Spoiler: it is NOT an Incubator or Accelerator
I have probably interviewed a few hundred professionals in my career as an Entrepreneur. After breaking the ice, one of the first things I do is ask the candidate if they know what Exponential Ventures does and what it means to be a Startup Studio. It turns out that only a tiny portion of the candidates understand what a Startup Studio does and how it differs from an Incubator or Accelerator. It is frustrating because our business model is significantly different (and more exciting) than an Incubator or even an Accelerator. Don’t worry; by the end of this post, you’ll know the difference too.
The Incubator: A Company that Nurtures Startups
Entrepreneurs starting on a tiny budget face an uphill battle on pretty much everything related to starting a business. Without investment, the entrepreneur is left to operate the business from home, often in their spare time, without the resources and network needed to kickstart the business. At this stage, the entrepreneurs would most likely be working on figuring out whether the business plan premises are aligned with the market, talking to potential customers, and securing some kind of investment to keep the business moving forward. Doing all of this on your own can be a daunting task, and it is the trail on which most entrepreneurial endeavors meet their fate.
The Startup Incubator is a place where entrepreneurs gain access to a shared co-working space, receive small bootstrap investments, mentorship, and access to resources to help them grow their ideas into validated business ideas. Some incubators are non-profit organizations kept and run by private and public entities looking to help local entrepreneurs get past their initial steps.
If you’re an entrepreneur struggling with figuring out how to start your business properly, Startup Incubators are good places to look for support. Make sure to look around and evaluate all opportunities available in your region before committing to one of them, especially if you’re required to give up equity in exchange for support. Giving up equity makes a lot more sense if an investment is associated with participation in the program, but that may not be true if the level of support offered is not backed up by an infusion of hard currency.
The Accelerator: A Company that Helps Startups Grow
For entrepreneurs that are further ahead on the game but ready to commit to the startup full time and looking for a boost, the Startup Accelerators are a viable alternative. Y Combinator and Techstars are amongst the most well-known accelerators. They’ll only take in startups that have already shown some early promises and a founding team ready to commit full-time to pursuing the business. The relationship is also meant to last a short period. On average, entrepreneurs stay engaged with an accelerator for three months, and at the end of this period, they’ll be actively seeking investment to keep growing from there. I do not know of any accelerator that does not require a significant amount of equity in exchange for their support. However, most of them will also make a small seed investment in exchange for that equity. They will also help you find more investors to keep the business growing after the end of the relationship. Accelerators also offer mentorship, shared co-working spaces, networking opportunities, and other valuable resources like most other incubators. Once out of their nest at the end of the program, entrepreneurs retain access to their network of mentors and investors for additional support in the future. However, you’ll be mostly on your own.
The Studio: A Company that Builds Startups from Scratch
Different from the Incubator and the Accelerator that exists exclusively to support the ideas of other entrepreneurs, a Startup Studio is a business focused on creating new companies from the ground up, leveraging its team and resources and sustaining that company for as long as it proves to remain a viable business or is ready to stand on its legs.
Instead of offering meager resources and dedicating little effort into the development of a business like an Incubator do, or having an intense and quick affair with lasting financial consequences (potentially good or bad) like an Accelerator, the Startup Studio model covers it all, being supported by a team that launches companies for a living instead of advising a living. A Startup Studio also incurs more risks than an Incubator or Accelerator since it commits a lot more time and resources to each startup. In exchange, the Studio model also retains the most equity of them all.
One of the key advantages of this model is that ideas can go from paper to market, skipping ahead several steps at once. No need to convince investors, hire engineers, figure out office, payroll, processes, etc. Everything is already in place, and the team can pick up an idea and quickly launch it to see if it achieves product/market fit. If it doesn’t, the project can be terminated, and the resources redirected to another idea. If it does, the project can either continue running from inside the Studio, pursue more investment for growth, spin it off as a separate company, or sell it. Either way, the Studio is better off by either having learned from the failure or profited from the success.
There you have it. A Startup Studio is a Company specialized in creating other companies. Exponential Ventures is one of the many true Startup Studios out there, but with an exclusive emphasis and know-how on Exponential Technologies. Aside from maintaining a team of designers, engineers, marketing, recruiting, and operators, we also carry a team of data scientists, and we have an on-premise cluster dedicated to Artificial Intelligence research and development. No startup can start with this much competitive advantage by going through the incubator or accelerator routes, and an entrepreneur would need to secure an uncommonly substantial initial investment to put together comparable resources as quickly as we can.
By the way, we’re always looking for talented professionals with an entrepreneurial spirit interested in joining our team to build amazing companies from scratch. If this feels like you, check our openings here.