By industrializing innovation, Venture Builders, also referred to as Startup Studios, Venture Studios or Company Builders, are helping to accelerate entrepreneurship. This article draws on insights from a leading industry report to present an assessment of the role venture builders play in the global market.
Venture builders* are organizations dedicated to systematically produce new companies. Venture builders engage in five core activities; they identify business ideas (either generated internally or sourced externally), build teams, invest capital, help manage and provide operational support to its startups. Collectively known as the Marmar stages, these set Venture Builders apart from incubators and accelerators by being actively involved throughout the lifecycle of a startup.
The best entrepreneurial talent is sought by their ability to solve real world problems and to execute on those ideas. Therefore, our purpose as a Venture Builder is then to test those ideas and back them with funding and resources in order to launch and grow impactful, scalable startups.
To do this, we’ve assembled a global team to guide great business ideas. We invest financial and human capital to support startups from the idea-stage until their first round of external funding. With better inputs, far more value is created resulting in higher-quality outputs. With a focus on sustainability, we want to build responsible companies across the UN Sustainable Development Goals (SDGs), with a triple bottom line approach: People – Planet – Prosperity.
Venture Builders venture where many other support structures don’t
Whereas most Startup Accelerators and Venture Capital firms work with startups with a proven model and early traction, Venture Builders start working with startups from the idea-stage, when there is often nothing else than an idea and a passion to solve a problem. This early financing risk is mitigated through a few elements:
- quickly validating the idea with rapid feedback loops for minimal investment;
- investing operational resources with internal experts (marketing, finance, technology, etc.) to let the entrepreneur focus on what they do best;
- investing capital in tranches, based on reaching milestones; and
- by financially engineering and pooling resources, the Venture Builder model is a proven way of maximizing a startups chances of success as compared to standalone startups.
The rise of scalable, synergetic entrepreneurship
Founded in 1996, Idealab is considered as the first true Startup Studio that has created over 150 companies with more than 45 IPOs and acquisitions. Another notable Startup Studio, eFounders, helped grow household names like Front and Aircall – using shared resources (capital, networks, skills, etc.) to launch solutions that then operate as fully operational companies.
Idealab and eFounders were just the beginning. As the years have progressed, new Studios have followed this model and built similarly successful portfolios. Studios are growing at an exponential rate as an asset class. This year, Enhance Ventures reported that there are roughly 560 Studios across the globe, representing more than 625% growth over the last seven years.
The path to sustainable businesses
By their very design, Venture Builders are made for critical early-stage experiments and prototyping. Entrepreneurs must overcome obstacles to determine whether their idea can progress. If the project fails a certain stage, Venture Builders know when to keep pushing or when to reallocate resources and move in the most efficient direction. As projects pass these obstacles, they gain traction and funding. The goal of most Venture Builders, therefore, is to streamline processes, freeing founders to focus on innovation, leadership and scaling. Consequently, investing in a company out of a Studio means investing in a project that has demonstrated its value.
The statistics speak for themselves. According to Crunchbase, 84% of startups out of Studios go on to raise a seed round, of which 72% make it from Seed to Series-A, compared to traditional startups in which only 42% of ventures that get to seed make it to Series-A. The latest GSSN Data Report states that the Studio approach is achieving better results (30% better to be exact) as they build repeatable processes, focus on their specific expertise and provide financial and human capital.
Not only is the Studio model more successful in terms of returns but also the time to which funding is obtained. It takes a traditional, standalone startup 56 months to go from zero to Series A funding whereas, a startup out of a Studio, attains the same goal in 25 months. If a company can scale faster at the onset of the business, then the pace of growth picks up for the startup as the shared resources of a Studio allow the founder to focus more attention on building their business.
The diversity of fund structures positioned to foster and profit from early-stage business development and support is increasing. Incubators and Accelerators are the first round of model innovation whereas Venture Builders represent a continuation of this trend. Further, this model thrives on shared solutions, shared talents and shared growth, which in turn result in reduced, distributed costs and better applied efforts.
At Satgana, we strive to help entrepreneurs solve wicked problems and, as a Venture Builder we have the opportunity to do so through the flexibility that the Studio model allows. Guided by the SDGs, we see the challenges the world is facing and aim to create companies to solve for these gaps by inspiring entrepreneurs around the world to build market-based solutions.
*Note that we are referring to ourselves as a Venture Builder because of our globally distributed nature, and in our view, the idea of “Studio” alludes to the concept of a physical space, while Satgana operates fully remotely. However, we still consider ourselves as friends of all the other Studios out there 😉