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In Part 1 of our two-part series, we offered a glimpse into how Venture Studios came to be, covering how venture studios offer resources and support to their portfolio companies, including funding, talent, and infrastructure.
The resulting impact on businesses launched out of studios is astounding (if we do say so ourselves).
Capital to fuel growth and scale can make or break a startup initially. On average, studio startups reach seed rounds twice as quickly compared to conventional startups (1.49 vs 3.03 years), with each consecutive funding round keeping pace as well:
Based on data from 182 startup acquisitions and 22 IPOs, venture studio startups average a 5-year timeline from founding to acquisition. That’s 33% less time than non-studio startups! IPOs of venture studio businesses average 7.5 years, 31% less time than non-studio startups. (Case and point with Dollar Shave Club and Liquid Death).
Startup studios demand a much higher ownership stake (an average of 20-40%) than VCs or angel investors. So, when a studio startup exit occurs, that concentration of equity leads to much higher returns, which is good for co-founders and investors.
A 2020 study conducted by StudioHUB quantified this insight in the following way:
While startups can outsource tasks like marketing, design, or development, hiring agency specialists costs three to four times more. Even contractors have a significantly higher hourly rate than full-time employees. In the beginning stages of a business, bang for your buck is critical. A startup studio is like having your own agency talent pool at a cost price. Score!
Entrepreneurs in traditional startups often find it challenging to change an idea or pivot due to their deep emotional attachment to their original concept (which they believe will change the world). Sometimes, they’re so deep “in it” that they fail to see the writing on the wall. This can lead to exhausting funds before pivoting (aka once it’s too late). Venture studios use rigor and process to pivot more effectively and are well-versed in testing quickly and saying “no” with discipline. Wash, rinse, repeat? Maybe. Maybe not.
There is something to be said for experience. Whether the results are failure or success, a lesson is learned. Venture studios are exposed to various businesses, and with that comes wisdom and the ability to share that wisdom and data with studio businesses and portfolio companies.
Launching the 7th or 10th startup in agritech or legaltech is much simpler than the first. Dozens of case studies have already been performed, problems identified, databases of partners and clients accumulated, licenses obtained, and metrics calculated. This can eliminate the need to reinvent the wheel, saving time, money, and resources along the way.
Small, great, mighty, and everything in between, venture studios represent a disruptive force in startup creation, offering a collaborative and resource-rich environment for entrepreneurs to thrive. By reimagining the startup incubation process, venture studios are reshaping how new ventures are launched and scaled.
As the startup landscape evolves, venture studios will remain a key driver of innovation and entrepreneurship, propelling the next generation of disruptive startups forward.
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