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What happens when studios launch competitors to other startups? They win.
One question on venture studios is whether their startups can ever be as successful as independent, VC backed companies. Founders launching independently own more of their companies and have more room available on their cap tables for venture capital. In theory this should attract higher quality founders, who are more motivated, go on to raise more money, and therefore have a higher chance of winning their markets.
In fact, the opposite appears true. In our database of venture studios and their startups, we found nine examples where venture studios launched direct competitors to existing independent, VC backed startups.
In every case, the studio startup has more traction:
A few observations:
Studios launched these startups after their competitor was already in market, so their dominance is more impressive given the other company had a head start
These are almost entirely B2C. B2C products might be more vulnerable to competition from studios, who can quickly test customer acquisition cost and roll out an aggressive online marketing playbooks for business models they choose to pursue
In one case, multiple studios launch competitors to an existing startup. In another, a studio launches a competitor to a startup incubated by yet another studio. In each case, the winner appears to be incubated
Even the “2nd place” startups appear to have achieved scale meaningful enough to yield a valuable business
The studio startups listed above are some of the most successful of any companies launched by a studio
To be sure, the majority of studio startups launched are not competing with existing startups, and the majority are B2B. There are likely more cases we did not find where studios launched competing startups. For this analysis we focused on U.S. based startups launched from leading studios over the last decade, and excluded startups launched in the last two years - as they are too early
Are studios aware of the competitor in market before launching? Do studios look at consumer VC seed investments for idea generation? Perhaps there are cases, but studios spend months, and sometimes years, incubating an idea. So in most cases the studio likely was already developing something in the category. Each category above has large, sleepy incumbents both startups are looking to disrupt.
One of the most exciting things about this industry is that venture studios don’t directly compete with each, enabling potential for further growth. This analysis shows even in cases where venture studios directly compete with other startups, they are able to out-execute and build valuable companies.
These nine examples also demonstrate that studios can attract high enough quality founders to turn their ideas into enduring businesses.