What is a venture studio?

Venture studios build businesses from idea to execution. Read on to learn about the venture studio model.

We’re glad you asked.

Perhaps it’s a term that’s new to you, or perhaps you heard they are similar to an incubator or an accelerator. That’s not quite correct.

We will be covering the following four areas:

Venture studios start with the idea itself.
A repeatable, business-building process.
An opportunity for continuous improvement.
Building great businesses for the long term.

To be clear, venture studios–also known as “startup studios” or “startup builders”–are their own beast–and they’re far less common. In fact, Enhance Ventures reported in 2020 that there were roughly 560 studios across the globe. While that number has undoubtedly increased since, that comes out to less than three per country globally in 2020. Just think about that for a moment…

What distinguishes venture studios from other entities is that rather than taking other people’s ideas or businesses and helping nurture and develop (incubator) or accelerate (accelerator) their growth, they start from a business’s inception.

1. Venture studios start with the idea itself.

Just like a founder, they come up with the idea and bring it to life. At most venture studios, this is done through a comprehensive process that begins with ideation, intensive market research and the development of a carefully articulated strategy and go-to-market plan.

Imagine a group of people sitting by a whiteboard (or virtual whiteboard) spitballing ideas and seeing what sticks.

Venture studios are professional business builders and ideators. Brainstorming is a critical component of the venture studio process, and it can be iterative to find the right idea that suits that particular studio’s niche and/or risk profile.

Once an idea is validated as worthy of pursuit by the team, the build and launch process begins.

2. A repeatable, business-building process.

Put simply, it’s quite like the build and launch of any business. While it varies from one studio to another, the core steps are inherently similar–build a brand, identify the total, addressable and serviceable markets, scope out key customers, define and refine the strategy, curate a tech stack, identify key roles and talent profiles, etc. and swiftly bring the business to market.

Venture studios are unique in that this process of creation, development, and growth is happening on a continual basis… Also, it’s typically happening with several new units (a “cohort” of businesses) being launched at the same time – all with the goal of creating businesses that have the best possible chance of success.

3. An opportunity for continuous improvement.

One benefit of this cyclical process is continuous learning and improvement, as the more opportunities a studio has to launch businesses, the more efficient and effective they become in their craft.

Venture studios provide targeted support and resources to their businesses, ranging from marketing to operations, to strategy, to IT, etc., all of which is handled by a team of seasoned professionals. This allows the people in those businesses to focus on strategy and execution, without all the ancillary details.

Studios can invest this level of time and effort because of their equity stake, which exceeds that of typical incubators (typically pay-for-entry) and accelerators (typically investing cash and mentoring and/or education in exchange for equity).

4. Building great businesses for the long term.

Under this paradigm, the venture studio can build the cap table and structure it for infusions of external funding at the appropriate time in the company’s journey without causing significant dilution to early holders (i.e. the studio and early hires).

Studios typically fund their own units at the onset, similar to how a child may lean on their parent(s) for financial support before they are old enough to have their own job. Eventually, they stay close to “home” (the studio), while developing their autonomy. The big difference here is that it happens on an accelerated time frame.

Eventually, the objective is that each business created and launched from a studio will experience an exit, at which point the studio can cash in on its equity stake. This underscores the long-term nature of venture studio relationships with the businesses they create. From idea to exit, the studio is involved over the full life cycle, with significant skin in the game, typically at least 30% equity.

Now that we’ve covered the basics of a venture studio, you may be wondering how nth Venture fits into the equation. We have a blog for that.

What is a venture studio?