Venture Studio – what is it and how do you build one?

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The continuing popularity of start-ups and the changing economic environment is causing originators to seek ever new ways of support. The origins of venture building can be traced back to the end of the last century, when IdeaLab from the United States supported the development of almost a hundred businesses and listed many of them on the stock exchange. Let’s take a look at what venture building is and how to build a venture studio?

What is a venture studio?

A venture studio (also: startup studio or startup factory) is a company whose task is to promote innovation and support start-ups at the pre-seed and seed stage.

In contrast to incubators or accelerators, most venture studios do not accept applications from external parties, but rather try to promote their own ideas using non-financial capital in the form of the know-how of their own collaborators. This type of support is referred to as a ‘Builder Studio’. If mentoring, technological or organizational-legal support goes hand in hand with VC funding offered to external parties, then one can speak of a so-called Investor Studio.

It is not uncommon for the venture studio itself to offer co-founding of the business, which significantly speeds up the entire product development process and shortens the time required to bring it to market.

How does a venture studio work?

The activities of a venture studio can be divided into four stages and this cycle will look similar for any startup, whether it is created from an internal or external idea.

First step – the idea

The first step is the creation and evaluation of an idea (ideation). This consists of a comprehensive evaluation of the idea, as well as an analysis of available alternatives. Based on the initial assumptions, an overall start-up concept is created.

Stage two – verification

The next step is to verify the idea by creating a Proof of Concept (validation). This is the creation of a model to demonstrate that the idea is feasible and has marketing potential. At this stage, the amount of funding required and the anticipated profits from the sale of the product or service are also assessed. If the Proof of Concept gets the green light, it is given ‘Go’ status. Otherwise, it will be ‘No-Go’.

Stage three – commercialisation of the idea

Commercialisation consists of setting up the start-up as a separate entity (usually a capital company) and acquiring founders, i.e. people who will support the foundation with their funds. When the company receives funding it is time to confront the theoretical assumptions with reality and transform the Proof of Concept into a finished product. Usually the realisation follows the MVP principle, i.e. Minimum Viable Product.

The product or service hits the market, albeit in a truncated version in terms of content and form, but one that meets the basic expectations of the customers. This allows the startup to verify that buyers really need what they have received. The MVP concept involves successive improvements to the base model according to the product market-fit philosophy until the product is deemed optimal.

Stage four – Growth

Growth stage is the stage at which a company seeks new opportunities to commercialise a product. New sales channels, business process management systems are explored and new products are developed. It is the last step before exiting the start-up (Exit stage), which can consist of:

  • the acquisition of the company by another entity as part of an M&A;
  • the company becoming independent by preparing a public offering and going public on a stock exchange.

What to keep in mind when building a venture studio?

When considering the creation of a venture studio, the first thing to do is to determine the model of support offered.

Builder companies should first and foremost take care to carefully select their staff line-up. The better qualified the team, the greater the chance that an idea can be extracted that can then be monetised. As a rule, most functioning venture studios clearly define their profile, e.g. promoting IT or MarTech ideas. The definition of the business direction should go hand in hand with the selection of the qualifications of the team members.

Investing companies, on the other hand, should place emphasis on creating the conditions for raising the capital necessary to promote the startup. Also important is the validation aspect, i.e. the ability to properly assess the sales potential of the ideas that applicants bring with them.

Developing a successful venture studio requires anticipating a number of legal and business risks and making appropriate use of existing regulations. It is worth considering the use of mechanisms such as the ESOP and the share vesting that is part of it, which cement the cooperation of the people who create the startup. It is also important to remember to properly regulate issues related to intellectual property rights (transfer of copyrights, licences) and industrial property (obtaining patent protection for an invention or a certificate of protection for a trademark).

Venture studio vs. other business development support models

Venture studio is not the only solution designed to support new ideas, but in practice it often proves to be the best. Why is this the case?

Business accelerators offer access to development tools, but do not have the capital to develop the idea. As a result, initiators still have to try to obtain funding on their own. Venture capital funds, on the other hand, provide access to funds on the condition that the business idea is deemed promising. On the other hand, there is no substantive support here, so you have to take care of the preparation of the pitch book yourself.

Business incubators are also available to initiators. In this case, support is mainly limited to brainstorming.

Venture studios combine all of the above-mentioned features and offer comprehensive support from the initial analysis of the idea, through the acquisition of financing to the promotion of the product and the scaling of the entire project. Using the studio’s services, people with a business idea can try to ‘kick-start’ both a small and a large business without worrying about both money and technological support.

Linke Kulicki Law Firm offers comprehensive support at the stage of establishment and ongoing legal services of the venture studio. Our lawyers will draw up the necessary documents – rules and regulations, contracts, ESOP plans, as well as take care of IP protection. With our assistance, your venture studio can operate efficiently and in full compliance with the law.