368: Creating or Working with a Company Builder?

[0:00:01]

Steli Efti: Hey everybody this is Steli Efti.

 

[0:00:03]

Hiten Shah: This is Hiten Shah.

 

[0:00:04]

Steli Efti: Today on the Startup Chat we want to talk a little bit about this concept of company builders or company studios. What is it? How does it work? Is it good? It is bad? Who should participate in that or think about that? First let me give a definition on a company builder or a company studio. This is the concept, it’s kind of something in between starting your own company and being part of an accelerator, like Y Combinator where there’s a bunch of companies that are started in the very early stages that go through a three month period of pivoting, developing, launching, changing and then raising money to go off on the races. A company builder or a company studio is one corporate structure that brings together talent and people, develops with those people ideas and kind of rapid prototypes these ideas and NVPs them. Once that NVP or prototype of a very early stage of an idea has some legs, the company builder basically infuses some capital, puts together the team and incorporates it as a separate entity and kind of like bursts a new company that is being pushed out of the existing corporate structure. It’s this idea of having one company that’s launching off companies, that’s starting off new companies. As a team member when you join a company builder or a company studio, the idea is that you’re an entrepreneur but you’re in a much more supportive environment where there’s going to be money and infrastructure and expertise to come up with the idea. To name the company, to infuse it with money. Only if the early test work out and you have a promising opportunity that’s tested and proven, then you get to take the team and the idea, whatever was accomplished internally in the company builder studio and run with it and become a real entrepreneur in kind of a safer bet or higher chance for success bet. This idea I think has been around for a very long time. It’s very appealing especially for entrepreneurs. A lot of entrepreneurs like the idea of starting a company builder because they want to start so many different companies. It’s also an appealing idea for first time founders probably that are like, “I want to be an entrepreneur but I have such a lack of experience. How do I do this?” It’s a good metro on both sides, but it’s very hard to pull off. I just want to talk a little bit about that concept, what you’ve seen work or not work. Is this a good idea for founders that have done a few startups that are thinking about starting a company builder themselves? What are the pros and cons for a first time founder that is thinking about joining a company builder, studio? Let’s just unpack this a little bit for the audience.

 

[0:02:48]

Hiten Shah: Yeah, you know they say that there’s different ways to learn about how to run a business or learn what you want to learn. The one way is you join a company and you learn. This is if you’re aspiring to build your own business or start your own startup or whatever, whatever you want to call it. Steli whatever you want to call it. I think one way is you join a company builder, they call them like studios sometimes. There’s an example of a bunch like Betaworks in New York or XPO which is in San Francisco and New York or Science Inc which is in LA. I’m sure there’s many others I’m not naming right now, but those are the three that come to mind that kind of cover LA and New York and SF. These are basically organizations that start multiple businesses. Some of them also invest in other businesses, but the primary objective of those organizations is to create new businesses. They give you a lot of support. They know what to do, like Science Inc has always been very focused on eCommerce and that space. They have other few products, but they’ve been focused on that space. Betaworks has been all over the place, they have B2B products like Chartbeat and Bit.ly as well as they’ve done consumer products like various different games. I think Dots was one of their games and then XPO has thrown out something like Reserve.com and Input.com and [inaudible] kit.com I believe and a bunch of others. It’s like another option if you’re not quite ready to go on it on your own. You can get into one of those organizations and learn about startups as well as have your own potentially and just take it from there. I would say that the benefit of one of those studios is the fact that you get people who have done it before. The organization is designed to support you or should be designed to support you in the earliest stages of the business. Now the thing is, these companies aren’t like Y Combinator. These organizations are not taking on like 100 or 200 people at once, so I would say they’re even more selective than Y Combinator. You’d have to talk to them and interview and see if you should join one of their teams or help them start a new business or what have view. There are highly experienced founders though or people I would say in some cases at those organizations that have done it before and know exactly how they think about building companies and can help you in a lot of ways if you need that help or want that support.

 

[0:05:46]

Steli Efti: Yeah. I love the idea of company studios and company builders for many reasons, I think it’s appealing for early and inexperienced founders. I think it’s appealing for very experienced founders that have done it multiple times and are now set on the idea that they don’t want to be an investor. They still want to be an entrepreneur but they don’t want to go through the grind of just committing to one idea for 10 years. It’s kind of appealing for many different reason, but there’s also I think a lot of about it that is a lot more difficult. I think having a successful company studio, builder is in many ways harder than just building a great company. Or becoming a great investor or having a good fund. I think because it is both things at once, so it’s very complicated I think to pull this off. I know a lot of founders that have tried it and failed. I only know one example actually, example that you didn’t name in sass that I’ve been impressed by which is eFounders in Paris.

 

[0:06:47]

Hiten Shah: Right, yeah.

 

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Steli Efti: eFounders has an incredible track record of sass companies kind of the type of companies and the success that these companies have has been really high. I’ve met a lot of teams and people and I’ve always been impressed by the caliber of people that have been able to attract and to put together in those companies. They’re doing something right. I think for both sides, but especially thinking about the founders that are thinking about joining a company builder, studio, I think it’s important to not just look at the track record of the founders of that as successful or rich people. Go, “Well these guys had great success with a product company, they wanted to do this thing. It’s surely going to be a success.” Really see does the studio have any kind of track record of developing successful standalone companies? I know a bunch of these studies that don’t that have really great founding teams and great talent and a great vision, but have not been able to pull it off and to build standalone companies that grow and flourish after the initial phase. They’ve just not been able to do that. We just look at the track record of the company builder and studio. Again, nothing is guaranteed, and although a studio can be a really exciting environment and I think it can provide some help and hopefully accelerate some of the steps in the early days, it’s not a sure fire thing. You can’t just trust others to figure things out for you and be like, “I’m just going to join the studio and they’re surely going to figure out the name, the brand, the idea of the product and the financing. All I’m going to do is I’m going to be showering in the fame and fortune of being a startup founder and an entrepreneur.” It’s not going to be that way, right? If you really want to be an entrepreneur a lot of the burdens probably going to be on you. You’re going to have to figure out a lot of things along the way. You can’t go into that thing with an employee mentality and mindset, but one in the fame and fortune of being an entrepreneur. That’s definitely not going to work. That’s the biggest advice that I have to give based on the experience, the people that I’ve seen involved with this. Both founders joining a company builder or studio and both a bunch of founder friends of mine that tried to do that themselves. It’s very, very hard to pull off this. There’s very few examples of those that do this successfully. If you join one of these places, you still have to get at it with an entrepreneurial mindset and realize that chances of failure are very, very high still, right, no matter what you do.

 

[0:09:23]

Hiten Shah: Yeah, I couldn’t agree more. I think that it’s another option and I really like your thought around it working for also experienced founders. A lot of the times some of these other things, experienced founders might shun for whatever reason, but these company builders, studios you see experienced founders definitely go into them. Sometimes a lot more often than other types of incubators or anything like that.

 

[0:09:52]

Steli Efti: All right that’s it for us for this episode. Again, if you have any experience trying to build a company studio, builder yourself or join one and you want to enlighten us with your experience, with your feedback, just let us know Steli@close.io, hnshar@gmail.com. Besides that if you enjoyed the Startup Chat and a lot of you are nice enough to tell us that you do, and if you haven’t done that yet, go to iTunes, give us a five star review. It helps us push and be more visible and so it helps us grow the community of the Startup Chat. We highly appreciate it. Until next time we’ll hear you very soon.

 

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Hiten Shah: Take care.

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