Venture Builder and Startup Studio are not the same thing.

Now, I am not a fan of definitions, above all for business models that are relatively recent, still not widespread and above all heterogeneous in their practical application. I also have a poor memory, so I forget definitions with alarming ease.

But I notice that, at least in Italy, the terms Venture Builder and Startup Studio get used as if they were synonyms, when in reality a business model at opposite poles separates them, which we can summarise in a tranchant way as follows:

Venture Builder = consultant

Startup Studio = entrepreneur.

Both the Venture Builder and the Startup Studio create startups

True. And not true. Let’s say both have the aim of building a venture from scratch (and possibly doing it the Lean way), but with the following important differences, which flesh out the tranchant definition above.

Purpose

The Venture Builder builds startups on demand, starting by creating a POC (Proof Of Concept). It therefore operates mainly on commission and gets paid for it. The evolution of the POC into a spin-off and an MVP (Minimum Viable Product) is a hope, but not an obligation.

The Startup Studio builds startups only after a thorough phase of data collection and market analysis. Even when it receives a prompt from a potential Industrial Partner. This is because the Studio’s model is performance-based: it earns mainly from the exit of the initiatives it creates. So, like every entrepreneur (and investor), it does not launch initiatives that do not promise potentially high returns.

Cap Table

The Venture Builder, creating initiatives on commission, when it enters the cap table of the startup it created, does so in a contained way and mainly to lower the initial development pricing of the POC. This allows it to cover its costs and achieve a minimum desired margin. If it then also manages to monetise an eventual stake, all the better.

The Startup Studio acts instead as an entrepreneur and for this reason it must have control of the economic and human resources that will make up the startup. It is not paid for its activity (or not enough to cover its costs), so it bets everything on monetising its stakes. Being a high-risk activity, it takes a good slice of the cap table, which can range from 30% to 80%.

Operations and results

The Venture Builder typically operates under the direction and control of the commissioning Corporate. It is a proper consulting relationship, aimed at generating POCs, in the hope that real business opportunities, and therefore spin-offs, will arise from them. This event is, to be honest, quite rare. The venture that does get spun off is born strongly marked by the Corporate, which usually holds broad control over it from the start.

The Startup Studio operates as a partner of the Corporate, carefully assesses all its proposals (project, financial and human resources) and decides autonomously whether and how to develop the startup (not least because it invests its own financial resources in it!). As the startup evolves and produces metrics, the Corporate increases its exposure up to the full acquisition. The Corporate is a true Industrial Partner for the Startup Studio.

So, for my Corporate, which model should we bet on to innovate?

It is a bit like asking the baker whether the bread is good 🙂

I will try in any case to give a sharp answer, drawing on what was presented in the previous paragraphs. There is no model that works in every case, because we know well that every company has constraints (people used to say “strings attached”) to come to terms with.

However, if your Corporate:

regularly carries out M&A operations (Open Innovation);

has a CVC (Corporate Venture Capital) or participates as an LP (Limited Partner) in another Venture fund;

has experimented with other models with the result of being full of POCs in the drawer

then it pays to rely on a Startup Studio, outsourcing part of the innovation processes and delegating them to those who have the focus needed to make them concrete (there is life beyond the POC!), operating from a position of greater independence and with total alignment of interests.

The hypothesis of trying both models in parallel should not be ruled out, either. In fact, if I were the Chief Innovation Officer of a large company, that is probably exactly what I would do.

Venture Builder and Startup Studio: final notes

Some Startup Studios choose to stay away from corporate logic, deciding to operate as holding companies and to see, as the exit for their ventures, for example, a stock market listing. There are many startup studio models and obviously some of them do not identify with what has been written here. The purpose of all this is solely to clarify the difference between the innovation operators that create ventures, involving corporates along the way in various capacities.

However you want to define them, you probably now have a clearer idea of who to call if you need a consultant or a business partner (and co-investor) to innovate.

Startup Bakery is the Italian startup studio specialised in creating B2B SaaS companies with Artificial Intelligence. We offer aspiring Co-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We help companies in their innovation process.