Startup Studios: Validating Ideas, Solopreneurs, Building Communities

“Don’t worry about failure; you only have to be right once.” – Drew Houston

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❓ What You’ll Learn

  • How does cheap prototyping create a competitive advantage?
  • How do startup studios benefit from hackathons?
  • How to use community building to attract founders?
  • How to do a hardcore year?
  • How to validate demand?
  • How to use a services business to fund your startup studio?
  • How to build multiple businesses as a solopreneur?

💎 Why It Matters

Companies founded by startup studios tend to produce better returns and scale faster.

🔍 Problem

About 90% of startups fail.

💡 Solution

Startup studios take a systemized approach to building companies. 

They apply accumulated knowledge and resources from building multiple companies.

🏁 Players

Startup Studios

  • Betaworks • Focuses on digital consumer products like Dots, Bitly, and Tweetdeck. Also an investor.
  • eFounders • One of the first enterprise-size startup studios focused on enterprise software.
  • NineTwoThree • Operates as an agency builder for funded startups and tech brands.
  • Human Ventures • Focused on businesses which ‘meet human problems’.
  • Idealab • Has created 150+ companies and 50 IPOs+ or acquisitions.
  • Rocket Internet • Builds and scales internet companies globally.
  • HVF Labs • Created by PayPal co-founder Max Levchin to solve problems on a longer time horizon.

Companies from Startup Studios

🔮 Predictions

  • Cheaper prototyping will make it easier for startup studios to try new ideas quickly.
  • Startup studios will focus more on community building to attract founders with big ideas.
    • Founders Club began as a community of early stage investors which then decided to leverage its network to create MVP fund. 
    • Revelry attracts founders to its studio by focusing its marketing efforts on community building. They help founders deepen their networks by contributing to accelerators, universities, and other networks.

☁️ Opportunities

  • Become an expert at validating demand. It’s easier to recruit and raise money when you have demand.
    • Buffer built a landing page with features and payment plans before launching its product. They used email sign-ups to understand what customers wanted.
    • Ryan Hoover built a 20-minute MVP using existing tools to test ProductHunt. He attracted 170 users in 2 weeks.
    • Bram Kanstein built EarlyOnes after his fourth business was acquired to help Web3 startups validate demand for ideas.
    • Ryan Yost is a developer who explains the process he used invalidate his automated assistant for ‘adult stuff’ with a landing page, surveys, and simple ads.
    • Lachlan Kirkwood writes about his two-year process of learning to prioritize validation.
    • Shane White uses no-code MVPs to validate SaaS ideas like Memory Share.
  • Run a services business to fund your startup studio.
    • Muhammad Bin Sabir (A Trends Pro member) used a growth consulting and no code development services business to fund his studio. 4 of his 6 companies raised pre-seeds within 6 months.
    • Late Checkout does 30 day design sprints with leading companies looking to become community companies. They get paid to learn.
    • Unstuck Labs offers prototyping, development, and ‘rescue missions’ for products.
    • Accenture helped Airbus optimize aircraft assembly and increase productivity 500%. 
    • Differential partnered with Big Ass Fans to drive sales through a custom platform. They partnered with TaylorMade to automatically track golf strokes to deliver insights to improve customers’ golf games.
    • White Label has led product development and growth marketing for 50+ clients.

🏔️ Risks

  • Weak Incentives • Entrepreneurs-in-Residence give up an average of 36% equity to studios. That’s not including dilution from future fundraising. Founders with much less equity may not approach the business with the same level of devotion as other entrepreneurs.
  • Opportunity Costs • Studios are constantly forced to spend resources on ideas with a lower expected ROI than the leading product. A single successful startup shouldn’t need to compete for resources with lesser businesses.

🔑 Key Lessons

  • Join a venture studio when it will improve your access to talent, technology, or capital.  Deepen your network with qualified and connected people.
  • Corporations should use internal startup studios to incubate new ideas that leverage their existing resources and advantages.
  • You can start a one-person startup studio as an indie hacker by building multiple products and seeing what sticks. 

🔥 Hot Takes

  • Working at a startup studio is a safer choice than a startup. Your career is insulated from a single idea’s failure.
  • Corporate startup studios often restrict innovation by tightly controlling teams. Startups from corporate programs have a 3% lower success rate.

😠 Haters

“Isn’t this the same as an incubator?”
Incubators offer founders a workspace, investment and community to help validate their product. Unlike startup studios they are not core team members working daily towards helping the business succeed.

“Startup studios made sense when the barrier to entry for entrepreneurs was higher. Server costs alone used to be prohibitive! The value proposition for studios is gone now that anyone can build a startup.
Things like no-code tools have made it easier than ever to build a product. But there is no substitute for experience when it’s time to go to market. 

“Aren’t the weaker or failing companies in the studio consuming resources that would be better used to grow the successful startups?”
Yes. It’s the startup studio’s responsibility to validate products quickly and cut the ones that drain resources without sufficient traction. Studios that fail at this will likely fail altogether.

“Why would I give up so much equity to a startup studio as a founder when I can raise capital on my own?”
Raising capital is one of many advantages that a studio offers. But that doesn’t mean the studio approach is right for you. Ask yourself whether the resources, network and capital are worth the equity that you’ll give up.

🔗 Links

  1. Startup Studios — Bullish or Bearish? • The tweet behind this report. 
  2. The Origin and Evolution of the Startup Studio • History of the startup studio.
  3. Is A Career In Startup Studios Right For You? • Weighing the pros and cons of working at a startup studio.

📁 Related Reports

  • No-Code • Use no-code to test ideas quickly as a studio.
  • Micro-SaaS • Start a one-person startup studio with a multitude of small profitable products.
  • Agencies • Fund your startup studio with an agency.
  • Growth Hacking • Template your growth procedure for a variety of startups.
  • Presales • Presell to validate new ideas.

🙏 Thanks

Thanks to Shashank, Sam Hickmann, Jeff Dyer, Brian Ball, Sean Hua, Mike, Muhammad Bin Sabir, Stewart Townsend, Anthony Hernandez, Vajresh Balaji and Soma Mandal. We had a great time jamming on this report.

✏️ Harry researched and wrote this report. Dru researched and edited this report.

📈 What else?

Trends PRO #0101 — Startup Studios has more insights.

What you’ll get:

  • 18 Startup Studios (157% More)
  • 18 Companies from Startup Studios (157% More)
  • 12 Predictions (300% More)
  • 13 Opportunities (175% More)
  • 6 Risks (200% More)
  • 8 Key Lessons (167% More)
  • 5 Hot Takes (150% More)
  • 13 Links (333% More)

With Trends Pro you’ll learn: 

  • (📈 Pro) How do startup studios use location to attract talent?
  • (📈 Pro) How do businesses expand to build flywheel effects?
  • (📈 Pro) How are people building startup studios for startup studios?
  • (📈 Pro) How are startup studios empowering marginalized communities?
  • (📈 Pro) What leads corporations to build their own startup studios?
  • (📈 Pro) How will governments use startup studios to develop new technologies?
  • (📈 Pro) What new jobs are being created specifically for startup studios?
  • (📈 Pro) How do founders use the holding entity model to fund studios?
  • (📈 Pro) How can you benefit from working for a startup studio?
  • (📈 Pro) How to find your niche?
  • (📈 Pro) How to leverage a startup studio’s network for your benefit?
  • (📈 Pro) How to use fractional talent for your ideas?
  • (📈 Pro) How can startup studios help you fundraise?
  • (📈 Pro) How does working at a startup studio reduce risk?
  • (📈 Pro) How to avoid bad deals with startup studios?
  • And much more…

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