Venture Studio Business Model

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Venture Studio Business Model

Key Takeaways

  • Venture studios provide companies with the capital, the initial team, strategic direction, guidance in finding the product-market fit, and assistance in scaling efficiently.
  • The venture studio makes a profit by taking a percentage of the startup. The venture studio's profit comes from equity.
  • Nobody Studios is a high-velocity venture studio based in Laguna Beach, California. This studio commits to creating "100 new companies by 2027."

Introduction

This research presents insights into the venture studio business model. This includes information on the business model, how it is structured, how it is financed, and where profit comes from. In addition, this also presents ten examples of venture studios that are based in the US and outside the US. The details are outlined below.

I. The Venture Studio Business Model

What It Is

  • A venture studio business model is a type of business model that seeks to build multiple companies in rapid succession. This business model is also called a startup studio business model. In the academic setting, this business-building model is called parallel entrepreneurship.
  • Venture studios assist in developing "the idea behind a company while simultaneously investing capital." This video from Applico also explains that venture studios provide the initial team needed by the startup.
  • Venture studios create or manufacture multiple startups. Venture studios provide companies with the capital, the initial team, strategic direction, guidance in finding the product-market fit, and assistance in scaling efficiently.
  • The venture studio business model is "the most efficient vehicle for new business creation."
  • A venture studio has the necessary infrastructure to be an efficient company-building machine.
  • Venture studios do not focus on startups "that have already launched." Instead, their investment is directed only in startups whose product the venture studio has defined and consumer demand the studio has validated.
  • Some well-known brands that venture studios have launched include Giphy, Dollar Shave Club, and Answers.com.

How It Is Structured

  • There are different venture studio structures. There's a structure for corporate venture studios and another structure for venture production studios.
  • Corporate venture studios sometimes partner with Fortune 500 companies, though there are also venture studios created within Fortune 500 companies.
  • On the other hand, venture production studios or venture factories are segmented and operate without partnering with Fortune 500 companies. Venture production studios offer "very strict criteria that companies must meet in order to be accepted."
  • The image below shows the structure of the two types of venture studios, the independent venture studio and the corporate venture studio. Independent venture studios provide all the resources needed to launch a startup. In contrast, corporate venture studios partner with mid to large-size companies to provide all the needed resources for a startup launch.

How It Is Financed

  • Outside investors normally finance venture studios. Venture studios typically "raise funds for the studio," but they "also have a traditional venture capital fund" bolted on the side.
  • Recently launched venture studios also go through funding rounds to raise the needed capital to fund startups.

Where the Profit Comes From

  • Once the venture studio validates the startup's business idea, the studio commits to support the startup financially and operationally. The support involves everything the business needs, including software development, legal, HR, finance, communications, and marketing.
  • In return for all the given support, the venture studio makes a profit by taking a percentage of the startup. The venture studio's profit comes from equity.
  • If the venture studio is a 1st Co-founder, the studio receives 50%-80% equity. If the venture studio is a 2nd Co-founder, it receives 35%-65% equity. If it is a 3rd Co-founder, it receives 10% to 25% equity.
  • Compared to traditional venture capital firms, venture studios normally "take a higher percentage of ownership in the companies they build."

II. Examples of Venture Studios

High Alpha

  • High Alpha, an Indianapolis-based corporate venture studio, builds tech startups or new B2B SaaS companies.
  • High Alpha's venture studio services cover branding, engineering, design, sales, marketing, HR and recruiting, finance, and data science. High Alpha provides the expertise needed to launch a startup into a world-class company.

Nobody Studios

  • Nobody Studios is a high-velocity venture studio based in Laguna Beach, California. This studio commits to creating "100 new companies by 2027."
  • Nobody Studios has been successful in getting startup "Parentipity from idea to product launch in just five months, in 14 languages and 20 countries," while spending only $78,000.

Next Studios

  • Next Studios is one of the top Indiana-based venture studios. This is Indiana's first Benefits (B) Corporation venture studio.
  • Next Studios help entrepreneurs shape, craft, and execute their ideas. Next Studios also return the generated profits "from corporate engagements to new entrepreneurs."

The Core Venture Studio

25madison

  • 25madison is a venture studio based in New York. In April 2021, 25madison announced the closure of its latest funding round. It has received investments from various investment managers.
  • The venture studio specifically partnered with investment manager Apollo and Endeavor to help build and launch businesses across industries.

Polymath Ventures

Highline Beta

  • Highline Beta is a Canada-based venture studio that helps business founders build a startup with an idea or problem space that aligns with the vision of Highline Beta's corporate partners.
  • Highline Beta has a partnership with Fortune 1000 companies. The venture studio offers an expert venture studio team to help launch the startup, including access to corporate partners and initial capital.

Softeq

  • Softeq is a US-based venture studio with client delivery centers in Germany, Lithuania, and Belarus.
  • Softeq has a quarterly application process for new business founders. Once selected, the startup will spend three months with Softeq to "develop a technology roadmap" and identify strategic areas that can be accelerated. Softeq also provides an investment of up to $125,000 for each startup.

Founders Factory

  • Founders Factory is a London-based venture studio and startup accelerator founded by Henry Lane Fox and Brent Hoberman.
  • This venture studio partners "with the world's best founders and corporates to build, fund, and scale ambitious startups worldwide."

Rainmaking Venture Studio

Research Strategy

For this research on venture studio business model, we leveraged the most reputable sources of information in the public domain, including Forbes, Entrepreneur, TechCrunch, LinkedIn, PR Newswire, and the websites of the companies listed above.

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