A strong entrepreneurial spirit continues to drive the creation of new businesses throughout the modern economy. Still, forming a new startup remains a risky proposition, with most eventually ending up in failure: wasting time, hard work, and investment resources. Because of this risk, entrepreneurs increasingly partner with venture studios, organizations with the business acumen and technical know-how that improve the chances of a successful startup.
In fact, venture studios and similar concepts, like startup studios, are growing in popularity, as VC providers want to see a better return on their investments. A recent study by Enhance Ventures illustrates this growth, noting at least 724 active studios as of early 2022, with over half being formed in the last six years. In fact, these numbers fail to tell the whole story, as a lack of Asian business formation data means Japan and China are underrepresented.
So let’s dive into the myriad reasons why the venture studio model continues to expand. While reducing the inherent risk of business formation remains one obvious explanation, other factors contribute to this acceleration. If you are an entrepreneur or have a compelling idea for a startup, partnering with a venture studio simply gives you a better chance of success.
Transforming The Model For Building New Businesses
Venture studios effectively serve as virtual factories for business creation. They provide entrepreneurs with what they need to nurture a transformative and scalable new company. The top venture studios include a mix of strong technology skills, especially in modern tech innovations, like mobile application development, the Internet of Things (IoT), the cloud, in addition to AI and machine learning. They also boast keen business knowledge in multiple industry verticals. As such, partnering with a studio with specific insights in your startup’s target market makes perfect sense.
Mature studios also focus on continuous improvement, creating repeatable processes that provide that significant risk reduction. As noted earlier, they essentially serve as factories for creating new businesses, while leveraging the latest software and business development methodologies. Because of these well-honed processes, entrepreneurs continue to decide on a studio partnership as opposed to building a new business on their own. This scenario naturally creates an environment ripe for new venture studios to service this expanding need.
Additional Reasons For The Expansion of The Venture Studio Concept
Here is a list of some of the other leading reasons entrepreneurs increasingly partner with startup studios, resulting in increased demand and new studio formation.
- Leveraging Mature Methodologies: As noted earlier, experienced venture studios gradually hone processes for software development, ideation, business market research, QA, and more. Once again, mature methodologies lead to a greater chance of a successful business formation.
- Access to Technology and Business Talent: The demand for talented technology professionals remains at an all-time high. Expect to pay high salaries if trying to recruit software engineering and business pros on your own. Working with a venture studio provides easy access to this critical talent.
- Partner With Experienced Entrepreneurs: Not surprisingly, many entrepreneurs form their own venture studios. Thus, partnering with one lets you learn from those already experienced in business creation.
- Corporations Forming Internal Venture Studios: Many startups incubated within a venture studio become successful by disrupting their target market. Uber and Airbnb provide two significant examples. This scenario is leading many established enterprises to either form an internal venture studio or invest in existing studios. Needless to say, this is another important reason for the continued acceleration of the startup studio concept.
The Secrets to Venture Studio Success
Understanding what differentiates the top venture studios from the rest of the pack also offers keen insights into the growing popularity of the concept. For example, many top studios focus on more than one industry vertical. This lets them leverage experience and insights in multiple business sectors, helping startups with both ideation and market research.
However, useful synergies exist for venture studios incubating startups in multiple related business sectors. For example, Betaworks enjoys success with new business formation in the TMT (technology, media, telecom) vertical. At the same time, they also help startups targeting the mobile and Software-as-a-Service (SaaS) markets. It’s an approach especially helping them leverage their in-house technology talent, considering the need for top-shelf software engineers in all three verticals. Their exits to investments ratio of 59.5% illustrates their high success level.
Identifying compelling target markets with low competition also raises a venture studio’s chances of success. Rocket Internet offers an example of a successful venture studio following this model. They analyze niche markets showing promise in the U.S. market and target European countries with a similar business model. The preprepared meal company HelloFresh offers one example of a successful startup incubated by Rocket Internet using this approach.
If you want to learn more about the growing venture studio concept, reach out to the team at NineTwoThree. As a top ranked digital agency, we regularly work with both entrepreneurs and third-party businesses, building a robust knowledge base of technical skills and business know-how. Connect with us to discuss how we can help transform your idea into a successful business.