THE ROAST OF A STARTUP STUDIO MODEL. PART 1

THOUGH FROM THE OUTSIDE, IT MAY LOOK LIKE A CORPORATION...

INTERVIEWER: Denis, I recently met you at a venture forum and was surprised at how differently you spoke about venture building.

DENIS: Both parties sometimes speak about different things but use the same terminology.

INTERVIEWER: You were a top executive of two corporations in the 2000s, and then you left them to run your own venture studio. However, in my opinion, a startup studio is quite a rigid system, leaning more towards administrative rather than entrepreneurial. Entrepreneurship is all about creativity and flexibility. That is why entrepreneurs drive the economy!

DENIS: Are you then striving for the purity of the venture industry?

INTERVIEWER: Entrepreneurship matters! In the early 2010s, you and your partners were at the forefront of one of the first venture-building companies. You called it a startup studio long before anybody really understood what it was. What do you mean by this term, and how are venture and entrepreneurship related to it?

DENIS: The main working principle that distinguishes a startup studio is that it does not seek or consider startups from outside but decides what new companies to create on its own. The studio itself creates the hypothesis of new businesses and gathers the necessary technologies. It also creates the legal entities for its startups and the majority of the startups could be subsidiaries. The other segment is made up by companies whose co-founder is a partner of the studio, but the challenges of working with co-founders are pretty obvious.

INTERVIEWER: So, were you establishing a corporation with subsidiary companies right from the outset?

DENIS: What indicators do you use to describe such a holding model as a corporation?

INTERVIEWER: For example, your startups have the same shareholder.

DENIS: Yes, all of the startups have one main shareholder – the studio. However, in some startups, here are private or corporate co-shareholders. Having the same shareholder doesn’t typically raise suspicion that different companies, legally, are not independent. What confuses you?

INTERVIEWER: Well, studios have some kind of a shared economic space, common technology domains. They share engineers, products, information, logs, and track records between the companies, and all startups use the same manageable internal resources. This sort of structure does remind of innovation departments within a single corporation.

DENIS: Yes, they do share these. But tell me, if different companies situated in the same town, have same technology domain, same cluster, share products and close deals with each other, if their staff discuss some common industry issues, does it also make them all just one corporation?

INTERVIEWER: What are you getting at?

DENIS: I guess you suppose that the startup studio’s companies have a common “planning department”,? instructing them what and how much to produce, who to sell it to, and for what price. You may think that these companies cooperate beyond the economic sense, making deals with prices lower than the common market ones and so on. That is not actually the case with startup studios. There are some information channels that exchange some of the knowledge accumulated by the startups. Even the smallest startup does only regular market deals with no discounts that may distort it economy. Just like any other companies in relations with each other.

INTERVIEWER: Ok, let’s assume that these are independent business units. But even if they exist in an open economy, even if they are not departments of a corporation with their own budgets, they still hardly look like regular startups.

DENIS: And why is that so?

INTERVIEWER: You said almost all startups could be subsidiaries. In many of them there are no founders at the beginning. Only the founding owner is the guarantor of business frames within the startup. There cannot be hired founders. And the startup’s independent economy does not change a thing, as this is not free entrepreneurship as such.

DENIS: I completely disagree with what you just said.

INTERVIEWER: ... and with international practice.

DENIS: That always happens when something new comes up. From a purely statistical point of view, new things are extremely rare. It is therefore more common to hear about more familiar, well-established, and widespread approaches and models. I believe the transition from a founder-generated model of startup to a model that begins with a hypothesis and investments in trial is the basic innovation of a startup studio. A business model innovation.