How Do Venture Studios Work?

The new engine of intentionality in the world of startups and innovation

Sometimes called “startup studios,” venture studios are organizations designed to create new startup companies. They do this either by generating new ideas for startups or by recruiting founders with ideas, and then they apply significant amounts of time and capital to the process of growing the startup successfully.  At the heart of every venture studio lies a process, which generally has four steps (though each studio may give them slightly different names):

  1. Ideation – the process of coming up with a new idea and “pressure testing” it with potential buyers through conversation and the sharing of prototypes
  2. Productization – the process of developing the “minimum viable product,” or MVP, which is not the final version but is enough to share it with customers for feedback and continued development
  3. Launch – the process of creating and initiating a go-to-market strategy, including sales, marketing and customer support 
  4. Scale – the process of building an organization around initial market success that will help it grow

Venture studios are often outgrowths of venture capital funds, as each stage of the process requires capital funding to pay for each activity. Depending on the depth of the involvement, the equity stake taken in the company can be quite high, as startups are risky and most fail.  The involvement of a studio in the startup tends to reduce the risk for investors, as the process and the experience of the team can help to avoid common mistakes that would cause others to not succeed.

There are several different models for venture studios, but most of the differences center around how much of the company is owned by the studio as compared to the founders.

  • 1st Co-founder studios are designed for founders with an idea but little to no expertise in how to start a company. Generally, the studio will take half of the equity in your company, leaving you with the other half, and then they will do practically everything else from validating the idea through development of the product through the launch of the product into the marketplace. Usually, the founder will move into the role of CEO at the launch stage, and the company then operates like other new startups.
  • 2nd Co-founder studios are designed for startups that are further along in the process. Often, they have a minimum viable product and some degree of customer interest but are struggling with a go-to-market strategy and the funding required to launch the product and scale a team. This is frequently seen with engineering-oriented founders who are experienced with a technology and have created the basic product but lack the business skill and experience to create a company around it.  More of the equity is held by the founder in this model – typically 65% with 35% to the studio, and the role of the studio is to supplement the founder’s team with additional resources working in concert to move the company forward.
  • 3rd Co-founder studios are designed for startups that have a solid team but have certain “holes” they need filled. A very typical need is for someone to manage the product or technology, or perhaps to setup and manage a sales team or a marketing team. In this model the studio operates like mercenaries brought in for specific purposes to complete the leadership picture. Here the smallest amount of equity goes to the studio – somewhere between 10% and 25% depending on how many needs must be met.

Of course, all of these are guidelines: there is an infinite range of models for studios across the spectrum.

Why do founders choose to partner with venture studios?

The core value proposition of a venture studio is to access skills, expertise and a network beyond the founding team. These resources reduce risk and enhance outcomes by equipping a startup with resources they usually cannot afford early on:

  1. Skilled teams employed by the venture studio or through their partner network amplify the ability of the startup to execute and reduce the time and expense of rework based on mistakes and inexperience.
  2. Methods and tools created and offered by the studio to portfolio companies help obtain results more quickly as they are the result of distilling experience and failures into process.
  3. The willingness of venture studios to “roll up their sleeves” and provide hands-on guidance both reduces risk and provides accelerated mentorship and training to founders.

Essentially venture studios absolve you as founder from having to figure out how to attract or get investors to fund your business or how to convince someone to invest in your product. You get to focus fully on leveraging the skills, expertise and network of the studio to build your startup.

Written by the NEXT Studios Team

NEXT Studios Adds Two New Studio Companies to Portfolio

Pulse Analytix and Voxi partner with fellow entrepreneurs to begin journey to build and shape their startups

INDIANAPOLIS, Jan. 15, 2021 – NEXT Studios, the Midwest’s newest venture studio, designed by entrepreneurs, for entrepreneurs, with entrepreneurs, today announced it has added two new Central Indiana-based startups to its portfolio. Joining NEXT Studios are Pulse Analytix, a digital platform focused on civic oversight, and Voxi which provides data driven product placement.

Led by tech and entrepreneurial veterans Joseph Cudby, Tom Kilcoyne, Shelley Klingerman and John McDonald, the NEXT Studios team is applying its innovative process for helping ideas become products and products become companies to two new startups. As the studio for entrepreneurs, by entrepreneurs, the chances of success are increased through collaboration and providing entrepreneurs the ability to work together with seasoned entrepreneurs to bring their ideas to fruition.

“We are excited to continue to grow our portfolio with these great startups that are empowering consumers and disrupting their industries through the power of data analytics and machine learning,” said Shelley Klingerman, managing partner of NEXT Studios. “We are thrilled to be their partner on their entrepreneurial journey.”

Pulse Analytix was added to the portfolio in November 2020 and is a cloud-based customer service platform that improves transparency, accountability and communication by empowering citizens to notify, track, and review interactions with government agencies, while enabling agencies to monitor, respond and analyze interactions. Lisa Mitchell and Marlin Jackson are a founding team that cares about the community. The seasoned entrepreneurs are driven by their passion to leave the world better than they found it after having cultivated success after coming from humble beginnings.

Voxi, founded by Nathan Miller and added to the portfolio in January 2021, creates custom platforms that serve as a marketplace for consumers to view, learn and purchase products they see on screen. In addition to their work with clients such as Two Chicks and a Hammer, they produce revenue generating opportunities for movies, shows, networks, music artists, podcasts and influencers by connecting content creators to brands with a shared target audience.

“We are excited to be part of the NEXT Studios family. Shelley and their team have already proven to be a great asset with key network connections and expert guidance to help us navigate these unchartered waters,” said Nathan Miller, founder and CEO of Voxi.

NEXT Studios operates from co-working spaces across Indiana. As new innovations can come from anywhere, the Studio enables visionaries from all parts of our State to develop their ideas, and fuel them with talent and capital in their own local communities. To learn more about NEXT Studios and ways they are expanding their partnerships, please visit next-studios.org.

# # #

 

 

About NEXT Studios

Founded in 2020, NEXT Studios is a venture studio that is a partnership of experienced entrepreneurs who help visionaries share their ideas, craft them through a repeatable process, and move them forward with capital and talent.  The studio works with entrepreneurs across the state to move their ideas into products and their products into companies.  The studio uses a proven process to reduce the risk for investors and encourage more local investors to get involved in our local innovation economy.