How to Spin Out a Digital Venture From a Startup Studio
How to launch a successful startup using NineTwoThree's Venture Studio model and prepare your new startup to work independent of the parent studio.
The ultimate goal of a startup studio involves incubating new businesses with a significant potential for success. After an engaged iterative process crafting a digital venture, the studio must also understand how to transform that mobile app or interactive website into a new company primed for growth. It remains the best way to achieve a meaningful return on investment for studio owners or VC investors.
In addition to crafting a compelling software product, the studio also needs to perform a detailed analysis of the target market for the digital venture. After all, the best app in the world makes little impact (or revenue) without the ability to attract users. Forming a new startup simply wastes additional money at this point.
Ultimately, your team needs to understand how to effectively spin out a completed digital venture from its startup studio. We boast significant experience performing a similar transformation on a variety of successful projects. So check out this high-level overview of a critical process for some advice and food for thought. It just might result in you turning a great app into a successful new business!
Select a Team to Operate The New Business
Of course, any new business needs a management team with an understanding of its market. Our preference involves selecting a project manager with both specific domain experience and an entrepreneurial drive. This PM then becomes the CEO of the startup after the app or digital platform is ready to be spun out of our startup studio. Since we follow the agency builder model of a startup studio, our project managers already have experience working on development projects for our clients - ideally in a similar industry to the new venture.
Other studio employees might join the PM in the new company. However, the startup likely needs an influx of talent in technical, business, and administrative roles. Also take care to begin building a company culture focused on growth and success.
The Startup Studio Management Team Assists in the Transition
While the new digital venture remains in its early stage, the NineTwoThree management team still provides advice and insights to assist in this emergence. We generally serve as a source of capital and development resources until the mobile app or interactive website begins to generate its own revenue. As an agency builder, our studio retains a strong interest in the success of the startups we incubate. Thus, we tend to stay involved in the management of our startups in at least an advisory capacity.
An Independent Business Set to Flourish
At this point, the new business begins to operate as an independent entity, generating revenue and expanding its user base. The new management feels confident in their potential success, and that attitude becomes contagious, helping to inspire the entire business. Again, this scenario remains a crucial reason to choose a management team with significant people skills in addition to their technical and business acumen. Inspiration plays a key role in the ultimate success of any startup organization.
In most cases, the parent studio still offers operational support as necessary. Startup studios working as agency builders like us retain more interest in the new business. Depending on the nature of their work and experience level of their management, we may offer more advice and managerial support compared to traditional studios.
Scaling From a Startup into a Thriving Business
The next phase of spinning out a digital venture into a business involves actually transforming the startup into a successful organization. This period typically lasts from a few months to a few years, depending on the industry sector of the startup and the startup’s growth plan. Scaling the organization remains an important goal for this phase. However, this growth needs to be managed for the business to stay resilient during any potential economic downturns.
We typically look for ventures that can charge $83.33 per month. This means that the venture will become a thriving business - with $1 million in annual revenue - with only 1000 customers.
Again, the management team of the growing startup keeps business stakeholders in the loop regarding their progress and current financials. This managerial strategy especially makes sense for sharing insights on emerging technology innovations as well as best practices for managing startups. Our experience in this area pays dividends for the startups we incubate.
Is It Time to Exit?
Once a startup becomes a thriving business, the stakeholders or other investors might begin looking for an opportunity to exit their investment. At the same time, the startup’s managerial team needs to remain open to any approaches regarding a potential sale or merger. Ultimately, the answer to this exit question relates to the longer-term goals of business as well as the percentage of ownership held by third-party investors. Agency builders might decide to retain at least partial ownership of the business, using it as a revenue source to incubate new startups.
If you want to learn some best practices for scaling your startup studio’s digital ventures, connect with our team at NineTwoThree. We boast significant experience starting new businesses and crafting state of the art digital platforms for our clients. It’s a thriving community out there, and we love sharing ideas. Contact us today!