Venture studios are a hot trend in the business world. Living in the age of the tech revolution, it’s not surprising that innovation drives many business decisions. Both new companies and large corporations are more and more concerned with innovation, and they put enormous efforts in being ahead of the market curve. But what is a venture studio business model? What do they do and how do they make money?
What is a venture studio?
A venture studio is a company that builds several new companies in rapid succession — they come up with the idea behind the new startup, validates it and develops it with a core team. Later on, once the new business is up and running, they look for a new team that continues developing this new startup.
Venture studios create these new startups by using their own resources. Normally, these companies have employees with previous experience in building their own startups. Being a team of experienced entrepreneurs and startup founders, venture studios can go through the process of creating new companies in a fast way, avoiding all the typical mistakes of first timers. This multiplies the possibilities of success greatly.
The venture studio business model has evolved widely during the last few years, and proven its success in different industries and countries. According to The World We Create, the venture studio market has grown 625% over the last 7 years.
👉 If you’re interested in this topic, take a look at our previous blog posts and find out what a venture studio is, and the differences between an accelerator, an incubator, and a venture builder. 👈
What does a venture studio do?
As we have mentioned previously, venture studios build new businesses for larger corporations. This is what venture studios like Corporate Lab work:
- Identify new business opportunities. One of the most challenging parts of building new businesses is actually coming up with new ideas. Venture studios work with companies from different industries and different challenges. This is why the first stage of the process is focusing on researching the sector and identifying new opportunities that solve a pain in the market and constitute a new income for the company.
- Market research. Before starting developing projects, venture studios research and test the market. Analyzing business ideas before executing them is crucial in order not to lose time and money. This is the phase where specialists define a business solution, find a target audience, identify the right channel, and make sure the project is technologically feasible by building a proof of concept (PoC).
👉 Not sure what a PoC is? These are the differences between a PoC, a prototype and MVP👈
- Building MVPs. After the analysis phase, a venture studio can proceed and start building a minimum viable product (MVP). Since these companies build new companies in rapid succession, they build fast MVPs in an agile way and save tons of time and resources. This is also crucial in order to pivot, if necessary. The objective of this phase is to find the product-market fit, the very first sign that the new business will be successful.
👉 Learn what 9 tools to use to build a fast MVP👈
- Scaling. Once the startup is up and running, it is time to scale the business. In order to do so, venture studios find strategic partners, communicate in the right channels, and tackle the target users. All of this should translate into exponential growth and scaling of the business.
- Handing over the new startup. The process of creating a new business is over. This final phase can differ depending on the venture studio. In our case, there are different options. First, the startup can be integrated in the company, and we find the right founders for you. Another option is we look for a team or entrepreneurs that leads and operates it independently.
How do venture studios make money? The financial model of a venture studio
A venture studio is a service company that offers time, effort, and expertise in a complex matter (sometimes, it offers capital as well). In return, a venture studio can receive equity or a regular payment for its services.
The pricing of a venture studio may vary depending on the level of risk involved — the more risk, the higher the inversion and the higher the equity or the payment. Other factors involved in the pricing of building new businesses include investment. If the company interested in building new businesses is backed up by a fund, the venture studio can multiply the options for success.
- Equity. The amount of equity varies depending on the risk involved. Normally, a venture studio with this financial model doesn’t receive this equity until an exit event occurs. Once the startup created is sold or taken public, the venture studio receives a percentage of the return.
- Payment for services. In other cases, a corporation can pay for the regular services of the venture studio. In this case, the venture studio gets money in a regular way, according to the services they deliver.
Corporate Lab is a venture studio specialized in creating new startups for large corporations. We work in an agile way, focus on market validation, and achieve a quick product-market fit. If you too want to take advantage of your unfair advantages, contact our team. We can find out what’s the best business opportunity for your company and build it for you.