Venture Studio Index - October 24, 2022
Venture studio enters the rollup space, a new term for venture studios, a customer discovery tool, and 4 new studios
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Juxtapose is building platforms to rollup mom-and-pop businesses in local services categories, starting with HVAC:
The HVAC company Juxtapose is building, codenamed Project Zephyr, aims to combine the best of both the VC and PE worlds. The firm will buy independent HVAC businesses, primarily in the US Midwest, and merge them into one company. Project Zephyr will build technology not just for ordering services but also for helping technicians to manage their workflow. The acquisitions will require a significant investment of hundreds of millions of dollars over the company's lifetime, Miller said. For now, Juxtapose will make the acquisitions out of its current $300 million fund, which it raised in 2021. But Miller believes they will pay off as Juxtapose builds a tech platform around them, with the aim of creating a transformative experience for customers and workers alike. That's what distinguishes Juxtapose's strategy from the typical private-equity approach, in Miller's view. "You don't typically hear about CEOs being excited to go to private-equity firms to innovate," he said.
PE firms love services business rollups, but the hardest part is finding the right platform business to start with. Building modern platforms from scratch is a novel application of the venture studio model, and I expect to see more. Venture studios regularly build startups that match popular VC funding themes, seems no reason why they can’t build for private equity strategies as well.
Local services is a difficult category for pure tech businesses, where customer acquisition is expensive and there’s low barrier to entry for competition. However, M&A rollups in industries with sticky customers where technology can improve economics could be a promising category for venture studios.
Of course, there will be competition. Within HVAC specifically, there is another tech-enabled, VC backed rollup - PipeDreams - backed by Canvas Ventures and led by a team from Nextdoor, Bain and Roto-Rooter.
Local services is a large category with room for multiple winners. The key question is the extent to which technology enables these services businesses to run more efficiently, and afford a higher multiple for local services businesses than your average PE-backed acquiror. And whether the technology must to be developed internally, or if it can simply be licensed from third parties.
(Business Insider - $)
Vault Fund, a fund-of-funds focused on the venture studios, argues the best term to describe this asset class is “company creation funds:”
“We’ve found that the term “venture studio” is too ambiguous and means different things to different people. In fact, we’ve seen creative agencies and accelerators describe themselves as venture studios, despite not being company founders and in some cases not even taking equity for their involvement in the companies….These entities must have ground-level, founding ownership stakes. Company creation funds are entities that create their own portfolio of companies with founding roles at entry level valuations backed by resources and processes to go-to-market at faster speeds.”
Twitter thread by the co-founder of On Deck debating the merits of offering higher cash compensation to access a larger pool of potential founders/EIRs who need to offset their personal fixed costs (Erik Torenberg on Twitter)
Content marketing piece from a studio startup founder: “Why I left Google to co-found with super{set}” (blog post)
Interesting tool
“The tools we use to de-risk startups faster” by Pioneer Square Labs. Demos a prospecting and outreach tool the firm has developed internally to streamline customer discovery. (PSL blog)
Interesting job descriptions
25madison - Chief Clinical Officer of Stealth Behavioral Health Company
“We are working to collaborate with primary care providers to create easy access to mental healthcare, specifically targeted at older adults. We use an integrated behavioral health model and collaborate with providers to ensure patients receive the best care.”
Redesign Health - Director of Investor Analytics and Strategy
Shows an impressive level of sophistication on fundraising operations, including:
“Maximize Capital Development business development team’s time spent selling by minimizing low impact non-selling activities…Develop evidence-driven client contact strategy recommendations…Rigorously track and manage sales funnel performance metrics, unearthing key metrics, sales effectiveness insights and opportunities to optimize funnel and drive results…Support sales strategy by identifying the most attractive opportunities based on value and probability of closing”
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Database additions
This week we added 4 additional venture studios and 8 startups to the database, which now totals 372 studios and 1,770 startups.
Submit studios and startups to data@venturestudioindex.com or reply to this email