What does co-founders of Uber, Foursquare, Digg, and PayPal have in common besides tech businesses and millions of dollars in the bank? Well, all of them (and many more) have either started or invested in startup studios.
In the last decade, startup studios have made a big name in the business community and regularly churn out the ‘next big thing’ in the startup world. But tech newbies often struggle to wrap their head around the concept. Are they like incubators, accelerators, or something entirely different? How do they make money and succeed so frequently?
Well, no need to fret. This article will put the concept of ‘startup studio’ under the lens and unravel the mystery that still surrounds it. Let’s start by understanding what startup studios are all about.
What’s a startup studio?
A startup studio, also known as a startup factory and venture studio, has the money, technical talent, and growth expertise to transform raw ideas into functional businesses. The ideas can come from inside the studio or borrowed from outside to launch almost non-existent businesses.
Unlike incubators and accelerators, startup studios don’t limit support in any way. They provide technical support, marketing guidance, design talent, initial funds, capital consultation, and everything else required to help ventures grow up faster. Rocket Internet and Betaworks are probably the most famous names in the startup studio fraternity.
For its uncapped services, startup studios take a big chunk (often 30-60%) of equity.
Which ventures are supported?
From e-commerce to logistics, transportation, entertainment, media, sports, AI, food, retail, design & fashion, everything makes sense for a startup studio. Heard of Dollar Shave Club? Yes, the one that Unilever bought for 1 billion. It was an apprentice of Science, a start studio that has also scooped out Hello Society, Dog Vacay, and Famebit.
Startup studios have been supporting ventures in both B2B & B2C segments, with reports showing an even split in focus. In short, anything with promise is interesting for a startup studio.
Read case studies to learn how groundbreaking websites and platforms are built!
How do startup studios function?
Startup studios differ significantly from incubator and accelerator-powered organizations. They stay and operate within the studio that kickstarted everything until they are ready to raise additional funds. It’s believed that ventures started in a studio can have an incubation period of around a year.
As underlined earlier, ventures that take birth at startup studios stay there for a much longer time. That’s majorly because:
They supply the team: Studios engage talent to start off the work in major departments. From technology to sales, design, finances, and legal support; Everything is provided on demand.
They supply the money: Startup studios have deep pockets, and they fish out money from them to make sure that nothing that supports venture growth woes is unfunded.
Think startup studios as rich, smart parents who are ready to go to great lengths to see their kids succeed.
What happens when ventures leave the nest?
Ventures that take birth in a startup studio leave after some time to raise additional funding and accelerate their growth independently. This money usually comes from venture capitalists and angel groups. All the funding and grooming pay returns when the venture’s market worth goes up; This is when the big bosses plan an exit.
For those who don’t know, an exit could be a merger, sales, or acquisition by a bigger business that finds worth in the company. Once the exit is complete, the startup studio has a payday. For a venture that’s born in a startup studio, the end is almost always the exit.
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Future of startup studios
Almost 300 startup studios are churning out hyper-successful ventures yearly. And there is no way the trend of startup studios is going to fade away. They are here to stay since they create massive value through initial capital, staffing, and guidance.
You must have figured out by now that this is not how most businesses take birth, operate and grow. Startup studios are the result of radical change in the conventional way of starting a business. And it seems the new formula is working.
It is safe to bet that startup studios will be around for a long time & will continue to support ‘worthy’ ideas.
Considering the success rate of ventures supported by startup studios, it doesn’t surprise anyone that many entrepreneurs want to nurture their ideas inside a startup studio. While COVID has played the spoilsport in the past year, the future of startup studios still looks promising.
That said, not all entrepreneurs want to part with 50% equity to grow their venture. If you are one of them, it makes complete sense to engage independent talent to handle different business aspects.
Big Kitty Labs is a full-service software development company that has been developing web applications, database platforms, and cutting-edge software for over a decade now. Contact us to discuss your technology goals, and let’s figure out the most practical way to succeed.