Unlike a traditional VC, accelerator or incubator, startup studios are company builders. Studios usually build many products simultaneously with shared resources in development, marketing, sales and more.
Recent entities that fall loosely under this category is Betaworks, Twitter co-founders’ Obvious Corp and A16Z, which is stocked with teams of marketers, business development execs, recruiters and more to create a long line of startups. Singapore is seeing such a trend as well with my venture, JF2, and The Co-Foundry by Michael Yap.
Diversification of risk. Some may call the startup studio approach untraditional or even unfocused. The standard operating procedure is to pour your heart and soul into your startup and work until it makes or breaks it. However, more often than not, even the most promising startups shut down. With eggs in many different baskets, startup studios have more chances to succeed for investors, staff, and founders.
Economies of scale. Many bootstrapping startups avoid hiring “non-essential” positions like sales, marketing, HR, legal and more. In studios, fledging businesses can call upon a shared resource to expand quickly.
Diverse learning and working experience. Often times, developers and marketers complain about the same dreary work day in and day out. The solution is to leave for greener pastures before boredom sets in. In startup studios, there are no dull days. With teams of various expertise and experiences brought around to each project, there is always something new and exciting to do.
Collective knowledge. Studios can draw on the wealth of knowledge and experience to scale numerous startups and ideas. Like a mutual mentorship, the experienced entrepreneur shows the younger peers the ropes. Younger contemporaries may bring a fresh perspective.
What do startup studios look for?
Ideas. Some studios like to be pitched, while others don’t. There are no obvious pros or cons, either approach could uncover a diamond in the rough. At JF2, the key is that the ideas are 100 percent generated in-house, without outside interference. It is all about greenfield ideas with little to no restrictions that could potentially scale to critical mass.
Talent. Studios will always need talent to take the reins. Not many will want to personally handle the CEO position for multiple businesses. Usually, once the idea is fleshed out and deemed worthwhile, the management will look out for suitable founders or co-founders. JF2 looks out for individuals with:
- Deep domain expertise
- 5 to 10 years of experience in leadership/management roles
- Detail-oriented and risk-seeking personalities
Funding. Most studios will provide the basic seed funds for the business to grow. There is also no hard and fast rule on the amounts required, but it should be in the region of $25,000 to perhaps $100,000. JF2 is no different – investing to create a MVP and get it to market. Also, the funding allows senior executives a soft landing from the corporate pay package with a decent salary and generous equity.
Each studio’s model differs slightly. There are different allocation of equity and titles. Many studios not only create and incubate ideas in-house, but also invest outside the studio. The only common thread is to share entrepreneurial wisdom and in-house resources to help generate ideas and build companies at scale.