What Are The Advantages Of A Startup Studio?

What Are The Advantages Of A Startup Studio?

A startup studio allows the entrepreneur to worry about the sales and marketing while the product is being built to perfection by a team that has worked with each other for years. We explore the other advantages in this post 

The advantage of a startup studio that is agency-based is that the entrepreneur or client that hires the studio is paying for a well-orchestrated team that will deliver a digital product based on a set of prototypes to be utilized in a specific industry. 

Most clients already have an established digital venture and require the product to be produced at warp speed with an extreme focus on user experience and customer adoption. 

In a startup studio, the product is the venture, the prototype is the business model, and the code is the deliverables. Alternatively, a startup’s product is a non-working piece of software that is using the business plan to sell a future deliverable. 

Startup studios are for experienced entrepreneurs or established brands. The mistake many people make is thinking that a startup studio is for newly formed ventures only. 

While paradoxically startup studios produce new products to the market, every output of a studio is already considered a successful release - even on day 1 of building the venture. 

Why? 

Clients of startup studios are obtaining a team of professionals to execute a business plan that has already found product-market fit and is in need of acceleration. Most clients that end up working with NineTwoThree are interested in using the studio to grow their venture - not experimenting with finding product-market fit. 

While startup studios are excellent at understanding how a product will interact with the end-user - they are not great at selling the idea to that end user. This is usually the responsibility of the client which means the formulation of product-market fit and adoption is usually solved prior to hiring a studio.

Startup Studios Transact a Team for Revenue

Failure is not really an option in a startup studio because it is transactional. 

A Client is paying for a product that will produce revenue - just like an Aquarium purchasing a dolphin to do tricks to sell tickets.  The dolphin (and the studio) have already proven they know how to perform the tricks - and once the audience is introduced to the trick - the monetary transaction will be executed. Hints, why the Client that comes to a studio knows exactly what price to pay to get the results necessary to be profitable. 

When an entrepreneur or an established brand comes to NineTwoThree for example, they are considering four options for growing their business.

  1. String together a team from random previous relationships to build their product which includes sales, marketing, project managers, developers, and testers. 
  2. Create a Business Plan and pitch at startup events to attract VCs which may also include hiring the team listed in 1.
  3. Build the product themselves with shoestring and bubblegum - without the team.
  4. Hire a Startup Studio

If none of these options seem appealing - a startup studio allows the entrepreneur to worry about the sales and marketing while the product is being built to perfection by a team that has worked with each other for years. 

Why Studios Struggle to Support 1st-time Entrepreneurs 

The model does not suit “new ideas.” If an entrepreneur comes to the studio with a new product idea - the studio will ask for hundreds of thousands of dollars to execute that idea and create a deliverable. So the Entrepreneur will ask a VC to fund the studio on behalf of their idea - and the VC will say “Sure, after your first 1000 customers.”

 The entrepreneur will ask the studio to build for equity, promising that piles of cash will be presented on silver platters. The studio will remember that they are basically an Agency that needs to pay their team monthly and decline. Basically, the studio will have to pay all the talent regardless of if the product gets to 1000 customers. 

This is why 1st-time Entrepreneurs have a difficult time working with a studio. To acquire the money to pay for an experienced team they need to ensure that the money will be well used. If they do not have the cash themselves, it is difficult for an outsider to believe that their money will be best spent prior to acquiring customers. 

It is the VC way of saying “Find product-market fit before paying for the product.”

Startup Studios support the 2nd Time Entrepreneur (Or Established Brands)

However, a second-time entrepreneur already has a little cash from the first exit and already learned one important lesson that she will not repeat. Finding the precious product-market fit before building the product. 

We often see entrepreneurs come to us with a product that “got them this far.” In one case, we had an influencer with 200k followers ask us to replace her app to support growth. The first app was not supporting her customers, had technical issues, and did not allow for feature updates. 

Hence, the studio model request makes sense - as the revenue from the current product could fund development. 

Once the new product was successfully replaced in the market - new features could be added to the massive number of users which would create more revenue. 

What's more, the studio was able to propose an additional revenue stream for the entrepreneur that would be “built into the product” for free. This set of features would enhance her brand visibility without extra effort and surely increase the profits as no additional cost would be spent. 

The Studio and the team had built for other influencers and knew how to maximize conversions. It was not a team of engineers meeting for the first time to build a project like a Startup - but a team that had seen the same challenges before and could navigate together.

Established brands operate with the same mentality. An internal engineer at one of our Client's facilities figured out how to code iOS and was able to launch an indoor mapping system. The product worked and allowed the Client to get investment. Now, with more functionality in the future, it was time for the client to build the product correctly and be scalable. 

This is why a Studio was called in for assistance and not an Agency. Our team not only provides the product - but also the documentation, foundation, and location coding knowledge from previous apps to know how to move faster than the Client ever imagined. The result is that we are extending the contract out to next year. 

Conclusion

Ultimately, the true value of startup studios is that they have already done a lot of the legwork that entrepreneurs would otherwise have to do internally and don’t have the time for. This helps them get to market faster, with the guarantee of a smooth journey to launch and beyond. 

In the same breath, this approach is more commonly used by experienced or second-time founders. Why? Because they already know they have a good product-market fit, they just need someone to deliver on their already-proven vision. 

By using a tried-and-tested team with support from a venture-backed business model, a lot of risks are avoided. And when working collaboratively and transparently as we do, there is space for magic to happen. This is one of the reasons why many of our clients consider NineTwoThree to be an extension of their in-house teams. 

It’s all in the delivery. 

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