Why a Venture Studio Model is Superior to Normal Startup Investing
According to Investopedia, 90% of all startups fail to get off the ground and produce adequate revenue. With 21% of startups failing in the first year, new startups must learn from the mistakes of their predecessors and rise from the ashes. Common obstacles for startups to overcome are failure to launch, operational challenges, having the wrong team, and trouble getting funding. The Venture Studio Model is different because it is a company that works to build several different companies in rapid succession.
What is a Venture Studio?
The definition of a venture studio is a location that aims to create multiple companies in rapid succession. The venture studio framework is a model for entrepreneurship that combines company building with venture funding. In layman's terms, venture studios are matchmakers, linking business ideas to their accomplished counterparts to execute those ideas. Venture studios provide entrepreneurs with an initial capital amount and operational support. Over the last seven years, the venture studio market has seen an incredible 625% growth.
In order to classify as a venture studio, a company must have all three of the following criteria; first, the resources to create startups from the ground up, including not just capital but time, effort, and workforce. Secondly, the venture studio must build several different startup companies in rapid succession, so they are often working on multiple prototypes simultaneously. And lastly, the venture studio must have infrastructure that leads to an efficient company-building machine.
Does the Venture Studio Model Work?
According to Global Startup Studio Network, startups that launch from studios experience 30% higher company success rates. Almost every company launched from a venture studio raises a seed round, and 72% of those who raise a seed round go on to raise Series A financing.
Studio venture capital investors are more involved in startups than a typical venture capital fund. A venture studio differs from an incubator studio because an incubator studio receives equity in the business in exchange for capital and expertise. A startup incubator usually offers a long-term relationship with curated members. Some may provide access to technical facilities and physical space. Meanwhile, a venture studio provides funding and access to all resources the startup needs. A study of 23 leading venture studios showed that of the 415 companies they created, only 9% have failed, 3% have successfully exited. The rest are still active with average yearly revenue of more than $1 million.
While many startups seek effective solutions to the many challenges they face, funding is arguably one of the most difficult to overcome. A venture studio model not only aids in venture funding, but also links businesses to operational support. To be a successful start-up company, one must have a strong foundation to rely on, and a venture studio model creates just that.