A walk through the venture studio model in 2023

For corporates looking into ways to unlock innovation and grow adjacent to their core business operations, Venture Studios is the ideal investment opportunity. Compared to the more traditional approach, the venture studio method gives 44% better results when it comes to the success rate of startups built - 84% of startups coming out of studios make it to the seed round while 72% reach Series A funding.

Venture Studios act as a catalyst in driving digitisation and elevating innovation and growth in a sector. One successful example of this is our Venture Studio with DB Schenker. Together with our partner, we develop a portfolio of ventures in the logistics sector, combining the unfair advantage of corporate assets and the strategic value of external capital across multiple studio ventures. (Sounds intriguing? let's have a chat about the perfect setup for you.)

The benefits of venture studios aren’t only visible to a few. Increasing numbers of large enterprises and industry leaders are beginning to adapt and incorporate Venture Studios in their growth strategies. As a result, over the last few years, the number of startup studios has grown significantly by 805% - from 80 studios in 2013 to 724 active startup studios around the world.

So, how did the concept come to be, and how much has it evolved in recent years?

In this article, we take a look at that and more!

Venture Studios: The Legacy and the Timeline of Evolution

Wave 1: It all started in 1996.

Venture studios have been around far longer than you would expect.

It began with Idealab, a California-based studio launched by Bill Gross with the idea of helping companies convert ideas into functioning tech prototypes. The success of Idealab speaks for itself - 150 companies (7 leaving markets with billions of dollars) and hundreds of thriving ventures inspired over the last three decades.

However, as the use of workflows and design thinking augmented, Idealab and other startup studios started tweaking their venture strategies towards a digital approach.

Wave 2: The Start of a digital revolution

Since 2009, the ‘traditional’ concept has evolved! The market entered the Web 2.0 era - digitisation started steering the wheel, and a new ‘modern’ startup studio model rose.

Venture Studios expanded its offering and included services like web hosting, tech component libraries, API-driven development, social media marketing, and more.

Wave 3: One step further with data-driven practices

2013 saw another shift in focus as accelerators gained market attention. Unlike Venture Studios, accelerators help startups grow from the later stages by providing resources and mentorship.

To combat the growing competition, venture studios started putting a strong emphasis on the use of data and building lean models. A new wave of venture-building was shaping as more companies began creating products with on-demand features - services like food deliveries that could be available any time you want without a trained person.

Wave 4: Long-term vision and a technology-oriented approach

Once the ball started rolling towards a more sustainable business model for startups, a long-term vision materialised in 2015.

To ensure the increased lifetime of ventures, technology became popular in the venture studios' landscape, and innovation started paving the way towards value creation.

Today, the venture studio model follows the same technology-oriented approach. In the last couple of years, venture studios have built and launched multiple startups with higher success rates than firms from accelerators or traditional venture capital approaches.

Venture Studios in 2023: The current state

We rose, and we evolved. Where are we now?

The venture studio landscape has expanded significantly in recent years. As of early 2022, there were 724 active startup studios worldwide (this number, however, leaves out the Asian business formation statistics).

There is also higher demand and acceptance of the Venture Studio model in Europe now compared to the early 2000s - entrepreneurs are moving from Silicon Valley, and Europe now has more startup studios than North America.

Even crises and economic halts didn’t deter the venture studios' wave - in the last six years, over 50% of the studios have launched despite the Covid19 pandemic, including the ones from large corporations like Proctor and Gamble, DB Schenker, and Mars.

We’ve seen how popular the venture studio model is among companies. Now, let’s look into why that is the case.

1. Innovation with minimum risk:
   Companies that built their business targeting traditional customer needs can engage in innovation and disruptive technologies through external teams and ventures, minimising the risk to core business.
   
2. New digital revenue streams:
   Venture studios allow companies to develop new cash-flow streams and address new customer segments outside their core business operations while growing and acquiring more market share.
   
3. High return on investment:
   Unlike Mergers and Acquisitions (M&A), corporations don’t have to incur high costs to invest in promising startups, nor do they take increased risks of stagnant growth and poor strategy like in Corporate Venture Capital. The startup studios enable organisations to build with startups.

The Venture Studio framework: How can companies select the best option

Numbers are growing - more enterprises are building their studios and launching new ventures. Given this, it’s not surprising that each Venture Studio has its modus operandi and model of founder support.

This raises a vital question: How can venture managers access the available options and decide which one is suitable? At MVP Factory, we have conducted market research and gathered insights from experts to put together a brief framework.

The MVPF Venture Studio model allows managers to analyse the different venture studio concepts using six key metrics:

• The Funding Amount: This signifies the initial funds provided by the corporate to the founders to help set up the business and operate. In most cases, this amount is between 100k to 500k.  
• Equity stake: In exchange for the funding, the companies usually get a stake in the venture’s equity - typically between 15% to 35%.
• Type of operational support: To facilitate the smooth functioning of the venture, companies provide additional support. This can be in the form of fundraising assistance, joint validation, scaling for founders, optimising existing networks for investors, supporting in Go-to-market, and many more.
• Support time: The firm can decide how long it wants to keep supporting the venture after the initial phase. Usually after 18 months or less, the ventures start operating with no external support.
• Joining stage: It’s not always the case that the studio imports the idea from its internal deck and validates it to build a venture. A lot of times, founders come up with their own ideas and get help during the pre-validation or post-validation phase.
• Founding frequency: The number of ventures a studio builds and develops in a year is known as the founding frequency. It helps analyse the studio’s experience in the field.

In a nutshell, this is how the MVP Factory Venture Studio frameworks look:

Venture Studios with MVP Factory: Our Competitive Edge

There are multiple alternatives available in the market - what sets us apart?

At MVPF Venture Studio, we aim to reinvent venture building by partnering with talented founders and building the next wave of market-leading tech companies.

Our cross-functional approach brings innovative ideas, talent, and capital, enabling corporates to launch successful digital ventures and build a portfolio of investments with the chance of a high ROI.

Here’s how our Venture Studio model with DB Schenker works:

1. Ideation - 1 to 3 weeks
   Business ideas are sourced - founders either bring their own ideas or optimize our internal idea backlog. The MVPF Studio Team then evaluates the real-life applicability of the ideas in close collaboration with DB Schenker and experts from the VC & Startup industry.
   
2. Pre-validation phase - 4 to 6 weeks
   We validate the desirability, feasibility and viability of the business model according to our proven playbooks and methods to match the market standards. Once done, we present a validated venture idea that is ready to be staffed with expert founders & human capital.
   
3. Validation Phase - 8 to 12 weeks
   Once the perfect founder teams are sourced to the venture ideas, we set the foundation for the venture's success with detailed financial planning, along with the goals and targets. Next, we scope the initial MVP and prepare the Go-to-Market.
   
4. MVP and Launch phase:
   After incorporation of the venture, we support the founders in developing and launching the functional MVP, building an initial customer base and setting up the first marketing activities. At the same time, we also support fundraising activities, admin tasks and setting up a hiring strategy.

Our Venture Studio with DB Schenker is an ideal real-life example of the successful applicability of the MVP Factory Venture Studio framework. The model not only brings together the inputs of all the parties involved - the corporate, the founders, and the venture builders but also allows venture managers to modify it according to their industry needs and business strategies.

If you're a company interested in setting up your own studio and launching new ventures - get in touch. Our team will be happy to develop a model that is tailored to your strategy and your organisational preferences.

Enjoyed this article? Learn more about Corporate Venture Building with our blog on the top 5 success factors when building your own ventures.

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