and increased returns for investors.
- Strategic Partnerships and Networking
Venture studios actively cultivate a network of strategic partnerships and collaborations. This network extends beyond the studio’s immediate resources and includes connections with investors, corporations, and other stakeholders.
Startups within the studio can leverage these relationships to gain access to funding, distribution channels, and potential clients. The extensive network of a venture studio amplifies the growth potential of each startup, leading to more successful exits and higher returns for investors.
- Diversified Portfolio
Venture builders typically work on multiple projects simultaneously, creating a diversified portfolio of startups. This offers several tangible benefits. Firstly, it allows for the exploration of various markets, industries, and technologies at the same time. The broad scope increases the chances of identifying lucrative opportunities and adapting to evolving trends.
Secondly, it provides a buffer against the inherent risks of entrepreneurship. Since resources are spread across multiple projects, the impact of failure in one venture is mitigated by potential successes in others. Additionally, the sharing of ideas and expertise among different projects can lead to synergies, enhancing innovation and problem-solving capabilities across the entire portfolio.
In conclusion, venture studios are proving to be a dynamic force in the startup ecosystem, offering a distinctive approach to creating and scaling successful businesses. Through rapid prototyping, operational efficiency, access to diverse talent, strategic partnerships, and portfolio synergies, venture studios deliver impressive returns on investment.
