How First-Time Founders Benefit from Venture Studios

How First-Time Founders Benefit from Venture Studios

Let’s cut to the chase. Entrepreneurship is exciting, but it’s also a risky business. Regardless of enthusiasm, product-market fit and funding, only about one in ten startups make it. The other nine fail. The top five reasons startups fail are:

  • No market need: 42%
  • Ran out of cash: 29%
  • Wrong team: 23%
  • Better competitors: 19%
  • Pricing/cost issues: 18%

So what is the difference between success and failure? A major component of success in entrepreneurship is experience. Data shows that founders with a track record of success are more likely to succeed than first-time founders. In addition to the difficulties of driving a new idea, product, or service to acceptance by customers, there are a myriad of challenges to building the business itself, from operations and staffing to sales, marketing and finance. For most first-time entrepreneurs, starting a company to commercialize their innovation is a step into the great unknown.

Now, however, there is a new model that improves the probability of success for first-time founders that includes experienced guides and resources. That model is a venture studio.

Eric Beier, MD, MBA, Boomerang Venture Studio

Who are these entrepreneurial first-time founders?

First-time company founders can come from virtually any walk of life. He or she may be a physician with an invention that solves a problem observed in his/her medical practice. University professors often become first-time founders when their research leads to a technology they believe has commercial potential. University students are first-time founders as well. In fact, my partner in Boomerang Ventures, Tony Petrucciani, founded his first company while a student at Ball State University. Literally anyone, at any stage of life, may seek to become a first-time founder of a new business based on what they believe is a great idea that will lead to a great business. 

As noted above, the vast majority of these businesses won’t succeed, and a considerable number of inventions and innovations end up collecting dust on a shelf or become a lifetime hobby since the inventor is unable to overcome the hurdles for launching a company. Some of the most common hurdles  include:

  • Time constraints due to a full-time job
  • Lack of money and resources to start a business
  • Lack of business experience
  • Lack of necessary teammates
  • Aversion to risk taking

Venture studios are the new path forward

Given the multitude of ways to failure, what should a first-time founder do to avoid the land mines that blow up  many new businesses? My recommendation is this: enlist the expertise and resources of a venture studio. Instead of going it alone and hoping for the best, a venture studio that will serve as your guide in helping you navigate all of the pitfalls and problems that can sabotage your business. A venture studio also helps with resources and connections you need to build and scale a thriving company. The right venture studio will help you work smarter, faster, and better and improves the odds of your advancing to the elite group of startups with a successful exit. 

Just what is a venture studio?  A venture studio can also be referred to as startup factory in which startups are “manufactured” by taking vetted inputs (ideas, talent, network, infrastructure, etc.), putting them through a sophisticated and standardized system of processes, and then generating better and larger exits than otherwise expected. A venture studio’s sole purpose is to create startup companies efficiently, systematically and for the greatest monetary upside. In return for services, talent, capital, and other resources, the studio becomes a co-founder of the startup and takes a chunk of equity. Thus, the studio model for the first-time founder follows the idea that “it’s far better to own a smaller piece of a big pie, than a big piece of a small or nonexistent pie.”

There’s proof of the effectiveness of the venture studio model. According to research by the Global Startup Studio Network, exit rates of studio-born companies range from 30 to 50 percent (an exit being defined as a corporate acquisition of the studio company or an initial public offering of stock). Compare that to the one in ten overall success rate of startups. While a studio doesn’t guarantee success, it does significantly improve the odds. Currently, there are more than 200 venture studios worldwide, and the venture studio model is gaining traction among venture capital and other early stage investors due to the higher success rate of portfolio companies that venture studios have demonstrated. 

Boomerang Venture Studio and first-time founders

Boomerang Venture Studio focuses on building successful healthcare companies in digital health, orthopedics, medical device, and life science tools.  Our model builds successful healthcare companies through five stages:

  • Ideation: understand the target customer and optimize value drivers and product market fit
  • De-Risking: identify and manage/mitigate key risks
  • Product Development: build product prototypes and manage technology, regulatory, reimbursement, clinical, and manufacturing hurdles
  • Go-to-Market: create the go-to-market strategy and build and finance the sales team
  • Scaling and Exit: rapidly grow the business, and identify and manage relationships with potential acquirers of the company

In the Boomerang Venture Studio model, the first-time founder focuses on what he/she does best, which typically involves furthering the development of the technology and/or clinical work. The Studio designs and builds the company with the ultimate goal of taking it to an exit. The Studio also takes the responsibility of developing and executing funding milestones and brings in new investors as needed through our extensive investor network.

The net benefits are these: first-time founders do not have to do all the work, risk-taking and funding development necessary to build a successful business and as a result have a higher probability of success.

Are you a first time founder in the healthcare or life sciences space and would like to explore how Boomerang Venture Studio can help you bring your idea to life? Let’s connect and explore the possibilities by contacting Martin Long, managing director of Boomerang Venture Studio at [email protected] or 317-556.4120. Find more information on our website.