Aug. 23, 2020

Venture Studio VS Accelerators - how to chose the right start for your startup? By Carey Ransom.

Carey Ransom, Founder and President at OC4 Venture Studio in this episode talks about the differences between venture studios, incubators and accelerators and explains how to choose the right program for your startup (hint: know your 3-month goal really well). We also discussed major downsides of venture studios to help you make a better decision.

OC4 Ventures: https://oc4v.com/ 

Carey's LinkedIn: https://www.linkedin.com/in/careyransom/

Office hours with Make it Studio: https://make-studios.typeform.com/to/bUvZoSwl - it's time to get some extra questions answered.


Transcript

He says, fun reason radio ad today's a guest speaker. We have Carrie ransom, founder, and president at home C, four venture studio. And Lisa will mainly talk about who should choose the venture studio who is it actually built for and how it operates. 

So, Carrie, unless you called by, you giving us some background on herself and on O. C. for venture studio. Sure. Constant. Thanks for having me really excited to be here a quick background on me. 

I grew up in a family business. That is really where I learned most of what I would characterize about business people, leadership, and a lot of my core values and I've spent most of my career. I chose not to rejoin that. 

It's been most of my career as a serial startup operator, an investor, and I've essentially had every imaginable job across every stage in a number of software companies. 

It's well, into double figures. And what I really done is is put together all of those learnings. 

A lot of mistakes, a lot of experiments, some success, and tried to package that up to make it much more easily accessible and scalable with a number of early stage companies through venture studio. 

And that's how we. 

Really put four together, so generally when I speak to people, ask them way easily, explain them, you know, what's my day job? And I work for venture city myself and when I asked them, you know, do are you familiar with the concept of venture studio? 

It's like ninety to ninety five percent of them used to respond. No. So, let's start with the description of all the venture studios. So I think it's a really interesting term, because it's sort of taken on its own life. 

And I think to some extent, you know, we may fraction the concept of venture studio over time into a number of of incarnation. So, I tend to think of them as a couple different today. 

So you have this class called startup studios that is maybe within venture studio as well and so I the way I tend to think about it is, 

you have one form that is idea centric, which is we have our own ideas. 

We really want to start and birth them from, within this studio where we have everything we feel like we need within the studio to really get this started. And that's that's what I would almost characterizes a more idea. 

Centric started studio. We really look at ourselves as more of a company building company, and we use the term venture studio, because that's at least somewhat known in the marketplace. 

So we look at what we do is, we really are in the business of helping to build companies. We actually look for. 

Founders, who are committed to trying to start and build a company and then we want to cofound or Co pilot with them with all of the resources that we have within our studio. 

And that includes capital that we're willing to invest, but also includes a whole team of people and capabilities. That were also willing to invest. 

And so we then get compensated through equity that we buy through either investment capital or through equity. That we earned through the sweat. 
And tears and time of our team, 
but we're investing into the company but it's a whole belief that where the business of helping to create companies, 

and therefore we are longterm equity owners alongside these founders that wanna go create the maximum value from this company that we can right yeah. 

Perfect description of the venture CDN thanks for making sure that you define those two different types of interviews one that creates ideas internally, which I don't quite understand. Does that that's weird. And those, they're good hours. 

I try to not be critical of the others. 

I mean, there are some that have births, but I I think some of those are probably an entrepreneur who maybe has multiple ideas at the same time. It doesn't want to commit to one. 

So it says, hey, I'll start the studio as a way. 

To really push a few forward and see which one maybe has the most likes. And then I'll get focus on that. I think that's been the reality for several of those very idea centric studios. 

But I, I'm a big believer in trying to add superpowers to the committed entrepreneur to greatly increase the likelihood of success. And I think what we're finding and you probably as well. 

Is there a certain entrepreneurs that that really resonates with? And there are certain that it doesn't and our view is, there are many different ways to make a company and build a company. 

We just believe this is a way that can really be predictably more successful. And so, for those who are open to that idea, those are the ones that we really look to partner with. Right? 

So, another question after I use you after I teach your venture studio and how it works. My next question. 

I mean, their next question is generally, how is it different from an incubator our accelerator so question is for founders from the founders ten point, who should go to a standard accelerator or an incubator versus who should go to the venture studio. 

Sure. Great question. And I think some of this is still to be determined. I've met plenty of founders who've been in an incubator and through an accelerator and still doesn't really have what they need. 

And that's not to be critical of those. I what I would say is it's really about. 

As early as you possibly can determining where your strengths are, where you're what I call area of genius is and looking at the best ways to supplement that. 

And the best ways to supplement you toward key outcomes. And so, and I think you and I would probably both agree that one of the key early outcomes that you're trying to get to is this idea of product market fit. 

And if you can use an incubator to help, you get there, that may be the way to do it. If an accelerator can help you get there, that may be the way to do it. 

In our case, 

we put just a lot more near term and long term resources into these companies on the goal to that outcome of early product market fit that 
we think we can do it more cost effectively and more capital efficient. 
Then many other means by which you could do it and really try to set the company up for the ideal growth trajectory that they want to go on, which could then be fueled with the next round of funding. 

And so I look at it is it says much a personality fit and values fit as well as what, what you really need to supplement you and your early team in that journey. 

Right. So, let's look at it from the eyes of the founder who is like, okay, I have made some sort of research on the market. I feel like there is some sort of problem. I maybe already have a couple of small paying customers. 

What should specifically be the decisive factor of going into an incubator versus going to venture studio, besides, you know, the gut feeling, or maybe I know someone interested y'all just go to him or her and talk to them. So, what's besides that? 

What should be the decisive factor you think? Sure. I mean, as I said, I, I think it is about is there alignment around the outcome? Right? 

If if I'm going to go to an incubator, what is it that I'm going to ultimately receive from them? And what is the outcome that I'm trying to achieve from there? 

Is it just that I'm trying to get a first version of a product developed and beyond that then I'm on my own. 

And if that's the case, then that may work if the event if the incubator can help me truly get to product market fit, then that may be a perfectly good fit. 

But, I would be very, I guess if I, if I were the founder, I would want to deeply understand what is the goal. What is the outcome that I should be expecting to achieve by being in here and within in our case. 

We're, we're really looking at. How do we help you get there. 

Or know, or can convince to get involved in the early stages where a lot is unproven, because we are people that love that journey of figuring it out. Right? Right. Perfect definition. Love it. 

And next question is about who, I mean, next question that I don't get as often, because it's just not very polite. But that people think about is what's the major downside of venture studio? 

Because the main venture studios take a huge chunk of the company like Sam, I've seen doing thirty percent. 

And just, it's, it's a lot, it's a lot to give out on this early stage. What do you think is the major downside of venture studio? 

So, I think one one of the potential downsize is that equity split if if that is really uncomfortable, we, we don't tend to take that significant of a of an equity position. 

We really will line up the amount of sweat equity that we expect based on how much work and how much resource we need to. Really put into supplement the founder or founding team. 

So, it's, 
it's based really on a, 
a more, 

I think practical approach, 

and if if we're really doing everything, 

then obviously we're going into ask for more, 

but we also will put capital into the business as well as traditional capital investor work. 

Right? So we will will invest in multiple ways but I think the one downside potentially is that if people are uncomfortable with it, the other I would say, which is the bigger downside. 

If you perceive it to be a downside is you're going to have true partners who want to have tremendous amount of involvement and influence in your business and the way I always describe the founders. 

I said, look, I'm not trying to run your business. I'm not trying to take control. I'm trying to create a really disciplined. 

Honest approach to decision making that means any one of us could be right we want to get to the best possible answer. 

And if you feel like, you have to go figure all this out yourself, you need to make every decision yourself. 

And that is what you really want to build as a company that's your choice but you absolutely should not be working with us as a venture studio because we want to be deeply involved. 

Because our belief is that you're going to get better outcomes through a well functioning deeply committed team and we want to help you understand that on the way to truly 

becoming the great leader of an organization that we believe by getting involved that you can become. 

And so I look at that as a self reflection self awareness, it could be viewed as a downside if that's not what you want, right? Yeah, that's actually true. 

And that's perfect description of venture to use, just like a Pre, big and Super active partner. And so it's a really good thing to review before you jump into that thing. You need to understand that. 

And there will be a lot of actual have a input from the Ventures to your point. So, let's talk about your sourcing. How do you find those companies that you want to help out? 

But you find those early stage entrepreneurs are a good fit for yourself. 

Sure, so we, we are very active in every possible way where early stage founders are around hanging out. 

So, whether that is events, when there used to be in person events, if, if you can think back to those days, we, we actively are working with others in the ecosystem. 

Whether that is attorneys or other folks. That would work with early stage startups. 

We we talked to a lot of venture firms that were partnered with to say, hey, you maybe seeing things that have something missing or that are too early for you. Maybe we can get involved to help get it to 
a place where then you'd have interest.
So, we, we really work across ecosystem. I've been in the startup world for well, over twenty years. So I have a lot of relationships, and I'm fairly well networked into the startup community. 

And so a lot of people send us founders just, you know, we, we spend a lot of time and, as we say to them, hey, even if we're not a great fit, we're gonna at least share some thoughts. And we'll happily introduce you to others who might be a better fit. 

We, we don't try to pretend that we're for everyone. We try to be really clear because this is a very long term embedded relationship that we're entering into. 

And so we, we need to all be eyes wide open and careful about making sure this is a great fit. So we do need to meet with a lot of people to really find those that resonate on both sides. Speaking of a good fit. 

I actually forgot to ask one my standard while my standard questions in the beginning would do general investing. So, do you, are you some field focused or are you general investors? Sure. 

So, I, I would call us somewhere between we are, we really have a process that we did here too. 

That's very product centric but we love businesses where software and data intersect and that that can look pretty broad. 

But, there are a lot of common thought and operating processes that you can implement in a business. That has a data centric software core to it. 

But we're right now about fifty percent of business to consumer fifty percent. B two B. we probably prefer B two. B. 

but when we see a really compelling software product, that can can be built with a strong data strategy to it. That's where we really start got it. So, let's go back a little bit towards the accelerator incubators. 

One of the reasons why people want to go there is because of those demo days, you know, most accelerators and incubators claimed that, you know, if you last for the whole program, if you stay there if you work hard at that, you'll get a chance to present in front of green investors and. 

Sometimes that's true, but sometimes will not get into that. I'm sure it'd be really critical of that. What does a Ventures to do? Has something like a demo date or something similar very good question. So, we actually did in the early days. 

We did a somewhat of a demo day type presentation somewhat to just introduce our companies to the network and so, 

and we had great reception to it.
So I think we will come up with some kind of similar structure again. 

So we experimented with one where we had seven companies present, which is kind of like a demo day and I think we will do that again. Because the feedback was very positive. 

I'd say the one difference is we do not have a set in stone program with specific timelines. 

This is a very rolling situation and so we are out setting up demo opportunities if you will for our companies, 
all of the time with different investors that are in our network to try to help them by showing that this is a company that we're deeply involved with here's the traction that they're getting, 

we'd love to have you get involved at the right time so it's really an ongoing. Effort that we are undertaking all the time. 

So, it doesn't naturally line up like a program based acceleration program does to just naturally have a group of companies, all of the same place, all the same time, given what we do. 

And so we're trying to figure out what the right. Output looks like. 

But even just doing a, a showcase of our interest studio companies, which is more, like, what we did previously, we found does have some value and merit. So I think we'll, we'll continue to do things like that. Sounds good. Yeah. Next time you showcase it. 

I want to see, but next question is the advice to those early stage founders for the most of my listeners are Pre, seed stage, slash seed stage and what's your advice to them? 

In terms of fundraising know those people who are thinking, if they need to go to venture city, if they want to go to an incubator accelerator, angel investors, maybe grant funding or maybe just bootstrap. What's your advice of them? How should they make up their mind? Sure. 

I mean, I think you really want to understand the journey that you're about to embark on. 

And if you really see and believe that you are on a path to something that has that kind of, you know, high growth, hundred million dollar, plus type of opportunity. 

And then then you really need to start to think about. 

What are the investors at those early first couple stages that can be those critical partners to help me through that? 

And if you have not been through it, 

yourself as either a part of a company, 

or having done this before, 

then I would strongly encourage you to find people who can help guide you on that journey or else, 

you're going to just run into a lot of challenges on the way, 

you're gonna run into the challenges of a lot of mistakes that you can make. 

And ultimately a lot of those you can recover from but they will waste time. They will waste money. 

They'll probably lead to some casualties on the way of people who may object out in various ways, but those are things that many of those are preventable by getting the right partners around you. 

And then the other is, you're going to end up with a lot of of nose through the process from people who just don't want to be that first person to make a bet on you that. And that's just the reality. 

And the majority of investors that are out there are what I would call pickers, which are they're looking for something that is likely to succeed with, or without their involvement. 
And they want to pick ones that it's sort of the, the laziness that a lot of us probably wanna pick ones that. 

They can feel good that they picked, but they don't really have to do very much. 

And I think, from our perspective, we feel like we want to do a lot and so we still are choosing people we are, but we're choosing people that we get to really work closely with. 

And that's part of what really gets us excited, which is why we set this up as event studio instead of going, and just being a, a picker and a passive investor. And so I think it's really understanding who the different types of people are out there. 

And finding the ones that really aligned with who you are as an entrepreneur, and the journey that your likely to undertake. And so there are a lot of different ways to build a company. 

Venture capital is a really expensive way to do it and and expensive type of money. 

And so if there are other mechanisms, like grants or other ways bootstrap to potentially funded, I'm never one to criticize that. 

And, I mean, part of why I said, at the beginning, I had a, I grew up in a family owned business. That lasted for almost two hundred and fifty years. So we owned it. 

We never took somebody else's money to give ownership away in that whole time. And so I'm certainly. 

A tune to that, as another way to build a company, and frankly there aren't that many that have lasted that long, so that's true. Yes, that's true. 

There are not that many hundred year old company,
so that's already there and great advice in terms of,
you know,
fine interpreters who've already gone through those fields, just searching CrunchBase someone in your field, 

who has gone through and exits cold email them asking what hey, you know,
I'm just in the same exact position,
you were ten years ago, 

do you mind helping me most likely? 

They will not mind helping you so do that, but be respectful for their time and all that stuff. So last question here, call to action, what's the one thing you want to lose here to do? As soon as the episode is over? 

So,
if you're an entrepreneur, 
I think it is that find a way to do an honest evaluation of who you are, where you are and what you really are trying to achieve with this endeavor. 

Is this about a true mission and calling that you have to go solve this problem in the world? Is this just a mechanism for you to seek fame and fortune? All of those are perfectly fine. 

I think it's just a critical for people's in self. Awareness is a big, 

big term that I think it's so helpful the people to try to achieve and it's something that I think we constantly should be trying to do and finding ways to have others help us with that 

help identify our blind spot. 

So, taking that stock doing that honest evaluation in some way, or ways to really get clear, because then that will help you determine. 

Your best paths forward from there? Perfect. Yeah, I'm not the biggest fan of, you know, self grace and self awareness and all that self analysis, but in this case, it's really important. 

You need to understand if that's something you can do for five, ten years and here I'm gonna say, yeah. Do some self analysis at this point. It's alright. 

And, you know, my personal call to action is usually go to the description of this episode. I'll leave the link to OT for venture studio to if you have after this episode,
considering more joint venture studio,
rather than incubator, 

go on and checkout and the scripts of this episodes, you'll find everything there and have a great day.