Roasted Reflections

Venture Studios

Venture studios work with different startups to activate a portfolio of ideas into reality.

They invest financial capital, then use a long-term lens to enhance the chance for traction by pouring resources into each startup they invest in. A compounding collection of services are provided within these funds and full access helps everyone building together, often in sprints.

The compressed nature of the building process makes venture studios somewhat comparable to accelerators, yet with an extended, almost open-ended timeline. This emerging model can also be used as a form of due diligence for venture capital funds. While there’s still a lack of standardization and wonky economics have some investors questioning the long-term mechanics of such an approach to investing in startups, it’s no surprise that the innovation economy continues to drive fresh approaches to raising financial capital through the art of supporting entrepreneurs.

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This caffeinated contribution was written by Miles Dotson. I met Miles through mentor madness with Techstars. We bonded over our shared interested in this emerging approach to supporting entrepreneurship. Miles co-founded Devland, which is an investment company that focuses on new innovative ventures with brilliant technologists and wildly underestimated entrepreneurs. Devland provides an alternative mix of investment pathways for committed entrepreneurs with program guidance and direct funding through Series A.

The builders venture studios can attract, do not always have familiarity with venture capital and the language of finance. Whether you call them venture studios or startup studios, the word “studio” gives them the sense that there is a seat for them, regardless if they have a passion for a new idea or if they have formed initial traction. Terms, timelines, and investment theses vary between venture studios, as they should, knowing each company and fund provide different strategic values. After years of experimentation, our team is currently using the venture studio approach to conduct due diligence over an average of 14 months, working alongside builders, getting in the trenches with them, and advocating for their growth. This provides a much better gauge of the entrepreneur as a corporate builder, leader, and team builder — further validating our cause to invest and market them to firms upstream from us.

To bring this short intro to venture studios together, we can think about this as a validation-led approach to venture capital. The intention is to discover outsized returns from potentials who do not generally have network into the world of capital, relationships, and resources needed to build a market leading business. We are operators, product leaders, and venture capital thinkers who understand the role startup creation plays in the market. Our goal is to illuminate repeatable paths that often result in early acquisitions, stable long-term growth, or public market entry while improving the average cost required to create that outcome.

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This has been a fun little series, brewed around a few interesting actors within entrepreneurial ecosystems. There are many more key actors, factors, and instigators throughout any startup community, but we hope you’ve enjoyed this sip of awareness around Accelerators + Incubators + Coworking + Venture Studios. As always, subscribe to Roasted Reflections and stay tuned for what’s being poured next week!

By Ben McDougal, ago

Coworking

Coworking spaces provide entrepreneurs and intrapreneurs with an environment where everyone is working on their own thing, but doing it together.

When you choose to ride the lonely roller coaster of entrepreneurship, coworking can provide a cooperative, fun, and supportive environment. Coworking spaces are built to energize your work and provide a professional location to host meetings as well.

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Coworking Day is August 9th.

As you might imagine, working around others naturally leads to more interactions. A good coworking climate offers more than trendy office space. It provides members a sense of community. With so many good people in one place, coworking spaces often become a prime location for a variety of events as well. This allows you to get more involved with less effort required. Whether it’s educational sessions, random conversations throughout the day, impromptu happy hours, or larger community events, coworking connects you to more people who “get it.” The home office or local coffee shop is still great, but joining a coworking community allows you to focus on your work while enjoying a communal experience with more people who share an entrepreneurial spirit.

By Ben McDougal, ago

Incubators

Incubators warm you up until it’s time to hatch.

They are similar to coworking spaces, but incubators often focus on entrepreneurial education. This developmental focus attracts newer entrepreneurs and has incubators most often found in educational environments, with semester or year-long programs. Incubators can also be found outside educational environments. Public incubators may have less rigidity, but there’s still urgency that most entrepreneurs benefit from. The timelines of an incubator are not as compressed as accelerators, but there is usually a beginning and an end to these programs.

This rotational nature of incubators provide a cyclical, yet stabilizing effect within startup communities. Entrepreneurs working through incubator programs become stronger founders eager to stay connected. As founders transition out of an incubator, they add human, intellectual, network, and cultural capital to the entrepreneurial ecosystem. Their departure also makes room for the next class of entrepreneurs eager to develop a business within the incubator.

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Wondering how your business should evolve? Work around other entrepreneurs.

Another common draw of an incubator, is less expensive office space. Low rent alone attracts early tenants, but here lies the motive for many unhealthy incubators. If an incubator is only about cheap office space, the lack of heart will suck the cool right out. A fixation on cheap rent leads to less interest in helping entrepreneurs. This leaves floundering tenants starving for community. As cultural starvation occurs, entrepreneurs migrate and programs fail.

Incubators must be safe cocoons for less experienced entrepreneurs. They should allow entrepreneurs to repeatedly test, fail, and improve alongside their peers. With a supportive space dedicated to nurturing the entrepreneurial spirit, incubators allow connected entrepreneurs to hatch fresh ideas ready to fly.

By Ben McDougal, ago

Accelerators

Accelerators are incubators on steroids.

These programs recruit scalable companies that have shown early promise. They coordinate dramatic transformation within a compact timeline.They are like early-stage investment firms, as they provide seed funding in exchange for equity. Accelerators hedge bets by connecting entrepreneurs to resources, mentors, customers, investors, and community allies.

The rise of the accelerator model is interesting. Accelerators help entrepreneurs build stronger companies, but they need money to function. How do they support the financial investments in each company? What about staff salaries, community events, and all the resources they provide? There’s usually an initial fund raised to start these programs. Some accelerators also have financial infusions from sponsoring organizations. With this financial foundation in place, accelerators then depend on the performance of the companies in their portfolio. When a portfolio company is acquired or exits, the accelerator’s equity converts to cash or ownership options in more successful businesses.

As an accelerator’s portfolio performs, its reach widens and the program prospers. This motivates program directors to pick the right companies. It also gives founders the confidence that the experience is built for them to succeed. These complementary relationships are how accelerators make a lasting impact in less time.

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Incubators vs. Accelerators vs. Venture Studios vs. Coworking

For entrepreneurs, so much potential makes it easy to fall in love with the idea of being an accelerator-backed company. As business owners consider applying to accelerators, it’s important to understand the terms. When startup accelerators first started in 2005, they were industry agnostic. As this collaboration-based investment strategy has evolved, industry-specific accelerators have also emerged. This means there are more accelerators than ever and not all of them will be the right fit. The educational, networked, and cultural experiences matter. Entrepreneurs must vet accelerators like they would other equity investors. Do terms of the accelerator align with the long-term goals of your company? Will the implied results outweigh an intense time commitment? Even if it’s temporary, will the team be required to relocate? How deep is the network of fellow founders who have worked through the accelerator? Do portfolio companies stay connected? If so, how does that connected landscape support your work beyond the program?

The accelerator experience can be life changing for a startup. Based on a deep understanding of each company, these action-packed programs #GiveFirst and help build on what’s working. They also quickly identify areas for improvement. This empathetic support combined with a shared mission to grow allows accelerators and their portfolio companies to be more successful as everyone collectively builds to go big.

By Ben McDougal, ago

Winding Whys

Asking “why” seems to be innate.

As soon as kids learn to speak, the inquisitions begin. The first few whys may emerge from innocent curiosity, but it’s easy to tell when the game is underway.

Endless whys may lead to frustration (especially when it’s bedtime, eh), but why not find joy in making these winding whys into a fun challenge. Instead of shutting things down, try to quickly answer every why. Can we mindfully outlast a youngster’s attention span?

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“Mom… Dad… why do you love me?”
After countless rounds of winding whys, what a fun chance to coalesce endless reasons into one run-on sentence.

As we zoom out, it feels trite to reflect on how humans have so many whys we cannot answer. Instead of the paradoxical path or trying to understand all of our own whys, the five whys from Toyota is an interesting tactic.

Developed by system thinkers inside Toyota back in the 1980s, this iterative technique was used to explore the cause-and-effect relationships underlying a particular problem. When following 14 specific rules after exactly five whys, the last answer often points to a process that is not working well or does not exist. This technique has critics and can lead to rigid, even shortsighted interpretations. That may be the case, but more often than not, our own willingness to go deeper helps move past easy answers.

The five whys may not solve all our winding whys, but the idea behind this historic tactic can be fun to use at home. We also know playing with why is helpful for decision making and culture building in business.

As winding whys carve through your mind, appreciate the difference between complex, complicated, and simple ideas. Socratic questioning, active listening, real-time doodles, media-supported storytelling, inverse charisma, laughing, and of course, child-like wanderlust all add a twist. Why not?

Brewed From Within
#119 📖 Life & Happiness

By Ben McDougal, ago