Venture Studio 101

What is a Venture Studio? How do they work? And how are Venture Studio's different from incubators and venture capital?

The Venture Studio model is getting increasingly more attention. Entrepreneurs, investors and even researchers are jumping on this new business model that is blowing early stage venture capital out of the water.

However when I talk to people they often get confused with incubators. And let me tell you: incubators and venture studio’s may seem similar but they are two totally different beasts.

So let’s cover some basics:

What is a Venture Studio?

A venture studio is a company that creates startups.

How does a Venture Studio work?

A venture studio build new ventures by validating business ideas internally with their own team.

After an initial validation a venture studio typically attract an outside CEO/CTO/CXO, and then invests both with capital and resources like developers, marketeers and HR.

The goal is to develop the venture towards a solid solution with a product-market fit preferably backed with a predictable distribution/marketing model.

When such a capstone is reached the Venture Studio will typically prepare the venture to ‘spin-out’ as an independent company.

What is the difference between a Venture Studio and a Startup Studio?

There is none. It’s like potato, potato. The term Startup Studio initially got more traction. In 2014 Wired referred to ‘Startup Factories’ and TechCrunch used in 2015 the term ‘startup studio’ simply sounds better being an alliteration (S+S).

However, as the startup studio’s evolved, the studio’s started to include investor funds as part of their business model. At that point the term ‘venture studio’ started to being used more often. The term ‘Venture Studio’ has a stronger association with venture capital and sounds more ‘mature’. Therefore many studio’s have shifted towards the term Venture Studio.

Late 2022 the investor and thought leading author Steve Blanc settled the battle between the two names by publishing an article in Havard Business Review named ‘Entrepreneurs, Is a Venture Studio Right for You?’. After this article the interest in Venture Studio’s surged making this term effectively the dominant term for this investment class.

How are Venture Studio’s different from incubator’s and accelerators?

The Venture Studio model is wildly different from the traditional startup incubator and accelerator-model.

While at first one might see the similarities. Both incubators and ventures studio’s claim to nurture startups towards early maturity. They both attract entrepreneurs and offer a validation process and support, but that’s about where the similarities stop.

In short: Incubators and accelerators make many small bets on entrepreneurial teams with promising ideas. Venture Studio’s make fewer but bigger bets on validated venture ideas and then look for talent to turn these ideas into ventures.

These are two fundamentally different business models!

Incubators: Lot’s of entrepreneurs, an intense program and small stakes

Incubator’s like Y Combinator, Techstars or 500 Startups provide a program for a large group of outside entrepreneurs. After an intense couple of weeks a few startups survive and win a prize or get offered small seed funding in exchange for equity.

Incubators and accelerators attract a large group of entrepreneurs and trust them of bring the startup idea to the finishline. By design, incubators make many small bets on a large group of talented entrepreneurs. They expect most of them to fail but hope to make up for this by spreading their bets. One ‘Google’ will then make good for 200 lots of small bets.

Venture Studio’s: Lot’s of ideas, professional validation and bigger stakes

Unlike incubators and accelerators, Venture Studio’s don’t start with the entrepreneur. They start with an idea. Or rather a ‘venture hypothese’. A Venture Studio internally creates many business ideas and then uses a thoughtful process to ‘vet’ and develop these ideas. Whereas incubators guide budding entrepreneurs with validating and ‘pivoting’ their ideas toward some form of product/market-fit.

Venture Studio’s do this themselves. They have specialized ‘idea testers’. These experts are more emotionally detached from the venture idea and therefore are more able to screen for ideas than a ‘passionate’ entrepreneur will be.

It is only after the initial validation that venture studio’s start to search for the right entrepreneur to fit the venture. Instead of an entrepreneur offering equity in their business, with venture studio’s it is the other way around. The Venture Studio offers experienced former founders the opportunity to get a sizable stake in their ventures. The entrepreneurial team starts out with a smaller stake, but in return they get a validated business and the promise of seed capital and an experienced team of developers and marketers.

After finding one or more entrepreneurs to further develop the venture a Venture Studio’s will then invest their own resources like venture capital, developers, growth marketeers, HR and more. Due to these bigger investments Venture Studio’s make a smaller amount of bigger bets.