The History Of The Startup Studio Model

The History Of The Startup Studio Model

After a long journey of connecting with startup studios, founders, and building our research around this leading space for entrepreneurs, we’ve taken a step back to take a look at the history of startup studios and its evolution. In this article, we will break down how and when the first startup studio was born, and understand better how this business model has been structured over the years. 

A startup studio deploys its expertise, resources and infrastructure under a platform approach to generate and validate startup ideas, then build and launch them into the market. The studio assigns a leading founder to grow the companies into independent entities with the studio owning the lion’s share of the equity. The expertise and pool of talent they provide allow them to increase a startup’s odds of survival and success compared to regular startups. 

Studios are different from accelerators and incubator – or at least they used to be. And while we’ve covered this in the past, the startup studio model was not always the way it is today. Surprisingly, startup studios go all the way back to the 90s at a point in time when many of the tech innovations that studios rely on today did not exist, such as smartphones, artificial intelligence, data sourcing, rapid prototyping, and cloud-service tools.  

The Beginning of Startup Studios

The concept of creating a startup to build other startups as a well-defined and repeatable process came to be when Bill Gross founded Idealab in 1996, originally meant to be an incubator. As you can imagine, Gross firmly believed in the process of ideas arising in a person’s mind, and ultimately turning into viable businesses – which is why Idealab was named that way in the first place.  

Company logo of Idealab
Idealab is the longest-running technology incubator and the first-ever startup studio in the world.

According to Gross, he noticed the traditional incubator method was not working the way it should at that time. A good idea is not enough to achieve success. Several elements are involved, such as having a skilled team, established and efficient processes, know-how, raising funds, and engaging investors. This led to him wonder “why do companies fail?” The studio has grown 45 successful startups, of which 5 companies Citysearch, CarsDirect, GoTo, NetZero, are worth billions of dollars. 

During a TedX speech, Gross mentioned the following: “I believe building startups is one of the best ways to make the world a better place. If you bring together a group of people with the same incentive and start a startup with them, you can unleash the potential of these people like never before. You can inspire them to achieve incredible goals.”

With the creation of Idealab, the first wave of startup studios started to roll as ideas were taken and transformed into successful startups. 

The waves of the startup studio model
The waves of the startup studio model

Startup Studios In The Tech Revolution

During the early 2000s, the Great Recession created a host of talented technology and business professionals looking for new opportunities. With many potential business owners struggling financially, entrepreneurs could now turn to a startup studio to reduce overall risk and gain support for their new digital venture. This resulted in studios modeling after Idealab to resist and keep proving the effectiveness of their proven model over and over again, led by top leading studios such as Rocket and Betaworks that emerged as their own entities by launching scalable businesses in a time of great demand and change with the new technological wave. 

At this point, the startup studio stood poised to make a significant impact on the process of forming new businesses. Once demonstrated the strength of the model, investors were more willing to invest in it, which encouraged for more emerging founders to create their own venture studios and start making an impact with the businesses they launched. With a new wave of studios including PSL, eFounders, Science, Wilbur Labs, Human Ventures and more, the startup studio’s approach started to gain more notoriety and support as studios were able to generate successful hits every year. 

The State of Startup Studios Today

In more recent times, social marketing provided useful insights on new markets, with AI and machine learning helping startups glean actionable information to increase their chances of success. Beyond 2023, the future of the startup studio concept looks very bright. Networking of entrepreneurs, venture capitalists, and digital agencies following this approach fosters a vibrant community focused on cooperation as opposed to competition. Expect studios to show an increase in value to investors as well as the global business community. Not surprisingly, venture capitalists and other sources already invest a growing amount into new and existing startup studios.

The startup studio is not new, but it is constantly evolving. Learning from the evolution of the model, defining a model based on deploying creative capital presents a clear opportunity.

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