🏁 Why Startup Founders in Egypt need to work with Venture Studios?❗

I know the pain of founders who have a vision, a dream and a team to build a startup but get confused down the road not knowing who to seek help from! Between fund raising, talent acqusition, product market fit, scaling & people management; it becomes impossible to think of anything due to the limited mental capacity.

In this article I discuss the below points:

1- What are Venture Studios?

2- Why founders should consider working with them!

3- Venture Studios types, approaches & model!

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When I quit my corporate career and worked for a startup, I found it really hard to explain to my family and friends what a startup is but now history is repeating itself with me finding it even harder to explain to anyone what is it exactly I’m doing working with VENTURE STUDIOS!

I’ve been consulting with one for a few months now but while attending RISEUP SUMMIT 2021 I found an entire talk by ENHANCE VENTURE STUDIOS on the topic which really helped me a lot research the concept and explain it here! (Kudos to both entities)

So consider the below…

PROBLEM:

Your’re an early stage startup founder who has a good business idea but missing out on:

- know-how of building a company

- finding investors

- hiring a skilled team

- creating quick validation processes and being as effective and efficient in all the above. (This is just to name a few challenges)

SOLUTION:

You do a simple google search or ask any entrepreneur and they tell you that for more than a decade all startups in Egypt have either gone to incubators, accelerators OR angel investors. They will mainly provide you with some money, network of advisors & then more investors in exchange for a fee or equity.

Don’t get too excited, there’s a catch here!

• Statistically only 0.1% of startups and 10% of VC funds are deemed successful.

Of all the startups that embark on an ambitious journey to change the world, only about 1 percent manage to raise even an initial Series A round of funding. Of that 1 percent, only about 10% succeed to generate returns for their investors.

Creating a startup is suddenly less exciting isn’t it…well venture studios present to us a solution that we as founders should consider!

1- What are Venture Studios?

The Startup Studio is not an early-stage investor, it is the Co-founder. Think of it as a startup factory that creates startups in a continuous production cycles.

The “startup studio” or “venture builder” model is basically an enterprise that has been formed to build and support multiple startups at their earliest stage under one roof & provide them with experts known as “Entrepreneurs in Residence” (who mostly have decent experiences leading and building startups).

This model has emerged to create new startups faster and cheaper due to shared resources with the end in mind of increasing the success rate of startups.

I find venture studios especially relevant for a market like Egypt where it is VERY HARD to get Co-founders, especially technical ones; so the studio basically makes you worry about your company rather than the talents needed to build it with you.

What’s unique about most venture studios is that they go beyond providing a Network of founders, investos, advisors and domain experts

A Studio hires a core centralized team that are their backbone in helping startups like you get quick validation on the business model and co-create/co-build it with you. The team might include (but not neccessarily limited to):

- a CTO and/or technical team

- a product team

- experts in growth management who can help in customer acqusition

This approach results in a dramatic decrease in startups’ failure rates because everything starts from an in-depth analysis of real market needs & instead of distributing resources to a wide range of startups that have a high probability of failure, as is the case for most incubators or accelerators, venture studios focus all their resources on developing a few highly promising startups.

The main goal is to get startups to independence and liquidate the investments through an Exit.

In a nutshell, venture studios are all about “less mentorship, more hands-on.”

The core team (entrepreneurs in residence) are not just experts available for advice; they are integrated into the team and often placed in leadership roles.

2- Why founders should consider working with venture studios?

We already mentioned that studios will be your co-founder, provide you with hands-on experts with massive experience and will help you with the funding; but as a founder you want to make an informed decision before working with them so let’s be data-driven and talk numbers:

• Failure: Startups created by a studio are less likely to fail compared to traditional ones (9 out 10 startups fail in the first year according to Forbes)

• Exit: 4.3 years Zero-to-Exit compared to 8 years for traditional startups

(Startup Studios’ Exit rate is on average 16% VS 8% for VCs)

• Valuation: $74 million average valuations compared to $50 million for traditional startups

• Internal Rate of Return: 53% IRR for Studios, 21.3% for others

The Startup Studio aims to liquidate its investment through an Exit. The interests of Studio, Startups and investors are therefore perfectly aligned because they all pursue the same goal, the Exit. Also, it means that the studio focuses on a few ideas they truly believe are the best options instead of a scouting for startups and having to pick the best in the pool or pipeline.

3- Venture Studios types, approaches & model!

When deciding to partner with a venture studio its always good to know some info about your “co-founding/co-creator”. For example are they following a vertical or opportunity based approach?

• Vertical: It can mean focusing on a sector (edtech, fintech, etc.), or on a business model (marketplace, eCommerce, etc.), or by target (B2C, B2B,B2B2C).

• Opportunity Based: Spotting the market’s opportunities without getting specialized in one specific industry. Here the Studio seeks to attract talents and entrepreneurs to launch ventures in various industries, seeking the highest return.

You also want to know what model do they follow?

Operator Model

They build startups from scratch based on market and trend analysis.

Agency Model

This model allows the studio to generate cash by acting as a trustworthy agency for startups and using the revenue from selling their service for startups to fund in-house idea development and startup creation.

Corporate model

Corporations usually have huge dimensions and big capitals so they might resort to creating a studio and providing it with powerful tools, such as know-how, distribution channels, IP, etc. to build startups under its umbrella leveraging on its foundation and network

Venture studios come have different methodologies:

a- They can generate an idea internally and work on it then get a co-founder for it

b- They can collaborate with successful serial entrepreneurs to develop something completely new

c- They can invest in pre-seed stage ideas that already exist and co-build with the founders

In conclusion, venture studios have been around since the mid 90s but only now the number of startup studios is reaching the order of magnitude of VC funds. So, the next time you talk to a VC, you can assure them that startup studios are not rare, and the concept definitely does not comprise only of “Rocket Internet”. The venture studio movement is accelerating with around 50% of the studios launched in just the last 4 years and I believe that we as Egyptian entrepreneurs should truly consider exploring collaborating with them.

Reach out to me to know more about the studio I’m collaborating with to fund and co-create edtech startups in Egypt! They go by the name of One Stop.