The Rise of Venture Studios

Ever since Bill Gross launched idealab in 1996, the venture studio model has been on a tear. Venture studios have proven to be more efficient and effective than other forms of venture building and are gaining popularity amongst entrepreneurs and investors. Venture studios have a higher success rate with a 34% exit rate - this is almost twice that of accelerators (19%) and multiple times higher than startups themselves. But what exactly is a venture studio, and why are they becoming more popular?

A Venture Studio Primer

A venture studio is a company that creates and builds multiple startups at the same time. This is in contrast to traditional accelerator or incubator programs, which often focus on helping a single startup grow and scale. Venture studios typically have a team of experienced entrepreneurs, investors, and other experts who work together to create and launch new startups.

Efficient and Effective

One of the key reasons why venture studios are becoming more popular is that they allow for a more efficient and effective startup creation process. By working on multiple startups at the same time, venture studios can leverage their expertise and resources to create and launch new businesses more quickly and cost-effectively. This can also lead to greater success, as the team is able to share knowledge and resources between startups and identify new business opportunities more easily.

Idealab has tried more than 5,000 ideas with 150 translating into actual businesses. This 3% hit rate may sound low but among the 150 ventures, 70% of them are successful, more than 2x that of seed-round venture capital backed startups. In fact, the average startup created by a venture studio returns an average IRR of 53% vs 21.3% for a traditional startup. If you look at Total Value to Paid-In, venture studio startups are 3.7x larger than a traditional startup. They also achieve seed and series-A funding 2.2x-3.3x faster.

Comprehensive Approach

Another reason why venture studios are growing in popularity is that they offer a more comprehensive approach to startup creation. In addition to providing funding and resources, venture studios also offer support for key areas such as product development, marketing, and sales. This allows startups to focus on building their business, while the venture studio handles many of the other important aspects of startup creation.

A Better Option for Entrepreneurs

Venture studios are also becoming more popular because they offer a unique opportunity for entrepreneurs and investors. For entrepreneurs, working with a venture studio provides access to a team of experienced entrepreneurs and experts who can help guide the development of their business. For investors, venture studios offer a way to invest in multiple startups at the same time, which can lead to greater diversification and reduced risk.

The rise of venture studios is a reflection of the changing landscape of startup creation. With their ability to create and launch multiple startups efficiently and effectively, venture studios are becoming an increasingly popular option for entrepreneurs and investors looking to build successful businesses. Whether you're an entrepreneur looking to start a new business, or an investor looking to invest in the next big thing, a venture studio might be worth considering as part of your strategy.