Venture capital (VC) investors have always played a vital role in providing funding for early-stage startups. For ambitious founders, moving to the VC stage is often regarded as a significant milestone, symbolizing an endorsement of their vision and high prospects for expansion. But startups typically require more than just funding to navigate the complexities of product development, go-to-market, and scaling operations—areas in which the traditional VC model can fall short.
This is where the venture studio model comes in. Venture studios offer a holistic approach to startup support, combining financial investment as well as hands-on guidance and operational assistance. It’s a relatively new model in the venture field, and one that’s quickly gaining traction for its innovative approach to nurturing early-stage startups.
As founder and managing partner of an early-stage venture fund, I’ve seen firsthand how this model can provide startups with the strategic guidance and support they need to win. The momentum that this model is gaining suggests it’s poised to have an enduring place in the venture landscape.
Verizon Digital Ready: $10K Grants and the Skills Entrepreneurs Need
Characteristics of a venture studio
The key differentiator between a traditional venture fund and a venture studio is that the latter is more involved in the daily operations, development, and growth of a startup. This is possible due to the way venture studios are structured, with teams comprising both employees and venture partners that take a hands-on approach to providing ongoing support across various areas, whether it’s website coding, customer acquisition, strategic planning, or anything else the founder needs.
Each venture studio’s approach will vary, as there are many variations on the venture studio model in the market. For instance, there are a few marketing agencies that have become venture studios, in which they offer funding opportunities in addition to their marketing services. At our studio, we’re structured more like a traditional VC fund that also provides ideas and technical support in exchange for a minority stake in the startup.
Ultimately, our goal is to help each startup achieve a level of self-sufficiency by achieving product market fit faster than it could by itself. Let’s say we have a startup that’s in the incubation stage. The company has a product idea, but needs help with further technical development, finding initial customers, and eventually selling the product. Our team will step in and actively work alongside the founder to help bring their idea to fruition, either by directly executing tasks within our team or outsourcing to specialists when necessary.
Once the startup has launched a viable product and is demonstrating growth potential, our team will step back and become more like a traditional investor, operating at a board level. This is the stage when most VC investors begin backing startups, and our studio will typically continue to take part by investing alongside other venture investors. A typical startup at this stage might raise between $1.5 and $2 million, most of which will go toward hiring a full-time team that will take over tasks previously managed by the venture studio.
Sign Up for The Start: A Newsletter Built for Entrepreneurs
Working with a venture studio
From what I’ve seen, the ideal founders to work with are those who seek not just capital and connections, but also partnership and collaboration. They have to want to work alongside like-minded professionals, building things and striving through every victory and setback together. Ideal founders often include those who have previously launched businesses, as they have a better understanding of their own strengths and where they need help from others. Not every entrepreneur is cut out for a studio, though. Some prefer to go it alone, and that’s okay. For those independent types, a traditional venture capitalist will likely be a better fit, providing financial support without the need for close, operational collaboration.
But for those founders who want a more collaborative and immersive experience when building a business, a venture studio will be the ideal choice. For me, the most exciting thing about working in a venture studio is getting to work alongside visionary founders, building new things, and changing people’s lives. My advice to any founder looking to work with a venture studio is to seek out studios that are highly enthusiastic about being part of the journey. Look for a studio that shares your values and genuinely believes in your vision. This shared enthusiasm and commitment can fuel innovation, resilience and, ultimately, success.
Another thing I would advise is to seek out studios that specialize in a particular industry. Some studios can be pretty generalist, which may not be as helpful for an industry-focused startup like MedTech or renewable energy, where specific domain knowledge and connections are crucial. It’s also important to choose a studio with principals who have a proven track record for success, with strong partnerships and tailored support that can provide additional avenues for collaboration and funding.
Lastly, look for a venture studio that helps entrepreneurs think bigger, bolder, and with more ambition. Launching a startup takes tremendous work, and there will be times when you doubt whether you can overcome the inevitable challenges. Having a studio team by your side that provides encouragement, keeps you focused, and reframes how to go after opportunities will be invaluable when things get tough. These are intangible benefits that founders won’t typically get from angel investors.
12 Absolutes of Fundraising from ‘Founder vs Investor’
Final thoughts
The traditional VC model, while still vital, often lacks the comprehensive support that many startups need beyond financial backing. The venture studio model aims to fill this void by offering ongoing support, both technical and personal, to help bring a founder’s vision to fruition.
That said, it’s not a model that will suit every founder. You must be willing to work closely with others, embracing partnership and teamwork as essential components of your entrepreneurial journey. For those who thrive in such environments, venture studios can give your startup the boost it needs to succeed.
Image by rawpixel.com on Freepik
