Discovery — all the business before the real business
Let’s imagine you’re about to embark on a new entrepreneurial journey. You’ve earned your stripes. You have either founded a startup, were second in command or were the product manager running the show. Plus along the way, you’ve learned that you thrive in a partnership more than going solo.
As you plan your future steps, you’re looking for a way to create a method to the madness of maximising startup success and not wasting too much time on something that might not last. At the same time, you are a product-focused business person who wants to build something solid while simultaneously wishing to minimise your time-to-market.
Say you think exactly along these lines; When starting a software business we all go through the same steps of validation, creation and failure. These cycles take skill, grit and perseverance to go through. The ones that come out swinging, go through to the next round. Some love the journey, while others don’t make it.
One thing is for sure, this is a very important part of building a company- and also one that sets the stage for future success. Once you’ve come to this realisation, you think — ‘I have the drive, passion, grit and network to build a company BUT I’d love to have more camaraderie and skills around me so that I iterate quickly and maintain momentum.’
What do you do? You consider partnering up with a startup studio.
Startup studios provide capital, operational support, research and development — essentially everything needed to build a sustainable business that thrives across time and trends.
So let’s dive deep into the minds of the studio and discover what they do with their co-founders before they even start a business.
The Makings of a Good Founder
Generally speaking, there are three variations of company creation for studios: Studio-led, investor-led and founder-led. Builders believe in founder-led validation for one simple reason: the entrepreneur must be involved in the problem and solution validation so that they can overcome the rougher patches of the journey without losing the power of the vision that started it all.
To ensure we partner with founders who match our beliefs, we thoroughly research our verticals within the future of work and living to ultimately identify key trends. Of this, we think of what’s hot — not just now, but also in the future. We create compact opportunity reports, which we candidly call sparks, that are conversation-starters with potential founders. We pick the best business opportunities/sparks and circulate them in said network. Check out our current sparks here.
Alongside our research, we’re in continuous conversations with potential founders, which opens a conversation with one of the opportunities we’ve published or has an adjacent idea they want to discuss — a great way to start a relationship and ultimately a partnership.
What does a Future Founder’s profile look like? Here’s what we’re looking for:
- Second-time founders or seasoned product managers — In the world of SaaS startups, all founders regardless of technical expertise should be product-focused. The intrinsic instinct for a product idea helps keep your focus centred from day 1, especially because our venture-building is founder-led.
- Actively engaged network — The EU startup network is a tight-knit community. Depending on which vertical you join us to build on, most of your early conversations in the validation process come from within your network.
- Firsthand experience with the opportunity — One can’t successfully build a solution if you don’t know what it’s like to be in the shoes of your future customer. The problem should matter to you — which is why you want it solved and solved well.
Digging Deep into the Problem
To start off, the Founder leads the problem validation process in weekly cycles of four to six weeks — they make conversations with the market, creating a sense of ownership from day 1. Any founder would love to sprint through these stages quickly and efficiently — sure that works, but we’d rather be certain of the idea we want to drive home.
Here is the thing. We prep and identify trends and key opportunities; after that, the Founder takes the main stage to validate the idea with the studio team and convert it into a startup worth building.
The problem validation process is mutually beneficial — at the end of this period, the Studio and the Founder know they want to move forward. On the studio’s end, this also entails verifying if the founder fits the opportunity and the studio’s scope. On the Founder’s end, having gotten a taste of the work with the studio, they will know for sure that the problem is worth solving.
The Blood, Sweat and Tears of Solution Validation
During this period, we first do validation cycles where the founder conducts one-on-one conversations with people in their network. Envision 10 conversations per week for 4 to 8 weeks. Following those conversations, we sit down to carve out data-driven validation using experimental tools like interviews, landing pages, clickable prototypes etc. to figure out if the solution holds merit. Here is what we look for:
- Does the business opportunity lead to a solution that fixes a problem worth solving? We don’t want a product to fix ALL the problems, we need it to just fix one well.
- How big is this problem? We need to understand the scope of the problem. Is it highly localised? Or is it a larger problem that more and more people around the world are looking to solve?
- Are they getting solved already? You need to look at what’s already out there in the market right now, and what they’re doing. On the other hand, if you feel there is no one doing what you want to, is there a reason this opportunity has been avoided so far?
- Who cares if these problems are solved? Is the solution you have in mind one that will highly positively impact its target market? We prefer to create scalable solutions to be implemented across the entirety of an organisation, not just for personal usage.
When these questions have been answered, we move on to the next phase we call Shape. Having defined a clear problem and solution, we work towards making this idea come to life. We partner the founder with a CTO, shape the first version of the product and have the founder bring in 10 launching customers who are willing to solve their problem with an early-stage product.
While the Founder is working on shaping the solution, we as the studio also have things to do and think about parallel to their efforts. What do we as a studio do in the meanwhile?
- Verify the Founder-Opportunity fit — Our companies are built with a business and technical founder, and they need to match well. So we first profile the business founder and then match a technical founder accordingly.
- Find out and scope the viability of the solution — We consult with our internal product, development, finance, legal and marketing teams to do this.
- Ascertain if the solution will be business-critical software — We want to build a need-to-have, NOT a nice-to-have.
- See if it passes the venture scalable test — This means, does the solution look like it could be picked up by a VC for a future global expansion? We want to build scalable products that can level up as the venture grows.
We work in parallel with the Founder’s efforts, and after we have both done our part in shaping the solution, we move on to co-building the first version, creating a brand strategy, its corresponding growth framework, early access website, etc. to use for securing pre-launch customers.
The Pre-Incorporation Climax
Think of it like this. If validating the business opportunity was an interval training, the shaping is your half-marathon.
Build companies that survive and thrive — That’s what we want and do.
All the efforts culminate in an incorporation pitch that we present to each other to check if we can pass the stage gate at the end of 20 week-period of validating and shaping the venture.
All engines are on, do we lift off now?
By now, you get the gist of the process. We aim to get the most prominent unknowns off the board to be able to launch a company in the right space, with the right people, at the right time. This doesn’t mean we make perfect companies. It means that we’re making an effort to figure out what works in the early stages instead of steaming ahead toward a mission that can fail down the line.
Okay. So, all lights are green. What happens now? Well, there’s one more thing. Studios are notorious for their hard gates, a moment in time when we pull up the curtains and look at all the stuff we’ve created till that point. At this point, all efforts by the founder (and the studio team) lead to the Incorporation gate. Does all the work make sense? And if it does, does it fit our studio scope? Is the timing still on point? I often refer to it as a fund investment committee, only now we’re talking not only about funding, but also the incorporation of a company.
There are four possible outcomes at this point:
- The Studio gives the green light to go ahead with it, and we officially incorporate the venture with the studio, CEO and CTO.
- If the conclusion is it’s not the right time for this business opportunity — It’s not a ‘no’, but rather that the market needs some more time before it has developed to need this solution.
- We come to the conclusion that it’s a local solution — It could be a good opportunity, a great one even, but the timing to make it EU-wide at the very least is not right.
- And who knows, it is also likely that at the end of these 20 weeks (or sometime in the middle) the founder finds out that it’s not the right time for this venture to take off the ground.
On average, about 60% of studio-born companies survive (source) after securing external funding, as opposed to the 10% survival rate of independent startups. The main reason for this is the thorough validation process done before incorporation all whilst pivoting or killing things that don’t work. We don’t normally kill ideas that have made it this far. Considering that business opportunity validation is conducted in weekly cycles, we have plenty of time to stop, think and pivot if necessary. The idea is to convert the best possible idea into the best possible startup that can debut in the markets at best possible time. Once this stage is passed, we start the actual company-creation process.
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