At the Beginning, there were Startup Incubators
The Business Model : i give you free office space, you give me a share of your equity.
But soon enough, Startup realized it was not a good deal for them. Equity was worth way more than some (cool) office space.
In an effort to provide more value to the startup so as to justify the share of equity taken, the Startup Accelerators were born
Ok guys, now i give you free office space AND some mentoring with top entrepreneurs / experts / mentors / anything that gives you a hard on.
Quite a good deal for the startups in the best Accelerators. But then top entrepreneurs / experts / mentors realized : I give some many good advice, I give so many key introductions to the good people … and I only have a few percent of the company ?!
And then the Startup Studios were born.
With a very simple idea : I am a top entrepreneur, I have very good ideas, I have some money to get a team, let’s make some MVP’s and find a newbie entrepreneur when we have a good one so as to keep developing it. We keep a good amount of shares.
This is what is considered state of the art today in the startup world.
What best entrepreneurs would do. What you can do when you have previous (hopefully successful) experience and a bit of money. When you decide to “give back to the community that gave me so much” by gifting the world (of entrepreneurs) with your incredible wisdom. Okay.
I think this is still a shitty deal.
First of all, you still get only 20-30% of the cap table because “you have to motivate the entrepreneurs that will scale the project”.
This is why it needs to be a moonshot business.
Then you need to raise funds. A lot.
But VCs do not like you : “why so many share to this guy who just initiated the idea ?”
Okay, so you have to give up equity. A lot.
The you get as much equity as you had in the Startup Accelerator business, but you spent much more time, energy, and money to initiate the business. And quite a lot of projects you launched failed even before having to raise any funds.
Great business !
The new (and hopefully final) evolution is Business Factories
The underlying idea of the Startup Studios was the right one : entrepreneurship is about repetition, learning curve, and good market timing. So the more projects you launch, the better you should be (let’s not talk about focus here, I’ll tackle that point in another post). But execution was bad.
A Business Factory is a business of creating businesses. Not by starting from an idea and finding entrepreneurs to develop it. By starting from an idea, building the business, hiring managers, and getting some positive cash flows from it to fund the next ones. This is a factory. We serialize, we reproduce some process, we get good machinery and good engineers to run it. You thought only entrepreneurs could startup up a business ? You were wrong, an entrepreneur with experience can build a factory to reproduce the process of starting up.
This is the real evolution.
Ps : you may have notice that I am talking about Business Factories and not Startup Factories. We will get to that later, but keep it in mind.
