Why Startup Studios Are A Great Choice For Emerging SaaS Companies?
Published on September 27th, 2023
8 min read
Published on September 27th, 2023
8 min read
With the rapidly changing SaaS industry and growing new businesses, success isn’t going to happen overnight. It is usually a long, tedious process of repetitive tasks with a touch of innovation now and then to keep up with the altering industry scenarios. As for the SaaS businesses, although the annual growth rate (even during the post-covid era) is projected to surpass 17% this year, the reality for the majority of the SaaS startups is entirely different. In fact, according to a report by Investopedia, “about 21% of startups end up in the startup graveyard in the first year.“, which is quite heart-breaking.
However, this worldwide pause has not significantly impacted the one thing that the investors are still showering capital on these startups like there’s no tomorrow. This can be owed to these startups’ exponential growth in recent years. New funding platforms are emerging that connect entrepreneurs with the right investor, investors who will provide resources, capital, and other intangible inputs that minimize the risk, expedite efficiency and help startups to move forward.
The most common obstacles startups have to overcome to see sustainable growth are:
Getting bogged in the details: Some startups fail before they even get a chance to launch due to operations, finances, partners, strategies, and many other factors. This often leads to your competitors entering and taking over the market while you are still deciding on which foot to put forth.
Waiting too long: Launching your startup at the time is an essential element that defines a startup’s success. Many startups often fail to find their footing because they have trapped their business into a pre-defined timeframe and aren’t willing to budge.
Operational challenges: From managing overhead to mitigating cyber risk, operational challenges can unnecessarily strain resources, time, and energy.
Working with the wrong team: Teams are the building blocks of a start. In fact, according to CB Insights, having the wrong team is the third major cause of startup failure.
Lack of funding: Raising funds is another challenge that entrepreneurs face and even if they do, maintaining the growth trajectory before their capital is exhausted is arduous. This is where using the correct avenues to drive capital can help.
Companies are bringing in trained and experienced members to help young entrepreneurs learn the ropes and build a new business from the ground up. These businesses that lend a helping hand are called startup studios. A newly emerging investment platform for startups, the startup studio business model is an organization that not only comes up with disruptive ideas and products but also oversees startups right from the onset of investment. They guide the entrepreneurs up until the product launch and beyond that.
Startup studios are usually organizations that take a hands-on approach and hire external or internal entrepreneurs to direct the course of a particular startup. They then come in and provide the startup with top-level mentorship. Startup studios help reduce the risk and add significant value with their operational expertise.
Some notable studios are
Startup studios are gaining worldwide popularity. Here’s a list of some international startup studios:
According to the Global Accelerator Network, on average, for initial capital of about $230K capital, startups give equity of about >30% to the studio. However, these figures vary depending on the type of support provided, experience and value from the incoming founder, etc.
For most startups, just passion, hard work, and capital abundance will not work. While suitable early-stage investment can make or break the success of many startups, a vast majority still fail even with lots of cash reserves. Some startups need organizational knowledge or studio knowledge, and for them, it’s far more valuable than capital. That’s where startup studios come in. Here’s a list of 7 ways startup studios help SaaS companies:
Startups in their initial phase often find it challenging to get the right people. If it’s before the first funding round, it’s next to impossible to reach people with the skill set your business needs onboard. This is where startup studios can help, as they don’t just provide the capital to run a business but also the team they require to build and grow.
One of the main reasons SaaS startups look out for a third party to come in and help is the financial resource. There are a bunch of big names who opened their venture studios to partner with startups like P&G – opened venture studios to partner with startups that sell packaged goods.
Getting access to the right people is crucial, especially in the SaaS industry. Access to corporate partners and government agencies can help boost the growth of your venture. Venture studios provide specialized knowledge and connect startups with the right people to get the correct answers quickly.
Startup studios are often equipped with industry professionals (internal and external entrepreneurs). Their team is usually made of professionals with years of entrepreneurial experience and specialists in product risk management and due diligence. They can jot down and help businesses implement the most relevant best practices.
Startup studios help steer the new startup toward a good trajectory, and that too from the very beginning. There might be trial and error in some aspects of your business, but since startups are in good hands, staying calm is easier. Startup studios have a set of processes that worked for companies similar to yours in the past. It can work for you as well.
Founders at venture studios tend to have a more practical and calculated approach to understanding and directing a business. They bet on successful ideas – whether it’s the numbers in the initial years, the efforts their team puts in, or their uniqueness and demand in the market. If a business idea doesn’t pass specific necessary validations, they reinvent or pivot it, if possible.
One of the problems that startups usually face is coming to a decision – especially when the people involved are from different backgrounds or lack the requisite experience to make prompt decisions. However, venture studios make the most of the skills and expertise of each team member. They eliminate individual biases and base their decisions on objective data.
Venture studios offer a good chance for startups to succeed and make it big in the highly competitive SaaS industry. They are a nurturing hub for new startups and a better growth solution for the otherwise wannabe founders. They provide a more “controlled” environment for building, growing, and realizing their dream SaaS company.
Want to work with us or have an idea? If you’re a SaaS startup and want to work with us about Firstprinciples venture studio, feel free to contact our expert team asap.
Technical Content Strategist and Inbound Analyst at FirstPrinciples, Heba is a motivated self-starter with a knack for analyzing and solving tough business problems. When not working, you can find her either reading a book, painting landscapes or sketching places she yearns to visit one day.
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