What is a Venture Studio?

The term ‘incubator’ has become widely recognised in the last few years; Venture Studio, meanwhile, is less well known. 

The key difference is where the business ideas actually come from. At a startup incubator, founders bring early concepts or ideas to the organisation, where they are then nurtured, supported, and grown with the help of an in-house team. You’ll often find these at universities, aimed at supporting aspiring student entrepreneurs. 

At a Venture Studio, ideas are developed and nurtured at a much earlier stage, in-house. These are based on external insights and internal research by the Venture Studio team. At Founders Factory, we accept both studio-led (developed in-house) and founder-led (brought by the founder) concepts, as long as the latter meet our investment criteria. With founder-led concepts, we bring founders in at the concept validation stage, often helping them flesh out certain proof points (e.g. product features, user demand, pricing, business model, etc) to bring them to that level of validation that would usually expect. 

The Venture Studio model is defined by being iterative. To date, the Founders Factory Venture Studio has spun out over 70 ventures. The process is adaptive: we constantly review and refresh our approach depending on changes in the wider market, internal factors that impact how we operate, as well as past successes and failures. Throughout the journey, the central question is: “How can we improve?”

Key aspects of iteration are:

• Retrospectives—held with the Venture Studio team and founders to capture observations on both the venture and the process

• Experiments—actions from retros, to hypothesise how certain changes or behaviours might have yielded a better outcome

It’s also worth highlighting one of the key features of the Founders Factory Venture Studio, what we dub our ‘unfair advantage’. These are our joint ventures with leading corporations, including Aviva, Fastweb, and Nesta, who partner in the venture building process. Often, areas of opportunity are identified through these partnerships. Founders also get access to these corporates on a number of levels, ranging from advice to pilot programs. 

How do we assess progress?

At Founders Factory, we use a Red-Amber-Yellow-Green (RAYG) system to assess the progress and health of the business. Ventures must meet a clear set of criteria before passing to the next level. Reaching Green is not necessarily a ticket for success, but it is a good indicator of business development. We assess this across five categories which define the core workflows of the Venture Build programme: team, product, vision, customers, and revenue.

These are monitored and updated through fortnightly studio team meetings, team standups, and retrospectives. These categories also provide high level goalposts for spin-out. 

Objectives are set for 30 days, 90 days, and six months. For each milestone, we’ll set three to five objectives, which must be measurable and verifiable—for example, ‘Acquire 25x waiting list sign-ups via organic marketing channels’, or ‘Finalise MVP features’. This is also tied to our RAYG status: broadly, businesses should be at Amber by 30 days, Yellow by 90 days, and Green by spinout. 

Studio meetings happen every two weeks, involving the Studio teams and founders. Key focus is on actions, issues, and objectives, rather than updates. Any updates should be submitted as part of a ‘pre-read’ beforehand so that the rest of the team can catch up on your actions, and create an agenda accordingly. 

Challenge sessions happen halfway through the programme. The Studio team comes together with certain other stakeholders (partners, our leadership team) to check the overall progress of the project and see if it is on the right track to reach its spin out goals. We’ll use this as an impetus to identify areas for improvement, start developing an investor narrative, as well as formalise feedback to the founder. 

Retrospectives happen off the back of the halfway challenge session. This is a collaborative process for the Studio team to assess what is and isn’t working well. We’ll set goals—both what is realistic for the six month mark, as well as some stretch goals—as well as spinout objectives. This may also be an impetus to start empowering the founder to identify what is missing and where they can leverage more value out of our team and network.

How successful is the Venture Studio model? 

Having only launched our Venture Studio eight years ago, it may be too soon to judge the success of the mode both in terms of return on investment and survival rate. More than other forms of venture capital, venture studios have a long payback period. That means the overall return on our investments will take longer to realise. 

Statistics from the 2022 Global Startup Studio Report indicate the strength of the venture studio model in terms of startup survival:

• Venture Studio startups have a 30% higher success rate than traditional startups

• 84% of startups coming out of studios go on to raise a seed round

• 72% of those ventures make it to series A (compared to 42% of traditional ventures)

• The time from founding to series A is 25 months for venture studio startups compared to 56 months for traditional startups

We continue to increase the number of businesses we're building and spinning out each year, with growing portfolios across our key sectors of fintech, climate, health, and deeptech. Businesses we’ve built include:

• Tembo—intergenerational mortgage sharing. Tembo has raised £7.5m to date, including a £5m Series A in 2023.

• Acre—end-to-end on-chain mortgage platform. Acre has raised £11.5m in seed funding to date.

• Again—supply chain infrastructure layer for reusable packaging. £2.6m in seed funding raised.

• Byway—flight-free sustainable travel agency. £1.1m in seed funding raised.

Read next: Accelerator vs Incubator: What’s the difference?