Press Release
If the incubator goes through Startup Studio... Guide to counterfeiting!
The startup studio model is becoming increasingly established in Italy as well. Not only are many new startup studios being created, but various accelerators and incubators have also started to expand their activities by creating startup studios within themselves.
The expansion of the Studio community is undoubtedly a great thing, and the new valid and promising realities that are emerging make the model more and more well-known, understood, and appreciated by investors and partner companies.
But as happens inevitably when a new model reaches a critical mass, among the many "genuine" initiatives, there is always someone that, due to excessive simplification, if not outright malice, presents as new what is not new just to ride the new trend. It is not uncommon to come across supposed startup studios that, upon closer inspection, would be better described as accelerators, incubators, or consulting services.
Not that the contribution of accelerators, incubators, and consulting services is less useful to the innovation community; on the contrary! But it is good not to muddy the waters and to differentiate one approach from another.
So how do we distinguish startup studios from accelerators or incubators? And especially real startup studios from the supposed ones? Here’s a mini-guide with the explanation of the three models and the fundamental differences between startup studios, accelerators, and incubators that will help you distinguish them better and expose any impostors!
What are incubators, accelerators, and Startup Studios?
First of all, some definitions.
What is a startup incubator? An incubator is an organization that provides support to startups during the early stages of their development: in addition to offering consulting services that range from training to mentoring to networking, incubators typically provide startups with a physical place to work. A startup can be hosted for varying periods of time. Typically, incubators charge a fee, but some also take equity in the startups that join their program.
What is a startup accelerator? An accelerator is a program aimed at speeding up the development of a new enterprise and targets already established startups. An acceleration program is generally structured around a "curriculum" of consulting aimed at supporting founders in various entrepreneurial activities in exchange for a percentage of equity. The goal is to help selected startups make a qualitative leap, making them appealing to a Venture Capital or directing them toward an exit. Many accelerators also provide financial resources and the use of physical spaces during the program, but this is not the defining characteristic of their offering.
What is a startup studio? A Startup Studio is a "startup factory," a genuine serial generator of new businesses that founds and builds new companies in series following a "parallel entrepreneurship" approach: the studio acts as a "serial founder" founding multiple startups "in succession" and launching them to grow (and exit) "in parallel," thanks especially to its resources, both financial and in-house competencies. Performing the dual role of "creator" and "investor," in many ways, a startup studio is like a Venture Capitalist that invests in underlying "self-generated" ventures.
How do incubators, accelerators, and startup studios work and when do they come into play?
Incubators, accelerators, and startup studios intervene at different times, and for varying durations, in the life of the startup:
Incubators accompany the founder, who has already established the startup (or is about to do so), based on a business idea, to create the Minimum Viable Product and a first articulation of basic business processes, helping the new company along a path often described as "from zero to one." A startup can be selected by an incubator at any time of the year, which mainly depends on the availability of resources and space of the incubator. Participation in an incubator does not have a predefined duration: it chiefly depends on the startup's ability to structure itself and take this first step, as well as on the founder’s ability to cover the cost of joining.
Accelerators intervene at a later stage than incubators: to be selected for an acceleration program, a startup must already be sufficiently formed and have taken its first steps. The engagement of the accelerator works as a "launch pad" to allow the startup to develop further, achieve its first business results, and demonstrate to Venture Capital and other potential investors that it represents a promising opportunity worth betting on. If selected, one enters an acceleration program at predetermined times and for a more or less fixed duration, which is the time required to complete the "curriculum" defined by the accelerator, culminating in the search for qualified investors.
Startup studios begin much earlier than incubators and accelerators. If it is true that incubators help the startup move "from zero to one," startup studios begin from the moment "-1," meaning from the research, selection, and validation of the idea. The startup does not yet exist and, unless the idea proves promising according to objective criteria, it might not exist at all. In a certain sense, in a Startup Studio, "you don't enter;" you only exit.
How do they increase the chances of success for a new venture?
Incubators, accelerators, and startup studios provide different responses. Unfortunately, most startups fail, and this is a fact that incubators, accelerators, and startup studios must contend with. The three models attempt to respond differently to the need to increase the success probabilities of each new project.
Incubator: Not everyone who wants to create a company has the right skills to do so. In fact, probably in most cases, the founders lack entrepreneurial experience. The incubator thus aims to increase the chances of success for the new startup by "immersing" the founders in an environment (also understood in a physical sense) that encourages innovation, contact, and contamination among different startups while providing them with training, consulting support, and operational services.
Accelerator: The strategy of the accelerator consists of identifying the most "promising" startups and helping them "accelerate" their growth path through a staged program culminating in a presentation to potential investors. Unlike the incubator, the accelerator "closely supports" the startup, also owing to the shares it holds. The accelerator thus aims to increase the chances of success for the startups in which it invests first through a selection process, and then by providing resources (financial, as well as consulting) and indicating a pathway to the startup to make the "quality leap."
Startup Studio: The startup studio model is based on the belief (and with statistics in hand, it is practically a certainty!) that providing training, skills, and resources to an "already created" startup is often not sufficient to increase its chances of success and attempts to go "upstream" of the problem by intervening before the startup has been founded. The reasons a startup might fail are manifold and range from operational problems (insufficient skills, experience, resources, and systems) to "cognitive" dynamics, such as the inability of many founders to recognize that their idea is not working and to "pivot" before it's too late. The startup studio first establishes an operational machine (comprised of resources, procedures, and a team of serial entrepreneurs) capable of performing the majority of the activities necessary for business creation. The studio team then proceeds to select and validate possible business ideas and creates a new startup only upon reaching some objective feedback. Only at that point does it select the co-founder and the most suitable team to manage the project. In other words, instead of helping an already created startup face operational challenges and find its positioning in the market, the startup studio aims, on the one hand, to address the majority of the implementation needs that typically hinder the progress of a new startup upfront while also verifying from the outset that a business idea can meet market approval. Only then does the startup studio found the startup and support it until exit.
What are the objectives of incubators, accelerators, and startup studios
Simplifying a bit (or perhaps quite a bit), one can say that the main objectives of these three organizations are quite different.
Incubator: creation of the MVP and the business plan
By entering the game in the initial phase of business creation, the incubator generally accompanies the new startup to create its MVP (if it does not already have one) and a business plan. The consultancy provided by the incubator therefore aims to ensure that the new enterprise is based on a sustainable or at least feasible product and plan.
Accelerator: KPIs and Demo Day
As the word itself implies, accelerators speed up the growth of the startup, and this growth must be quantifiable, so the emphasis is on achieving KPIs and creating figures that demonstrate the startup is a good investment. The consulting provided helps the startup become better structured, "scale," and accompanies it toward a Demo Day, an event where all the startups of the same "class" present their "pitch" to investors and Venture Capital funds.
Startup studio: exit
By entering the game even before the incubator and accompanying the startup until it is sufficiently structured, the startup studio also does many of the things done in an incubator or an accelerator, from the business plan to the MVP, up to the pitch with the business KPIs. However, the ultimate goal of the startup studio is exit, meaning selling the shares to an investor or a corporation.
How do incubators, accelerators, and startup studios earn money and how do their revenue models differ?
All three entities provide services to startups and, of course, none of them is a charity. And although all three business models might involve both an investment in "equity" and a fee for services, they are quite different in their definitions of success.
Incubators: Incubators primarily earn based on a fee, and as long as the startup can cover this fee, it can receive both consulting and a physical space to operate in, as well as connected operational services. The success of an incubator is therefore mainly tied to the duration of service provision rather than to the success of individual startups. However, the reputation and importance of an incubator do depend on the success of the startups it hosts.
Accelerators: Especially at an international level, large accelerators invest in startups in exchange for equity, but it often happens to meet accelerators that also require a fee in exchange for providing services. Although there is no universally applicable rule, in most cases, an accelerator is considered successful if the valuation of the startup increases at the end of the acceleration path and if investors or Corporate Venture funds enter the capital.
Startup Studio: The startup studio is the founder and first investor in the startups it creates, so even more so than for accelerators, the success of startup studios is linked to the success of the startups created.
How to recognize "real" startup studios
Given that there are no universal criteria and that each entity sets its own rules, here are some questions that can help you distinguish "properly said" startup studios from other types of entities:
Does it target already established startups?
If the answer is yes, then it is definitely not a startup studio. The startup studio creates startups from scratch.
Does it invest directly in startups?
If the answer is no, then it is not a startup studio. The startup studio is the first investor of the startups it creates.
Does it help startups grow or create them?
If it merely helps and supports startups in their growth, it is probably an accelerator or an incubator. It is only a startup studio if it creates startups from scratch.
Is the offering primarily consulting?
If the answer is yes, then it is not a startup studio. The team of the startup studio supports the startup also through consulting, but especially in the early stage, the studio team is in fact the team of the startup. Consulting is secondary.
Is it open to anyone who wants to become a founder and does it require paying a fee?
If the answer is yes, then it is not a startup studio. The startup studio does not aim to help anyone who wants to create a startup to become an entrepreneur, but selects the most suitable co-founders based on their profiles and experience to manage a project that is already initiated or at least already defined. And above all, it primarily does this by investing.
Does it primarily earn through a monthly fee?
If yes, it is probably not a startup studio. The startup studio is primarily a founder and first investor, and this business model is primarily based on the studio's ability to achieve successful exits.
Summary
Recently, there has been a lot of talk about startup studios, but often there is confusion about what a "startup factory" really is, and it is not uncommon to come across organizations that, due to excessive simplification, and sometimes a bit of malice, use the term startup studio very liberally.
In this article, I hope to clarify at least what a startup studio is not: it is not an organization that primarily provides consulting services and does not aim to help existing startups perform better.
The startup studio creates startups from scratch, on its initiative and beginning with its own resources.
And if you come across a "startup studio" that does not fit this description, arm yourself with some healthy skepticism and look deeper: you will probably recognize an incubator, an accelerator, or a consulting service.
Some useful links:
For further details, as an example, I point out the description of the studio from Startup Bakery, its business recipe with the main ingredients, and the descriptions of the startups created so far.
Startup Bakery is the Italian startup studio specialized in creating SaaS B2B companies with Artificial Intelligence. We offer aspiring Co-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We assist companies in the innovation process.
