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Getting Started with Startup Studios: Founders’ Stories, Principles and Motivation

Thursday, October 7, 2021

Today we will tell the stories of the founders of startup studios. What got them into such a complex business? How did they find their own recipe for success? What principles is their conveyor based on? 

Startup Jedi

We talk to startups and investors, you get the value.

People are the soul of every startup. Behind every success story of a unicorn is the story of its founder that may be difficult and controversial, but that is certainly an interesting and exciting one. Creating a startup studio is an extremely difficult task that requires an extraordinary mind and dedication. Today we will tell the stories of the founders of startup studios. What got them into such a complex business? How did they find their own recipe for success? What principles is their conveyor based on? All of this is part of the story of these phenomenal entrepreneurs.

Bill Gross: "Startups are one of the greatest forms to make a world a better place."

Idealab was the first among start-up studios. The company that started the conveyor belt of startup creation was founded in 1996 before the rise of Google, Facebook, Airbnb and other giants, 15 years before the emergence of other startup studios. The studio has grown 45 successful startups, of which 5 companies Citysearch, CarsDirect, GoTo, NetZero, Tickets.com are worth billions of dollars. Today we will talk about the motivation and principles of Bill Gross, one of the two founding brothers of Idealab.

History. Bill Gross dived into entrepreneurship at the age of 12. According to Gross, he started by selling candy at bus stops during his high school years. After graduating from college, Bill, together with his brother Larry, went into software startups and succeeded. The brothers founded startups GNP Loudspeakers (development of audio equipment) and Knowledge Adventure (educational computer programs). Their next large-scale project was IdeaLab.

Motivation. Taking responsibility not for one startup, but for dozens of them is still a pretty risky business, and back in the time when the information society was just developing it was sheer madness. Not surprisingly, it wasn’t money that motivated Bill Gross.

“I believe building startups is one of the best ways to make the world a better place. If you bring together a group of people with the same incentive and start a startup with them, you can unleash the potential of these people like never before. You can inspire them to achieve incredible goals, ”said the founder of IdeaLab in his TedX speech. 

At the dawn of his career, the businessman was inspired by the process of ideas arising in a person's head, and, like many entrepreneurs, he believed that an idea is everything. Actually, the very name of the company Idealab refers precisely to the importance of ideas. Over the years, the studio has started more than 100 companies, many of which turned out to be successful, while some had to be closed, having taken up a lot of time and resources. The brothers were constantly looking for an answer to what makes startups take off. Analyzing their own experience and other startups in Silicon Valley, Gross found an answer to this question. They had to give up on the concept that coming up with an idea is key to a startup's success.

Principles. In his research, Bill Gross relied on 5 factors that ensure the success of a startup: idea, team, timing, business model and investment. After analyzing more than 200 success and failure stories of startups, Gross came to an unexpected conclusion. Timing accounted for 42% of success stories, the team for 32%, while the idea itself only accounted for a 28% success ratio among the companies he reviewed. Business model (24%) and funding (14%) were the factors least influencing success. Gross confirmed the statistics with the success stories of his own companies —  GoTo, Tickets.com, and those of giants like Uber and Airbnb.

It is the principle “the idea is not as important as the right moment of launch” that formed the basis of the activities of all the following start-up studios. They filter dozens and hundreds of ideas before they find the very idea that at the right time is confirmed by user interest. And judging by the fact that our list starts, not ends with Gross, the concept seems to work.

Michael Jones: "Do we have a cool captain for this ship?"

Science Inc is one of the largest startup studios in the world. One of the main success stories in the studio's portfolio is Dollar Shave Club, a company that burst into a market divided by monopolists like Gillette, and a few years later conquered 8% of it and was sold for $1B. All this might not have happened if it wasn’t for the  joint work of the founder of the startup, Michael Dubin, with the head of the Science Inc studio, Michael Jones. 

History. Michael Jones, like Bill Gross, got started in business back in high school. He became the founder of a music magazine that spread throughout America. After graduating from college, the entrepreneur and partners founded the startup PBJ Digital. Having sold a stake in it, Michael took on the next project, and, together with two 24-year-old co-founders, launched Userplane, which was sold to AOL for $40M. Following the takeover, Jones was promoted to vice president at AOL. After a couple of years, Michael switched to investing, and soon became a successful business angel in the United States. Jones' double experience as a founder and venture capitalist helped found his Science Inc. startup studio.

Motivation. Jones sees Science Inc's mission in identifying outstanding entrepreneurs, helping transform their idea into a product, and working with them to make their dreams come true. The rest: searching for investors, choosing the optimal business model and selecting the team are just the tools for working on the mission. The studio does not work with every project. Instead, Michael Jones and his team are looking for promising markets that will influence technological development in the near future.

Principles. For Jones, the most important thing when selecting projects is the personality of the leader.

“In my understanding, the process of working with startups that are just starting out looks like this: I put the right people on the ship, give it direction and let it go in the hope that it will reach its destination. We have never drawn up detailed business plans. It's more of a strategy —  hey, do we have a cool captain for this ship?” —  explained the entrepreneur in an interview.

It was this “cool captain” that Jones saw in Michael Dubin, when he came to him with his daring idea and video, which later gained 27 million views and even collapsed the company's website on the first day of sales. Jones allocated the first $100,000 investment in the project and started looking for investors who later boosted the company’s sales.

Another important element for the founder of the studio is that founders have to believe in the project.

“Business involvement, dedication to business and unconditional belief in the success of your product always speak for themselves. It is these factors that allow us to predict the prospects for each startup”, says Michael Jones.

Denis Kovalevich: "This is our response to Silicon Valley"

Technospark” is a Russian corporate start-up studio engaged in creating start-ups upon request from large businesses. The studio has now built over 120 tech companies that manufacture literally everything from solar roofs to self-driving trucks. Denis Kovalevich, CEO of TechnoSpark, believes that a venture builder is the profession of the future, and start-up studios give everyone a chance to become an entrepreneur.

Motivation. According to Kovalevich, working in a startup studio allows “ordinary, disciplined and strong people” to become entrepreneurs. These are the people who could not become Elon Musk or Steve Jobs, but still want to try entrepreneurship. Besides, instead of becoming the managers of an already successful company, they can stay entrepreneurs “for life”.

“In a sense, TechnoSpark is our response to Silicon Valley. The valley attracts the most “notorious” entrepreneurs from all over the world: strong, energetic and powerful people. But there are few points like this in the world, and none in our region”, Denis Kovalevich believes.

The creation of its own Silicon Valley in Russia is a large-scale, ambitious and very important mission of TechnoSpark.

Principles. TechnoSpark creates companies for business needs. The main value for large companies that become clients of the studio is time. It takes 8-10 years to independently develop and implement this or that innovative product.

“If any corporation does this on its own, it will be too late”, Kovalevich notes.

That is why in the work of TechnoSpark everything is aimed at maximum speed and efficiency. The team does not manage entrepreneurs and their ideas, as Science Inc does, at the most it takes them as product managers who will test and develop the company's own products. The entire process, from the conception of an idea to the sale of a successful product, happens entirely within TechnoSpark itself.

Attila Szigeti: "Startup studios are like parents who give birth to a baby"

Attila Szigeti is co-founder of a startup studio Drukka, serial entrepreneur, and he is also a researcher of the phenomenon of start-up studios and the author of the first book about them, Startup Studio Playbook. Probably, in a few years, venture capital studios and the mechanism of their work will become a familiar and clear phenomenon, but so far Attila is one of the pioneers in the popularization and study of start-up factories.

History. In 2014, Attila Szigeti was a successful programmer at IBM and Citigroup, but the desire to “create something on his own” made him take a desperate step: quit and start from scratch by opening his own IT firm. The startup had to be shut down a year later, but Szigeti took the failure as a necessary experience. Thinking about the next project, the entrepreneur realized that he wanted to do something fundamentally new, something more innovative and large-scale than an IT firm. His friendship with entrepreneur and business angel Tamas Bochner led to the creation of a startup studio Drukka.

Motivation. By that time, there were already several successful start-up studios in the world: Idealab, eFounders, Rocket Internet. The founders of Drukka wanted to replicate their experience in Hungary: take the best principles, minimize risks and personally launch the conveyor of startups in their country. Attila Szigeti took up market research. He talked with the founders of start-up studios, collected information bit by bit online, analyzed the stories of successful startups in order to draw up his own work algorithm for Drukka. While working on it, he felt tempted to share this knowledge, which is how the Startup Studio Playbook came about.

Principals. The approach of the startup studio Drukka is quite pragmatic. Entrepreneurs analyze trends, business models, the most successful ideas and try to implement them in the European market. The studio team brainstorms dozens of ideas, the most successful of which are tested by user demand. If the team decides to create a new startup, an entrepreneur may be invited to join the leadership with a share in the company of about 25% (the share may grow if the startup is successful). The studio remains responsible for all resources, the team, and searching for an investor.

This approach is best explained by Attila Szigeti himself: “Startup studios are like parents who give birth to a baby, then raise the baby themselves, make their own decisions for him/her and prepare their child for an independent life as an adult. While an incubator is more of a kindergarten, where you put your child for some time, but the one responsible for the child’s education and upbringing is still you”.

Zamvera Brothers: "Do not treat your idea like it is a gift from God, actually chances are that it is stupid"

The startup studio Rocket Internet (Germany) is, without exaggeration, an odious company. On the one hand, it is one of the largest and most famous international start-up studios that has launched many successful startups, including Alando, HelloFresh and Zalando. On the other hand, many entrepreneurs are annoyed by the studio's style of adapting successful American companies, and Amazon believes that the Zalando online store has been copied from them "to the last pixel".

But the Zamvers brothers undeniably managed to achieve their goal, which was to create an assembly line that produces successful startups, earn billions, become famous all over the world and significantly affect the development of the economy in several countries at once. Now Rocket Internet is not on the exchange: perhaps it will be restarted, and we will soon see a completely different startup studio.

History. The Samwer brothers —  Mark, Oliver and Alexander —  come from an unusual family. The great-great-grandfather of the future owners of Rocket Internet was the Minister of Foreign Affairs of Germany and their great-grandfather was the founder of the large insurance company Gothaer Group, whose revenue exceeded €4.5B in 2020. His father was once the lawyer of the future President of Germany Karl Carstens. Of course, the brothers wanted to keep up and build their own business empire. All that remained was to choose a direction, which Oliver's trip to Silicon Valley helped with. The atmosphere of the "cradle of startups'' inspired Oliver Samver to devote his thesis to US startups together with fellow student Max Finger. It turned out to be a serious study as Samwer and Finger interviewed more than 100 startups, identified the main patterns in their work and success, and, most importantly, set out many ideas in their work that later formed the basis of Rocket Internet. Max Finger co-founded a startup studio.

Motivation. The ambitions and desire to create a multi-billion dollar company played a serious role in motivating the Samwer brothers.

“We wanted to build a business, but we didn’t always know what it would be”, Mark Samwer once said in an interview.

Having studied the history of startups in America from all sides, the brothers came up with rules of work that allowed them to realize the dream of a huge international company. The principles of rapid growth, work in markets with low competition, active and even aggressive promotion of newly created companies, “borrowed” from American startups while working on the thesis, laid the foundation of Rocket Internet.

Principles. “Do not treat your idea like it is a gift from god, actually chances are that it is stupid”, yesterday's students Oliver Samwer and Max Finger wrote in their research. But this phrase was not just a shocking statement of ambitious young people. It became the cornerstone of the future Rocket Internet empire. The founders of the startup studio did not have to puzzle over innovative ideas. They successfully adapted the best startups from the USA. The first big success of entrepreneurs was the German auction site Alando, very similar to the American eBay. 100 days after its launch, it was bought by eBay for $43M. Surprisingly, Oliver Samwer considers this to be the biggest mistake of his career. The founder of Rocket Internet is sure that he could have sold the company later and at a much higher price.

Then other “adaptations” of large startups appeared, including Zalando marketplace (whose prototype was Amazon), food delivery service HelloFresh (whose prototype was Blue Apron). Zalando's capitalization was €26.35B, and HelloFresh reached €14.31B (despite the fact that the American company Blue Apron at the same time was worth about $100M on the stock exchange).

By 2014, the startup studio had grown so much that it began to create companies in other countries and in emerging markets: in Africa, Asia, and the Middle East. As The Generalist notes in his large study, dedicated to the venture capital studio, many entrepreneurs and experts criticize Rocket Internet for actively exploiting the ideas of other entrepreneurs, exiting startups too quickly, and constantly rotating employees and company management. At the same time, Rocket Internet created thousands of jobs, developed infrastructure, logistics, built enterprises and provided benefits to the local population in order to launch companies in different countries. Thus, the positive impact of the venture studio on the economies of developing countries is obvious.

Paradoxical, controversial and very successful Rocket Internet will remain a super-phenomenon for a long time, even among start-up studios.

Conclusion

The stories of founders of startup studios are very different, but you probably found a lot of common points in the biographies and principles of these entrepreneurs. This is the implementation of entrepreneurial projects from an early age, and reliance on a team, and a love of innovation.

So as Bill Gross once said: “Startup organisation is one of the greatest forms to make a world a better place. And creating a startup studio is twice as good”.

7 Oct 2021

 

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