In the world of VC, venture studios (or, firms which integrate capital investment, operational resources, and expert guidance to lead founders from ideation to launch and through the first few stages of growth) are becoming more popular by the day. That’s mostly because they provide promising founders more than just money. Instead, they give founders the holistic support they need to actually build a great business.
VentureDevs––the company I started with my business partner, Wojtek––is a hybrid venture studio/development firm. Born out of the principle to help businesses not only launch but to also grow successfully, our venture studio arm works with the founders of idea stage startups. Originally, we had aims of simply starting up and building our own ideas so as to be self-sufficient, determining which models would work and then scaling ourselves out of those businesses to start new ones. We realized along the way, though, that many other business leaders needed help in this same process—especially as it related to tech operations.
In fact, a variety of people we knew had already approached us asking for this kind of help and insight. With the abilities we’d developed and connections we’d amassed, the idea of operating in this way arose because it just made sense to us. While we also service growth-stage and older companies, we maintain our studio arm, providing both investment and long-term service support to select founders.
Through our experience, we’ve seen how operating like a venture studio has several enticing benefits for entrepreneurial-minded investors.
Providing founders with something that goes beyond financial investment or just one service brings you closer to their operations and allows you to continuously engage in the effort of building new businesses. It also gives you the opportunity to become involved with uniquely inspiring people who will inevitably turn into valuable business partners down the road. Our network is now brimming with folks who run companies, startups, and corporations.
As far as building a company goes, running a venture studio offers you unique insight into what works and what doesn’t. You’re able to take a hands-on approach, and your understanding of the underlying science becomes much more robust. This chance to actively contribute to the growth and development of the companies you work with is what many investors want to be doing.
And, by directly contributing to a business’s success, you have more control over its future as opposed to simply writing a check––which, in a sense, also makes running a venture studio a smart play in terms of ROI.
For someone who greatly enjoys company building, operating as a venture studio is, for these reasons, something to consider. And many VC firms are recognizing this fact; the smart ones are copying the venture studio model and offering their portfolio companies similar kinds of multi-layered services.
That said, this doesn’t mean starting a venture studio is for everyone. In fact, it takes significantly more effort on your end as an investor than a traditional investment would since you’re more involved on the operational side of things.
Here are the key questions you should ask yourself to find out if the route’s a fit before diving in.
1) Why do you want to do it?
It’s critical that you set up a venture studio for the right reasons. It’s a different model that requires the right kind of mental investment. If you’re getting into the game for an ego boost, or just for the money, it’s unlikely you’ll succeed. Sure, the hope is that you’ll make money, but you have to realize the companies you work with might not pan out.
Instead, if helping founders build their businesses or realize their potential is itself your passion, then you will likely find this much more rewarding. You have to want to be in the trenches with them. No, you won’t be the CEO of the companies you work with––you won’t have that kind of bandwidth, and CEOs must themselves be 100% focused on their individual venture––but you have to want to provide more than the typical investor. (For a model here, look at Richard Branson who, by way of his Virgin brand, has overseen and assisted more than 500 companies over his career and also happens to be my business idol.)
In running a venture studio, you will be very much engaged in the science of building businesses––designing products, utilizing your connections to secure deals, selling, marketing, and so on. This is the work you’ll be doing day in and day out, and the quality and commitment and passion with which you do it is what will set you apart. This has to be what excites you.
2) Why do you think you can legitimately help more than somebody else?
Before you commit to becoming a venture studio, you’ll need that differentiating factor––evidence that you can provide unique value. At VentureDevs, we believe we provide a unique kind of value that proves useful in a venture studio capacity. We offer things like talented technical and product teams, our own experience as successful founders, out robust network, and our proven commitment to working with founders on a truly collaborative level from idea to launch through all stages of growth.
It’ll benefit you to try and identify similar differentiating elements of the service and value you’re equipped to provide. To this end, you’ll need to know the difference between a venture studio and things like incubators, accelerators, and folks who operate like more traditional VCs––these entities which are also focused on helping founders get their ideas off the ground. Ask yourself: what can you provide that even top-tier accelerators can’t? How are you providing something differently? Can you be both an operational partner and an advisor, offering guidance and wisdom from an entrepreneurial perspective? Will you give the startups you work with time to grow? (Many accelerators, for instance, work with founders for only a finite amount of time.)
And you’ll have to answer for yourself, too, why you want to operate like a studio as opposed to something like an accelerator. (If your answer is you want to partner with founders for the long haul, you’re on the right track.)
At the end of the day, I’m an expert only when it comes to my own experience. But I can tell you that if you’re at all like me––interested less in money than in the tactile process of building companies which provide value and solve problems––then exploring the venture studio route may very well be for you.
You just need to make sure that this kind of grind and commitment is what you want before diving in. Don’t do it because it’s a hot new trend. Do it because it’s something that genuinely inspires you.