Rise of the Venture Studio

By Steve Gotz, Silicon Foundry

Several weeks ago TechStars officially announced the launch of TechStars Studio which they describe as an environment for corporates “to rapidly envision, validate, and launch disruptive new startups.”

In addition to TechStars Studio, the industry has seen a burgeoning number of Venture Studios launching on a regular basis. Suffice to say, I believe it is time to declare that Studios have become the new Accelerators, which means it probably makes sense for corporate strategy and innovation executives to start thinking about how Studios may be an important new capability in their strategic arsenal.

Venture Studios, as we know them today, have existed in one form or another for at least a decade, but up until recently only a handful existed such as IdeaLab, RocketInternet and Betaworks.

Studios are different from traditional accelerators in many ways, one of the most significant being identification of the opportunity. Accelerators generally wait for an entrepreneurial team to form and pitch an idea whereas a venture studio generally relies upon a core team to constantly explore and validate new opportunities often times in collaboration with other funds and/or corporations. When a viable one is identified, the Studio then goes out and recruits a full team to pursue the opportunity.

Starting with a Team vs. Starting with an Idea

It may seem like a small difference, but in reality the advantages of this model quickly become apparent. Traditional accelerator programs need to wait for a team of entrepreneurs to organically find each other, mobilize around a shared idea and start validating an opportunity, a complex process that is fraught with inefficiencies and a multitude of existential threats to the team and company. Venture Studios are an attempt to eliminate the inefficiencies of that startup process, to the greatest extent possible.

Venture Studios have an additional key quality the ability to intentionally create exceptionally talented teams of entrepreneurial operators and point them, with a laser-like focus, at the most pressing challenges and largest growth opportunities. The best venture studios I’ve seen are focused and intentional about validating an opportunity and then methodically finding the best team of entrepreneurial athletes to maturely and methodically pursue the opportunity.

Beyond these core qualities, Venture Studios start to quickly take on customized properties.

• Some studios collaborate with corporates (High Alpha), others operate on a more arms-length basis (NFX).
• Some studios have their own investment fund (Union Labs), other studios operate on a consulting basis for corporates (Mach49).
• Some studios are set up as wholly-owned corporate subsidiaries, others are set up by consortiums of corporates who collectively own the Studio.

Based upon early data, it appears that some of these tweaks can have significant impact upon the ultimate success or failure of the Studio itself and the companies which it has a hand in creating. It’s for this reason that executives from some of America’s leading venture studios (High Alpha, IDEO CoLab, expa, TechStars, Pioneer Square Labs, Human Ventures, Union Labs, Science) recently gathered in San Francisco for the first ever meeting of the Venture Studio Collective. They came together with the goal of exploring ways to share best practices but accomplished much more. By the end of the meeting the walls were covered with ideas to better communicate Venture Studio value propositions, operating principles for engaging with entrepreneurs and most importantly ways to create uniform standards and KPIs so that performance can be accurately measured by entrepreneurs, corporate clients and institutional investors.

So what does this mean for the modern executive?

Think about the possibilities. As the CEO of an incumbent corporation, what would you do if you knew you had at your disposal a world-class team of entrepreneurs that was obsessed with staying one step ahead of the competition? BBVA asked that question and in response they setup Denizen, an innovative cross-border bank account designed for expatriates. Standard Chartered asked that question and in response they are building a new Digital Bank in Hong Kong. Heidelberg Cement asked that question and they built the Uber of Cement Trucks. We are only scratching the surface with these examples; just within the financial services sector there are a broad range of areas ripe for reinvention and incumbent corporations have an important role to play in that process.

We have entered a period where technology and impatient capital markets accelerate market change through the lowering of traditional barriers to entry and emergence of unexpected rivals from previously disparate markets. In this market you can either be the disruptor (sometimes of yourself), or you’ll be disrupted. While it is still early, Venture Studios appear to be one of the most sure-fire ways to preempt irrelevance and catalyze growth. I don’t think it’s provocative to say that in the not-too-distant future most corporations will add Venture Studio capabilities to their strategic toolkit (in much the same way that accelerators have proliferated across the corporate landscape); the most forward thinking organizations are already experimenting with the model. Are you?

Steve is a Partner at Silicon Foundry, where he works with some of the world’s leading corporations (AmorePacific, Barrick, British Petroleum, Deutsche Telekom, Majid Al Futtaim, SK Hynix, Standard Chartered Bank, UPS and the Royal Bank of Scotland) to create more impactful commercial structures and strategies to maintain and further enhance customer relevancy in the digital age.