Is a start-up studio the best place to develop your business idea?

What is a start-up studio? How does it work? And how can you get involved with one? All is revealed by today's entrepreneurial insider...

I have worked in the entrepreneurial space for more than seven years, doing everything from running my own consultancy, writing a book about professional football economics and co-founded the world’s largest co-living space for entrepreneurs. But this wasn’t enough, I felt as though I wanted to experience something different, so I decided to join the start-up studio of Founders.

So, what is a start-up studio?

In simple terms, a start-up studio is a company that starts companies. It usually carries funds either from the studio owners, or investors, to create new start-ups on a proven formula. It creates them on its own platform of pooled resources such as office space, back-office solutions, legal advice, management processes and a multi-disciplinary team. By building several companies a year with the same team, start-ups studios can re-use this infrastructure, people, software and best practices across products and services.

Start-up studios are far removed from co-working spaces and venture capital (VC) companies, with start-up studios being hands-on investors - while VCs act more as advisory partners. Those in the studio co-found and build companies with everything from designers, developers and growth hackers. Whereas in an accelerator or venture capital organisation entrepreneurs are often on their own when recruiting key talent, something that can kill progress.

Around the world start-up studios are becoming more and more popular. According to Attila Szigeti and his start-up studio report, there are more than 51 studios and 212 studio companies around the world. Since 2008 the 51 studios have raised more than $4 billion and created more than 15,000 jobs, with the market led by the likes of Rocket Internet, Betaworks, efounders, Expa and Founders.

Why join one?

Like anything else in this world, there are pros and cons to take into consideration. Here is what I hear most often about the pros and cons of life in a start-up studio.

Pros

  • Faster start and build time.
  • The teamspirit of working closely together with other co-founders.
  • If a start-up fails, the team is reassigned and doesn't scatter.
  • Faster financing rounds - some all the way up to series B. 

Cons

  • Can make raising funding down the road more difficult.
  • Start-ups within a studio have to fight for resources.
  • Focus on internal ideas limits innovation.
  • Less motivation, passion from founders & team.

The fact that I have had my own company and worked for a brief time in a VC, might mean I have a slightly different take on the ups and downs of life in a start-up studio. I used to trade stocks and am generally a big fan of hedging my risk, but you need to be able to calculate that risk. The beginnings of Virgin Atlantic illustrate this point well, with Richard Branson insisting upon the right to deliver the planes back to Boeing after 12 months if the plan did not work.

He made sure that the loss would not financially ruin the Virgin brand and block their ability to play the entrepreneurial game again.

Start-up studios provide the same downside protection for both founders and companies. From a founder’s perspective, you don't have to struggle to pay yourself a salary from the very beginning and you still have equity upside in your work. Additionally, in case your start-up idea flunks the studio is not interested in scattering your talent, since they have invested a lot of money in your skills. This means you can help other portfolio companies or start another project within the factory.

Read: What are the characteristics that make entrepreneurs?

From a company point of view, the advantage of getting hands on support in various aspects of your organisation is very beneficial. While those start-ups based in a studio can expect to raise money in under a month, standalone start-ups usually spend anywhere from three to nine months on this, taking away valuable time from building the team and product. Personally, the biggest upside of joining a start-up studio is the community and team spirit of like-minded experienced entrepreneurs that you get to work with.

If you want to join a studio, this is what they’re looking for

In the case of Founders, we’re looking for "entreprofessionals”. This means people that have tried to start their own previously, resulting in either success or failure – it doesn’t matter which. It’s important founders come with the experience of building a company from scratch, safe in the knowledge that it’s much the same as jumping off a cliff while learning to build a parachute - you never learn that at as an employee or while studying at university.

Today entrepreneurs are faced with an incredible amount of choice. From incubators to accelerators and intrapreneurial programmes. Start-up studios might not be for everyone, but they are undoubtedly an exciting way to build companies through a proven model. Creating companies is a hard discipline to master and studios act as a great platform to optimise creation for a better tomorrow.

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail from gettyimages.

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