August 11, 2022
In our recent webinar series held on July 2022, our guest speaker Lynsie Campbell, Founder & Managing Director at Better Work Ventures, gave her insights on why you should build your next venture with a startup studio.
Make sure to follow us on LinkedIn and join our LinkedIn group to not miss the next webinar sessions. If you want to watch the full conversation, make sure to watch the recording of the webinar. The recordings of previous sessions are available within StudioHub premium membership packages. But now, let’s dive right in …
Lynsie started working on her first startup in 2006. During the next years, she worked in early-stage tech companies, first on her own companies and then also working with other early-stage founders to launch and grow their businesses.
Looking back at her experience and the ones of founders she met, the failures typically fall into several buckets. A small percentage of startups suffer from user-unfriendly products, poor marketing and product mistiming. Another portion doesn't have the right founding team: the skill sets aren't rounded out properly. Another set runs out of money before getting to Series A funding. And then, the big one is, founders don't do enough research and misread demand before they start building their companies.
Unfortunately, founders make those mistakes over and over again and Lynsie thinks a big part of that is because they don't necessarily have the right support to do things differently.
Part of the problem is traditional VC. It is a path that the majority of founders have been told they need to go down, but it doesn't necessarily support a diverse range of founders and this leaves significant opportunities on the table.
Only 2% of venture funding went to female founders in 2021. Only 2.6% went to Black and Latinx founders. Solo founders are very unlikely to be accepted into accelerators. Lynsie has been based and has been investing in the Midwest and there's still not a lot of venture funding in the area. Traditional VC is not necessarily the right path for everyone. Founders are not one size fits all.
To explain how a startup studio can solve some of the issues listed above, Lynsie used her own studio as an example. Better Work Ventures is a Pittsburgh-based startup studio. A studio usually has a thesis by which it builds its companies: High Alpha builds B2B SaaS companies, and Enhance Ventures builds marketplace startups. Better Work Ventures will work with overlooked founders to build community-driven tech companies. What’s a community-driven startup? They have a few key elements:
So why a startup studio? There are a lot of reasons to choose a startup studio model over launching a traditional fund or accelerator. One of the reasons is that it's a new asset class that combines financial capital, which is the money to help invest in supporting and growing these businesses; the human capital, the people that were bringing around this and then the analytical rigor to build new ventures from the ground up.
The studio model is grounded in repeatable processes and with the right thesis, once and the more you do this, the better you're going to get. 72% of startups out of a studio make it from Seed Stage to Series A, whereas only 42% of traditional startups make it that far.
Better Work Ventures has four stages to build ventures: Ideation, Validation, Build, Spin out. In the first stage, Ideation, Better Work Ventures recruits “high-capacity, high-conviction, force of nature” entrepreneurs and generates business ideas. During this phase, they’re going to work with founders and residents for three to six months. One of the benefits given to the founders is that they are going to receive a monthly stipend, making the process easier for overlooked founders. The goal during this stage is to look at as many ideas as possible, with more than 100 ideas reviewed per year.
The second stage is Validation: the studio team and founder will conduct in-depth research and design the initial prototype to validate the business concept with real customers. This is the point where a lot of founders do it wrong: they come up with the idea, they start building it, and then they validate it. Studios focus intensely on this validation stage and as a team, you are not going to build anything until you're really confident that a problem exists and your idea is the solution to that problem. At this stage, Better Work Ventures is going to invest $25,000 into the validation and try to do that over the course of eight to 12 weeks. A company is not formed at this point, but at the end of those eight weeks, there's going to be taken a decision. From hundreds of ideas per year, they validate only nine.
Of these nine, only three will actually make it to the Build phase. The studio is going to invest $500,000 over the course of nine to twelve months and build the MVP with the founders. If the startup is gaining high-growth traction, a seed round is raised, a team is built, and the company Spins out. All with hands-on support from the studio. When they get to the seed rounds, Better Work Ventures will invest another $500,000 in the startup. But they’ll be looking to raise from $2 to $3 million with Co-investors and then with their existing investor net.
Lynsie is also a 2x tech founder, author of This Better Work, and a General Partner at The Fund Midwest. Over the last 15 years, Lynsie has been embedded in early and growth-stage tech companies across industries as a founder, advisor, and investor, driving go-to-market strategy, operations, sales, and partnerships with a focus on all things culture & customer.