[HN Gopher] Startup Studios
___________________________________________________________________
Startup Studios
Author : vitabenes
Score : 114 points
Date : 2021-01-06 10:09 UTC (12 hours ago)
(HTM) web link (latecheckout.substack.com)
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| [deleted]
| nickelcitymario wrote:
| When I think of "studio", I think of a movie studio. Each product
| would be the equivalent of a film.
|
| The studio brings together the necessary talent and sets them
| loose on a well-defined project (with a deadline, a scope, and a
| budget).
|
| The best studios, under this model, know that the most important
| thing for their success is finding the right top talent. (In
| films, that would be your writer, director, and starring cast. In
| tech, the typical hacker+designer+marketer trio of project leads
| would probably be the closest equivalent.)
|
| When viewed in this light, I think the studio approach makes an
| awful lot of sense. It's similar to VCs and incubators, yet
| different in a crucial way.
|
| A studio looks primarily for talent, and trusts that when they
| have the right people, the right ideas and execution will follow.
|
| The VC model, as best as I can tell as a distant observer, is
| focused first on identifying the winning ideas, and then securing
| the right team as a secondary item.
|
| Both approaches care about both the idea and the talent. It's an
| order of priority thing. Are you banking on your ability to spot
| winning ideas or winning talent? Studios spot talent and then
| evaluate ideas. VCs spot ideas and then evaluate the talent.
| amadeuspagel wrote:
| That's a good argument. I find it striking for example how much
| better youtube music looks compared to spotify, given that
| spotify started so much earlier. But google can afford to hire
| the best designers in the world.
| marcinzm wrote:
| >The VC model, as best as I can tell as a distant observer, is
| focused first on identifying the winning ideas, and then
| securing the right team as a secondary item.
|
| I see the exact opposite.
|
| I keep hearing that (early stage) VCs care about the team a lot
| more than the idea. The idea is necessary as a way of knowing
| that the team can come up with a concrete idea but not more
| than that. Later stage VCs focus on other things but those
| aren't close to a film studio.
| nickelcitymario wrote:
| But do you know of any examples of VCs investing in a team
| before knowing what the product will be? Maybe those examples
| exist and I'm ignorant of them.
|
| By contrast, movie studios keep lots of people on staff or on
| rotating contracts, often with no idea of what the film will
| be. They hire people on the assumption that those people will
| figure out the idea.
| taylorwc wrote:
| Early stage (preseed and seed) investor here. I think the
| easier way to conceive of this is that if I have conviction
| around the team but not necessarily the product, I will
| likely invest. The inverse is almost never true for me.
|
| I have invested in founders where I thought their initial
| conception of the product wasn't likely to find PMF but I
| believed that the team had good instincts and the necessary
| skills to iterate to a different product.
| enos_feedler wrote:
| If you didn't believe the idea could find PMF why did you
| believe in the teams instincts?
| taylorwc wrote:
| Same reason an NBA team will draft someone who isn't
| ready be a starter averaging a double double. If I
| believe the team is elite and that the potential is
| there, there's potential for such an asymmetric outcome
| that it's a worthwhile bet.
| enos_feedler wrote:
| I don't know the NBA that well but in NHL you would draft
| someone with high stats in the minor leagues, knowing
| they will develop (physically and mentally) into someone
| who can achieve the same stats at a higher level. The
| game is the same but the parameters are larger. It takes
| time to work out at the gym, make quicker decisions,
| cleanup some weakness. There are many other factors like
| how their strengths will play into the teams structure,
| etc.
|
| Is this the model you would apply? What are the
| parameters that are key to founders beneath the idea
| itself?
| dia80 wrote:
| I think Color Labs was close. While I'm sure they shared a
| plan with VCs I remember a lot or surprise that they had
| raised so much cash pre-launch.
|
| https://en.wikipedia.org/wiki/Color_Labs
| Jommi wrote:
| Yes this is exactly what early stage and seed investors are
| doing. They know the idea will still live, but they trust
| the team to figure out what to do.
|
| I know several people on both sides of this equation.
| simonebrunozzi wrote:
| The topic of "startup studio" is really interesting for me, and
| I've been thinking about it for a few years now.
|
| The biggest unknown for me is having enough data to understand
| what's really going on there. Are startup studios successful? If
| so, how much? How much funding is going there? etc.
|
| Finding that data is way harder than finding data about either
| startups or VCs.
| lazyjeff wrote:
| Aren't university research labs a type of a studio?
|
| 1) Generates and tests ideas but within the scope of the
| professor's expertise and vision (what the article calls the
| "focus"). An automatic moat if the idea is something the research
| lab has been working on for years and knows all the research on
| it.
|
| 2) Despite the challenges of grant funding, university research
| labs generally fail from lack of funding at a low rate over 20
| years. Especially compared to the runway of a typical angel/VC
| funded startup.
|
| 3) Has the ability to commercialize at the right time and
| immediate access to an amazing employee pool (like Qualcomm,
| Google, Tableau, Duolingo, VMWare, Coursera), trading off some of
| the financial upside for reputation.
|
| Of course, many research labs opt to run like paper publishing
| factories instead, but it's up to the professor.
| [deleted]
| JumpCrisscross wrote:
| Wouldn't Fairchild Semiconductor and Xerox PARC be early examples
| of studios?
|
| Aside from enforcing draconian non-compete, non-solicit and IP
| ownership rules, I don't see why that pattern wouldn't reassert
| itself. Great teams budding off when they find a rhythm.
| Outsiders picking off your best using the increased compensation
| focussed attention can afford.
|
| Are there examples of unambiguously successful studio-launched
| start-ups?
| jefftk wrote:
| It's a minor one, but CogoLabs (former employer) operates as a
| studio, and spun off AutoTegrity which sold for ~$100M.
|
| On the other hand, Cogo hasn't had any exits since 2011:
| https://www.cogolabs.com/incubation
| paulbjensen wrote:
| Pusher is an early example of this model. It came out of a hack
| day at a Ruby on Rails consultancy called New Bamboo, got spun
| out into its own business, raised VC, and then sold to
| MessageBird.
|
| New Bamboo got acquired by ThoughtBot some years ago.
| klangdon wrote:
| Great article. I have personally have been working this way for
| years. The author mentions that this has been successful in the
| last decade, but I think the best example of this approach is
| much older with Edison and General Electric.
| inferense wrote:
| Having the firsthand experience with a studio, I have to
| disagree. While the idea of a studio producing ton of ideas and
| scaling teams sounds promising it hinges upon hidden variables
| which are intrinsic to the studio model and are often detrimental
| in the long run.
|
| Most of the successful startups are based on a pure, authentic
| vision of a founder who is absolutely convinced about their
| vision for the future. Unfortunately, this element doesn't exist
| in a studio environment, and the artificial placement of a "CEO"
| won't do this magic especially in the early stages. More often
| than not, this is an essential organic process because all of the
| other subcomponents such as product, hiring, culture etc. are
| determined by the CEO who is motivated by something other than
| metrics.
|
| Secondly, if a studio plans to work on something more complex
| than a tiktok for dogs kind of app, a certain level of domain
| expertise needs to be present. This goes back to the founder-CEO
| problem where the founding team has already established some
| curiosity and knowledge in the domain.
|
| Nonetheless, the article misses to pinpoint some very imperative
| limitations of the studio concept, I have outlined just few from
| my own experience.
| tylermauthe wrote:
| I think you've hit the nail on the head with the founder vision
| and passion being a key element which cannot be developed in a
| shop.
|
| Perhaps, rather than a studio, this is why we see incubators
| like YC; helping a ton of startups grow and finding funding for
| the best ideas.
|
| Maybe we will see a movement further down the chain: finding
| entrepreneurs or "proto-founders" - founders before they become
| founders - and coaching them on idea generation and developing
| their passions. I suppose an example of this was Thiel's
| scholarships and the various "founder schools" that we see.
|
| Innovation is hard to teach, but it's not impossible. Perhaps
| these trends will continue, and I wonder what we will call the
| organization format that this leads to.
|
| edit: formatting
| naravara wrote:
| > Most of the successful startups are based on a pure,
| authentic vision of a founder who is absolutely convinced about
| their vision for the future.
|
| Is this that different from how film studios work? Many
| successful films are based on a pure, authentic vision of an
| auteur after all?
|
| I also don't know if your assertion is necessarily true either.
| I've been at a modestly successful startup and I have to say
| most of our early successes came from all the people around our
| Founder who pushed back against, and checked his more impetuous
| and self-destructive tendencies. I think the Founder story is,
| as often as not, an act of self-aggrandizing myth-making. In my
| company's case, our Founder's best skill was having a nose for
| talent, but his notions of how to build good software were
| wildly off-base.
|
| It is akin to the "Great Man" theory of history or even the
| auteurship theory around filmmaking that erases all the
| surrounding actors and the interplay of forces that drive the
| eventual outcome.
| rtx wrote:
| They might be able to beat lifestyle startups.
| kahuna_splicer wrote:
| I'd have to agree with this. It's difficult to imagine an Apple
| or Google coming out of a lab.
|
| At the end of the day, the vision needs to be held by one or
| two people who are capable of building a powerful product.
| meddlepal wrote:
| Define successful in your second paragraph? Are you only
| considering traditional VC unicorn-type startups successful or
| something else?
| inferense wrote:
| Good question, I believe this would fit any innovative /
| product driven startup in general as opposed to a startup
| replicating an existing service / product (i.e web agency)
|
| Read this a while ago, before I observed the dichotomy
| myself. [1](https://a16z.com/2010/04/28/why-we-prefer-
| founding-ceos/)
| wslh wrote:
| > Most of the successful startups are based on a pure,
| authentic vision of a founder who is absolutely convinced about
| their vision for the future.
|
| This is true for the unicorn startup type: you don't create a
| Google, Facebook or Microsoft with a startup studio but there
| are many opportunities in other startup types. I would add the
| deep tech[1] concept that complements some of the weakness of
| the general startup studio.
|
| [1] https://en.wikipedia.org/wiki/Deep_tech
| CaptArmchair wrote:
| The article describes something akin to what a "spin-off" is.
|
| Reading the article, the author seems to assume that you already
| are in a capacity to set up your own studio. Either by having an
| existing business or being able to acquire an existing business
| and redirecting revenue streams, or by raising external capital
| (VC).
|
| But those aren't the only ways to acquire the funds to set up a
| "studio" that separates the operational aspect of product
| development from the financial rigours that come with founding a
| business.
|
| Such "studio's" can be found in research environments (academic,
| military, pharmaceutical, telecommunications, technology,...)
| Bell Labs, Fairchild, Intel,... come to mind as examples that
| started out as studio's before spinning off as independent
| businesses. Other examples would be public funding e.g. via
| programs managed by departments such as DARPA, NASA, SBIR
| (https://www.sbir.gov/), or via licensing, procurement, research
| grants and so on.
|
| Those examples are far from inclusive. The author already asserts
| that the idea isn't new either.
|
| The bigger problem I have with the article is that it's unclear
| who it's intended audience is. I don't think it's founders since
| the very essence of bootstrapping assumes spinning up a new
| business as fast as possible.
|
| Investors then? The author claims how studio's "de-risk" by being
| able to diversify and rapidly pivot between ideas compared to
| independent start-ups. For instance:
|
| > Because studios become experts at rapidly generating and
| testing ideas, the cost of each attempt is much less than it
| would be for a normal startup.
|
| The author doesn't back up this claim. And what about other risks
| which are innate to studio's? Setting up a studio is still a
| sizeable investment in time and resources. And creating spin-off
| companies is never a goal in itself, it's only something that
| happens if there's a clear strategic advantage or incentive in
| doing so, depending on the relationship between the different
| stakeholders.
| amadeuspagel wrote:
| Startups are different from things like movies and games where
| the studio model has been successful:
|
| - You only want to watch a movie or play through a game once.
| Even if you watch a movie several times, you'd prefer watching
| another movie that's just as good. As for multiplayer games, I
| actually wonder whether startups focused on one game will become
| more successful, though see the next point.
|
| - A movie or game competes with every other movie or game, which
| requires a huge upfront investment.
|
| - A startup can expand to cover entire categories. I find it hard
| to understand how a studio focused on creating communities makes
| more sense then something like reddit, which lets users create
| their own communities.
| motohagiography wrote:
| Every enterprise customer basically tries to turn you into their
| own studio, so it's always been kind of an anti-pattern to me.
|
| There is a class of business that has capital to be a customer
| for this, but it's pretty rare. I'm thinking a small/medium
| business that has generated reliable cash flow for a decade+ that
| gets inherited by a family member without expertise, so they go
| to market for a growth strategy. Tool and die makers, auto parts,
| law firms, residential real estate development, etc.
|
| It reminds me of "interactive agencies," "creative design firms,"
| and other hybrid marketing+dev services shops we have today.
| sokoloff wrote:
| On the sources of funding, #3 (Acquire a Profitable Business)
| seems like an outlier. 1 and 2 are plausibly related to the
| studio business. #3 is just an alternate source of funds,
| presumably unrelated to the studio, and if that were so easy to
| acquire profitable businesses and run them so hands-off that you
| can focus on the studio business, why not just keep acquiring
| profitable companies and skip the whole studio as it's an
| unnecessary extra step? Maybe we should all just go do that.
| duxup wrote:
| I'm certainly not well versed in startups or studios but this all
| sounds like terminology wordplay and deck chair moving.
|
| Isn't this just describing an R&D type department inside
| something larger?
|
| When we get to "How do you fund a studio?". Things start to
| sounds bit 'job canon' or 'be radio head' like.
|
| Acquire another business and Run a service business sound just
| like ... doing what you're trying to do anyway, run a business...
| and just getting to the point of just doing that seems like a
| hell of a lot to 'just do', let alone now start up this studio on
| top of all that.
|
| As for VC money, aren't we talking about a startup again?
| indymike wrote:
| I'm probably going to do a studio after I drive my current
| startup to an exit. I don't think it is a better business model:
| I just think it will make the next 5-10 years interesting. That
| said, here's the two sides of the studio story:
|
| Cup half-full: our studio reduces risk by providing shared
| services, resources and expertise to our startups. Our studio
| makes our startups stronger. We're able to leverage the investor
| and business relationships we have to accelerate our studio
| companies. We've seen situation X before and are perfectly
| equipped to guide our startups through it.
|
| Cup half-empty: Risk is being aggregated into the studio. The
| weaker studio companies are consuming resources that would best
| be used to fuel the successful studio companies. On top of that,
| distractions and non-essential requirements are being injected by
| the studio. On top of that, if big investor gets pissed with
| someone at the studio, future funding is in doubt for all.
|
| Reality: Both views are true and accurate and at times, the
| positives are in play, and in other times, the negatives.
| mkl95 wrote:
| My experience at a startup that tried this approach is that
| engineers got frustrated and quit (yes that includes me). I don't
| think a "project of the month" mindset is healthy even in the
| short term. People are not built to handle massive amounts of
| stress and failure constantly, our brains can only take it once
| in a while.
|
| I can only see this approach working at places that have raised a
| lot of capital that allows them to outsource these projects.
| Consultants will get paid with your investors money, deliver the
| codebase, and you get to blame them in the next board meeting
| after you fail to attract a single customer.
| tomhoward wrote:
| This is interesting to read, as it's pertinent to where I'm at
| and what I'm contemplating for the next stage of my career.
|
| I had a promising start with a consumer travel startup about 10
| years ago, but stepped back from that about 6 years ago as it
| wasn't taking off and I was experiencing severe burnout.
|
| I've since worked on projects in ag-tech, travel, medical
| services and commercial real-estate.. All of them are showing
| some viability and could become very successful if properly
| funded/staffed. I've also identified some new opportunities that
| I'm keen to explore, particularly relating to health and personal
| growth, after my own journey to overcome burnout. And, I still
| haven't fully scratched the itch of the original travel startup.
|
| I'm uncomfortable with the idea of committing exclusively to any
| one of these concepts, as several of them are compelling, both as
| commercial opportunities and the potential to havre a positive
| impact for the people they serve. I'm also now a father and
| mortgager, so I'm not in a position to bet everything on a single
| idea the way I was 5+ years ago.
|
| Whilst the industries/markets I listed might seem very disparate,
| I'm confident there are common aspects of the way these companies
| could be built and run, that could mean it could be beneficial to
| build several of them out of the one studio.
|
| I've been turning the idea over in my head for a while, with part
| of me feeling like it makes sense and could work really well, but
| the other part of me thinking "nobody has made this work before,
| everyone will say you're unfocused and noncommittal..."
|
| So, it's just nice to see others thinking along similar lines.
|
| If anyone can point to any examples of this kind of thing working
| really well, I'd love you to share them.
| klangdon wrote:
| I have been doing this for years. Currently doing it with
| Sperry Labs (https://www.sperrylabs.com). I have found that
| when an idea takes off into a successful product, the entire
| studio ends up going that direction until exit, then you just
| start over with a new studio. But I have seen successful exits
| with Brightcove, oobgolf, and AirCare Labs. And successful
| products with Dynasign, ServiceCapture, Callbot, and Play
| Impossible Gameball.
| jl2718 wrote:
| What's the right legal equity agreement for studio founders?
|
| I had a bunch of hacker houses that I wanted to turn into a
| studio model, but I couldn't figure out how to assert equity
| rights. The normal path for successful founders was for them to
| come to the house, experiment, meet co-founders, move out, ...
| funding. Any equity agreement made at the outset (SAFE) would be
| worthless. New project. New people. Or maybe they could be
| enforced, but not easily, not like Erlich. Those were the
| successes. Most would just get discouraged and start full time
| job hunting. So I couldn't find a way to make it sustainable even
| when home runs graduated out of it.
| _0o6v wrote:
| Apart from the obvious bias having been written by a co-founder
| of a product studio, there are plenty of examples of product
| studios not working out. It's also a hugely saturated market now.
| Success stories (e.g. UsTwo) are very rare.
| ghaff wrote:
| My other thought is that, while it's not _quite_ the same
| thing, if you look at modern movie studios, it starts to look a
| lot more like VCs than anything else. They hear pitches, they
| help develop promising ideas, fund pilots in the case of
| series, and green light a relative handful. So product studios
| seem more a variant on VCs than anything else.
| NotPavlovsDog wrote:
| Nobody wakes up at night dreaming of making somebody else rich.
|
| There is a place for studios, but there's also a reason many
| founders want majority control. Instead of "I have a vision, let
| the market see if it's viable", it turns into "take it to the
| committee, and the committee is steered by the studio CEO and
| then by the investors and whoever else".
|
| Zuckerberg: "If I didn't have complete control of Facebook, I
| would have been fired"
|
| Say whatever you want about Zuck, but you don't want to get fired
| from your own idea. Let it burn with you. A studio will probably
| not enable that.
| ChefboyOG wrote:
| Big time anecdata incoming:
|
| I've been around a relatively large number of studios (more
| specifically, people who have founded studios), and from my
| experience, this post doesn't match up to reality.
|
| From what I've seen, there are categories (often deep technical,
| bordering on academic niches) where studio-ish approaches work--
| which is why research labs and similar models have existed for a
| long time. The studio model, however, doesn't seem to confer any
| automatic benefit to businesses in general. Most studios I've
| seen have been full of sort of "meh" SaaS's and zombie startups.
|
| At the same time, I've seen friends have a lot of fun running a
| studio, even if it didn't lead to a slew of giant exits. One man
| I worked with had successfully exited his business after 15 for a
| very large sum, spent a long stretch doing angel investing and
| some advising, and realized he just loved the early stage
| environment and helping out founders, even if he didn't want to
| personally build another startup. The studio he founded, which
| has been mildly successful but not at the level that someone in
| VC might aim for, has brought him an immense amount of joy and
| continues to, and the community that has emerged from it is full
| of some really amazing people.
|
| So, yeah, I don't believe we're entering a golden age of studios
| in which products developed within them will dominate every niche
| --with the exception of niches where studio-like models have
| always dominated--but I do think studios can still be fantastic
| in a social/personal sense even if they aren't producing
| Google's.
| moralestapia wrote:
| >[...] has brought him an immense amount of joy and continues
| to, and the community that has emerged from it is full of some
| really amazing people.
|
| This is pretty much why I am pursuing the creation of something
| like this in my hometown.
| hashmal wrote:
| 15 months or years?
| fairity wrote:
| Years, of course :).
| claudiulodro wrote:
| Rather than a studio, I think the "future" of startups is giant
| conglomerates with many products, and we've seen this trend
| already happening. Compared to studios, they have more capital
| and can take better advantage of economies of scale.
|
| It's not really a motivational thought, though.
| enos_feedler wrote:
| How to fund a studio (or any high risk startup for that matter)
| is an interesting question. I've been thinking about alternatives
| to VC/angel funding or taking on consulting projects as mentioned
| in the article. The issue with consulting work is it takes away
| the one precious resource you need to grow your high risk thing:
| time.
|
| I am thinking about funding my own startup using a model where I
| lend my startup personal capital with no interest and the startup
| uses that as an investment/trading vehicle to earn income and
| trading profits. My theory is that if a person is a capable
| visionary founder (sees the future, understands consumer trends,
| whats missing, etc) and has a solid plan for how to enter the
| market with a new product in the next 6-12 months, they probably
| understand the product tech market in that time frame as well.
| The "thinking time" could be shared between investing and
| building product. The actual work time goes completely to the
| startup, since buying and selling securities just takes clicks.
| this could fund a payroll for a founder for years while they
| build, without having to give time to an employer or consulting
| client. Of course, this requires lots of upfront capital
| (~100k-1M). But you could give that capital back in 2-3 years.
| the startup just borrows it.
|
| A scaled up version of this model could be an endowment fund at a
| university. However this is a much more aggressive and smaller
| version of that.
|
| Curious what people think of this before I dive in :)
| marcinzm wrote:
| As I see it most startups already do this via pivots. They don't
| go all in on an idea, they test ideas and then adjust ideas based
| on feedback. When something starts to stick enough then they go
| all in. Early funding is often about the team rather than the
| idea as I understand it.
| lawrenceg wrote:
| I've been running a studio-style business for about 10 years in
| Toronto. Funding it from services and working on product on the
| side is absolutely brutal, as I'm sure many of you already know.
|
| It doesn't really allow you to fully concentrate on your product
| and put the 110% effort required into quickly iterating on
| product/market fit.
|
| Eventually what most of the time ends up happening is dropping
| the ball on the client work and failing to launch a successful
| product.
|
| I'm now a bit more pragmatic about this whole thing and I'm
| helping clients deliver on their vision of a product by providing
| solid dev work and tips/consulting from my start-up experience.
| fergie wrote:
| The number one biggest risk to a product startup is that it turns
| into a consultancy/Studio since every half-decent software
| engineer, designer or project manager can be _fairly_ easily
| rented out for ~$300K a year. Therefore a relatively insecure
| startup can be turned into a pretty secure studio simply by
| hiring out expertise to external customers rather than building
| stuff themselves.
|
| Pretty much the first thing you learn as a startup looking for
| funding is too keep quiet about any consultancy that your company
| does.
| balfirevic wrote:
| > since every half-decent software engineer, designer or
| project manager can be _fairly_ easily rented out for ~$300K a
| year.
|
| Did you omit "provided they live in silicon valley"?
| Mauricebranagh wrote:
| 20 Years ago when I worked for BT the external day rate for a
| journeyman consultant engineer (MPG2) in the UK was PS670 and
| we where 25% cheaper than many others approx. PS900 for
| someone from the Big4
| ghaff wrote:
| Yes, but that's not how much the engineer took home. The
| reality is that $300K/year is still a very good salary for
| most software engineers in the US today.
| balfirevic wrote:
| fergie did talk about external rate, not what the
| engineer takes home. On the other hand, it wasn't in the
| context of big-name consultancy but that of a little-know
| small studio.
| ghaff wrote:
| Ah. OK. Though even for a small outfit I'd expect a
| fairly good uplift over what the engineer is taking home,
| especially if the engineer is earning a salary rather
| than just getting paid hourly when they're working.
| [deleted]
| SuoDuanDao wrote:
| I thought they meant on the supply side - I imagine most
| half-decent software engineers would leave a startup for 300K
| a year almost anywhere
| marcinzm wrote:
| Yet plenty of engineers leave FAANG for startups.
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