Despite startup studios offering many benefits for entrepreneurs and investors, this business plan might not fit every type of entrepreneurship style.
The U.S. registered more than 5.4 million applications to form new businesses in 2021, approximately one million more applications than in 2020. With 2022 reaching its halfway mark, many investors have been ramping up their investments in various promising business models, particularly startup studios. Startup studio business models effectively set up core structures that allow them to finance their operations and startup creation efforts. As such, founders can feel secure that their project is not only in the right hands in terms of a knowledgeable and capable team of experts, but also backed by the right financials.
Despite startup studios offering many benefits for entrepreneurs and investors, this business plan might not fit every type of entrepreneurship style. Here is a brief overview of whether a startup studio is right for you, along with some helpful tips to determine which startup companies to invest in.
Startup studios are composed of people who have already succeeded in their industries. They have a team of designers, developers, administrative experts, and marketers to help the startups associated with them. Their tools, ideas, funding, and human capital all act as a resource for the startup they are working with.
Startup studio teams from all around the world have been able to perfect their own formulas for success and as such, become masters of venture building. One of the most evident advantages of the startup studio business model is that even if a startup project does not reach the launching phase, all the competencies acquired throughout the process will not go to waste: instead, they will turn into insightful knowledge for the next upcoming venture.
Oftentimes, startup studios can seem like a daunting model due to the amount of equity and many do not accept outside pitches from entrepreneurs. However, startup studios are seen as the safest approach to early-stage investment, being that the studio will see the startup through the acceleration phase and through common obstacles that 90% of startups fail to overcome. However, it is an ideal option in the following situations:
Every business starts with an idea. However, many entrepreneurs need adequate funding to transform their business-worthy ideas into a functioning business. Fortunately, the startup studio business model offers all the help and resources needed to build a thriving business off of an idea, including funding, mentorship, and labor for the business's operations.
Startup studios provide you with everything you need to bring your business to life and set it up for success. However, most startup studios take a portion of the business's equity as payment for the resources offered and services rendered. Many entrepreneurs consider this a fair compromise to make in exchange for help overcoming challenges that could negatively affect their startups, as 90% of startups fail within five to ten years.
Startup studios offer equal opportunities for investors, mentors, and entrepreneurs. Essentially, founders and co-founders are investors and mentors willing to contribute their time, expertise, money, and other resources toward a startup's success. Founders can expect excellent ROIs when the startups in their portfolios succeed.
It is important to find a startup studio business plan that fits your startup's unique needs and preferences. It is important to consider the following factors when choosing the correct startup studio:
Most startup studios tend to focus their investments and operations on one industry. For example, a startup studio focused on the healthcare industry is unlikely to take up a startup in the entertainment industry. More notably, these studios hire experts in their specific industries, making them ill-equipped to help startups in other industries.
A business's location plays an integral role in its overall success. Your chosen startup studio should be located within your business's preferred locality. The studio should also be easy and quick to access. Unfortunately, this is not always an option considering that startup studios are still relatively new and not evenly distributed.
3. Reputation & Performance
Startup studios are also commonly known as startup factories because they help build many businesses. You can review a studio's success rate by reviewing its portfolio of past startups, including the failed and successful businesses. Ideally, your preferred startup studio should have a highly successful portfolio of startups in your industry.
4. Culture & Outlook
Finally, try to understand how your chosen startup studio works by learning more about its culture and outlook. Essentially, the studio's culture is the values and virtues – it is how the company does everything it does, including working on projects such as your startup and interacting with clients. Ideally, your preferred startup studio should prioritize your startup's success and accommodate your needs and preferences as best as possible.
The startup studio model is so popular and efficient that it is changing the startup economy. A startup studio could be what you need to bring your business idea to life if you are an entrepreneur. Explore our blog to learn more about the startup studio model!