The differences between a traditional startup and one created in a startup studio that made me appreciate the advantages of venture building
The first time I heard the term “startup studio” I think I pictured something halfway between a co-working space and an incubator or accelerator. In short, a “studio” (in the physical sense) made available to new startups, perhaps offering services (from a coffee machine to marketing advice) to young first-time entrepreneurs. If you are approaching the world of startup studios for the first time, chances are you pictured something similar too.
In reality, nothing could be more wrong. In this post, retracing some of the thoughts and doubts I had when I first approached the startup studio model, I hope to help you clear your head.
First of all, what is a startup studio?
Having established that it is not a co-working space, nor an incubator, let alone an accelerator, to clear the field of any misunderstanding, here is a definition straight away, the same one I was given when I first heard about the startup studio:
The Startup Studio (also called a “venture builder” or “company builder”) is a serial generator of startups: a company that founds and builds new companies in series.
I was then told, by a promoter of the idea, that the Startup Studio model rests on the idea of “parallel entrepreneurship”: the studio acts as a “serial founder”, that is, it founds several startups “in succession” and grows them “in parallel”. In short, it is a startup “factory”.
Thanks to this explanation I had formed a first idea, correct if perhaps a bit rough: the startup studio must be a kind of “container” that “bakes” multiple startups, worked on at least partly in parallel, even though they launch one at a time.
Up to this point I had followed the reasoning fairly well, though some questions were already starting to flash through my head: But aren’t the various startups made by various founders? In what sense is the founder the studio?
It was then explained to me that this model was born to shorten the times of creating and launching a startup, to increase the “quality” of the startup produced and to reduce its risk of failing.
And at that point I remember having more than one doubt: is it really possible not only to create more startups in less time, but even to “make them better”? And what does increasing the quality of a startup even mean? Why should a startup born in a startup studio have better chances of success?
If on one hand the idea that creating several startups in series could produce efficiencies seemed intuitive, on the other that was not enough to explain why the founded startup could have an even marginally lower risk of failure. After all, a startup is a startup… right?
Maybe not.
There are startups and startups…
Even though I had been shown data according to which startups spun up in a startup studio deliver higher returns and reach funding rounds in less time (see for example the GSSN white paper), part of me remained unconvinced.
Perhaps because most of my career unfolded in the corporate world, where an iron rule reigns, admitting very rare exceptions: to do something better takes more time. Something, then, did not add up.
I think I began to truly understand the advantages of the startup studio model when I stopped for a moment thinking about the overall picture (the studio’s whole “portfolio”) and concentrated instead on the single startup. That is, I tried to understand how the journey of a “traditional startup” (born the way any startup is born: with a founder who has an idea and turns it into a business…) differs from that of a startup spun up in a studio, and there I found my keystone.
First of all (and forgive me if it is banal), the label “traditional startup” covers an enormous, varied category, ranging from Airbnb to that time a friend of mine and two of his former schoolmates created an app that would revolutionise the social media landscape and, alas, threw in the towel within a year: a genesis similar in many respects, with a terribly different epilogue.
In short, there are startups and startups. But that is precisely the point: for every successful startup there are many startups that fail, some because they did not find the right conditions to develop, others because they simply could not work.
To the uncertainty inherent in the very concept of a startup (uncertainty about the idea, the business model, the problem/solution fit, the product and its commercialisation…) further, contingent difficulties get added (difficulty finding capital, resources, skills, experience, contacts…), and it is often hard to establish, after the fact, what caused a new venture’s lack of success.
The startup spun up in a startup studio, obviously, has no guarantee of success, but it is born in an environment designed to offer the new company better, more controlled conditions in which to develop.
The genesis of the startup, the “controlled” environment in which the startup is generated and the creation process characterise the startup studio model and explain its advantages. And when I finally managed to see it this way, I began to understand the sense of this venture building model.
Below, I have tried to summarise nine differences that I consider fundamental.
Nine differences between a traditional startup and one created in a startup studio
Here are some of the attributes that differentiate the early journey of a startup born the traditional way from one created in a startup studio:
1. Validation of the business idea
Traditional startup: The genesis of the business idea can follow a thousand paths, and the validity of the idea itself depends on the founder’s creativity and above all on their ability to validate it. The subjectivity of the founder, who in most cases is precisely the person who gave birth to the idea, can stand in the way of an objective assessment.
Startup studio: A process of “natural selection” of the idea reigns: starting from a wide selection of business ideas, only those that prove most promising on the basis of an objective, collective validation get chosen. By virtue of the greater resources available and the approach followed, the Startup Studio is able to collect, analyse, compare and validate many more business ideas (and to do so with more objectivity) than the “average” traditional founder.
2. Selection of the founder
Traditional startup: the founder is usually the person who had the business idea. For the startup to succeed, not only must the idea be valid, but it must also (and above all) have been born to a founder, or a founding team, with the skills and experience needed to carry it forward.
Startup Studio: first the idea is identified. Only after the idea has been “validated” inside the studio is a co-founder selected who has the experience and the skills best suited to carry the project forward and act as the startup’s CEO.
3. A “lean” roadmap (selection, validation and iteration)
Traditional startup: The approach considered most promising for the traditional startup is the “lean startup” method, based on iterative cycles aimed at generating learnings, pivoting to different solutions or, if things do not work, “pulling the plug”. In the case of the traditional startup, stopping the project means closing the startup for good and admitting defeat. It is not an easy choice to make, and many traditional startups therefore end up iterating solutions endlessly, hoping to reach success even though the evidence suggests otherwise.
Startup studio: The startup studio adopts, both by choice and by necessity, a roadmap made of predictable milestones (managing several startups at once would not be possible otherwise) and of “stage gates”, moments of truth in which it is decided whether or not to take an initiative to the next phase. The startup studio therefore proceeds by selection, validation and iteration, drawing on the lean startup philosophy. Unlike the traditional startup, the lean methodology is applied not just to the single startup but to the whole portfolio: if a startup does not get the required signals within the set timeframe, it can be pivoted or the project can be stopped, reassigning team and resources to another startup without drama.
4. Experience and human capital
Traditional startup: The level of experience inside the traditional startup depends heavily on the founder’s CV and on their ability to assemble a quality team from the start, as well as on the financial resources available.
Startup Studio: The startup studio is made up of professionals, entrepreneurs and successful former founders (if you are curious to discover the Startup Bakery team you can find it here). In the early phases of the startup’s development, the studio’s team is in practice the startup’s team, and is therefore able to avoid the typical mistakes of a “new” founder and to identify and apply the most appropriate best practices. What’s more, the team’s experience grows over time as the number of startups “baked” by the studio increases.
5. Resources and financial capital
Traditional startup: Before reaching a funding round, the average startup rarely has access to significant capital. As a consequence, the startup’s initial development and its ability to test, validate and improve the idea and the solution it offers are generally quite limited, or proceed slowly.
Startup Studio: The startup studio makes its resources available to the startup from the start and, in fact, the validation of the idea happens even before the startup is incorporated. The studio’s resources offer the new startup the ideal environment in which to develop, and this allows a considerable shortening of the timeline.
6. Repeatable processes, services and intellectual capital
Traditional startup: With the exception of “serial” founders, the life cycle of a startup is essentially a one-off project, with a beginning and an end, which does not repeat. Many of the activities needed to create and run a company (such as the legal incorporation, the creation of the brand, the development of the tech stack, the drafting of contracts, the fulfilment of various legal and administrative obligations…) are mostly learned along the way, by someone learning to be an entrepreneur for the first time. As a consequence, these activities are often carried out with sub-optimal times, methods and costs. Processes get created and optimised on the startup’s product but not on the startup itself. In fact, a lot of time, resources and energy are spent on managerial and administrative activities that, however essential, have nothing to do with product development.
Startup Studio: The startup studio’s activity is characterised instead by the standardisation of processes around a “recipe” in successive phases, and by the creation of a set of dedicated services. Every activity that can be repeated from one startup to the next gets “engineered” and optimised. Startup Bakery, for example, has formalised its startup development approach in a four-phase business recipe, setting up a set of dedicated services to give startups the support they need at every phase. By virtue of its internal intellectual and human capital, the startup studio can create significant efficiencies: the learning and execution times of many tasks are zeroed or reduced, and the team can dedicate far more time and energy to product development.
7. Absence of bias
Traditional startup: A traditional founder is often “in love” with their own idea and, more or less unconsciously, motivated to push it at any cost, perhaps ending up spending time and resources uselessly chasing an idea that simply does not work as they would like.
Startup Studio: The collegiality of the startup studio, the presence of a governance and the very activity of managing a portfolio of startups tends to eliminate, or at least strongly reduces, individual bias. If an idea does not work, the Startup Studio has an interest in redirecting resources to other ideas and other startups within its investment plan.
8. Synergies and economies of scale
Traditional startup: On a single startup it is fairly obvious that there are no synergies or economies of scale.
Startup Studio: The startup studio manages to create synergies and economies of scale on various fronts, from software licences to office spaces to negotiating services with third-party firms and professionals outside the studio.
9. A network of talent, entrepreneurs, investors and companies
Traditional startup: A startup’s network is essentially the network of its founders and its team.
Startup Studio: The startup studio works actively and continuously to become an integral part of the entrepreneurial community, weaving relationships at the local, national and international level. Beyond creating a continuous pipeline of talent, over time startup studios become a point of reference for entrepreneurs, investors and partner companies.
Sometimes, doing things better can take less time
In light of these differences, that iron rule I mentioned earlier needs revising a little: doing things better takes more time… with equal resources, skills and experience.
The financial, human and intellectual capital of the “traditional” startup is hard to quantify: some startups certainly boast substantial resources, are backed by visionary investors, can count on incredibly experienced teams and have a clear methodology from day one; in most cases, though, that is not so, and everything must be built from scratch.
The startup studio, instead, already has a base on which to build the startup. This combination of human, financial and intellectual capital is a differentiating factor, and it is the reason the startup studio is without doubt a model worth betting on.